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How Many Suppliers are in the Global Supply Chain? Anecdotal evidence that a significant number of suppliers have "gone bust" over the past year abounds. How many are left? New research suggests much fewer than just two years ago.Procurement departments continue to wrestle with maintaining supplier viability. In the U.K. alone, there has been a 47 percent increase in the number of public-sector suppliers that have collapsed in the first half of 2010 over the same period in 2009. According to research from accountancy firm Wilkins Kennedy this week, 168 businesses in health, social services, education and defense collapsed in the first six months of this year, up from 114 in the first half of last year.

Throughout the entire global supply chain, just how many suppliers remain?

"The [...] overall number of relevant and highly used suppliers is significantly smaller than many believed," according to Mike Anguiano, chairman of CVM Solutions, a provider of supplier management solutions.

New findings of a multi-year analysis of suppliers to Fortune 1000 companies, conducted by CVM, indicate that there are approximately 4.9 million unique suppliers in use by Fortune 1000 companies. Of these, only 309,790 (6 percent) were used by two or more companies in 2009. That is 15 percent less than the 366,356 in 2008.

The study, announced this month, also shows that the number of suppliers is decreasing at a faster pace in the first half of 2010 than previous years, although the full scope of the decline will not be evident until the end of this year.

As the number of highly used suppliers has continued to decline since 2008, the remaining suppliers may struggle to support increasing customer demand throughout the coming years, the findings suggest.

The study's data further highlights other declines in the supplier base. For example, the number of unique supplier families dropped from 93,038 in 2008 to 62,976 in 2009, while the number of small and diverse businesses dropped from 1.15 million to 851,699 during the same period. These figures were based on the total population of common suppliers.

CVM points to continued challenges for small and diverse businesses. "Fortune 1000 spending with small and diverse businesses is under pressure, as the number of these suppliers continues to decline," the study says.

While the overall number of suppliers is trending downward, CVM also noticed that, despite the disappearance of certain suppliers, new ones are being added.

"This trend leads us to believe that there is a Darwinian effect occurring in the supply chain as Fortune 1000 companies cut weaker suppliers and replace them with stronger ones," Anguiano said in an announcement of the findings.

Ultimately, supplier consolidation continues to increase, as evidenced by the smaller number of unique supplier corporate families. According to CVM, the two key reasons for this trend are that smaller independent suppliers are being discontinued or going out of business and mergers are reducing the number of parent companies as larger firms acquire smaller suppliers.

Last year, companies were advised to monitor their suppliers' financial health more closely than usual. This effort should continue today, according to CVM.

"The worldwide economy continues to struggle, resulting in ongoing shrinkage in the overall number of suppliers," CVM adds. "As this trend continues, Fortune 1000 companies must be diligent in managing their suppliers."

Related

Spotting a Troubled Supplier

Auto Part Suppliers Rebound as Vehicle Sales Recover

Resources

CVM Solutions Sees Darwinian Effect in Fortune 1000 Supplier Base

CVM Solutions, Aug. 10, 2010

Public Sector Suppliers Suffer Surge in Insolvencies as Government Cuts Take Hold

Wilkins Kennedy, Aug. 23, 2010

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Port Tracker report calls for 15 percent annual volume increase and a new peak month - Article from Logistics Management

Port Tracker report calls for 15 percent annual volume increase and a new peak month - Article from Logistics Management
By Jeff Berman, Group News Editor


August 06, 2010

Following last month’s report which noted import cargo volumes at U.S.-based retail container ports would begin to decline in the coming months, the most recent Port Tracker report by the National Retail Federation and Hackett Associates notes that 2010 volume is pegged to hit 14.5 million containers for a 15 percent annual increase.



July volumes are expected to rise 1.38 million TEU, or 25 percent, and August volumes are expected to rise 14 percent year-over-year at 1.32 million TEU, according to the report.



Port Tracker indicated that U.S. ports handled 1.32 million TEU (Twenty-foot Equivalent Units) in June, which is the latest month for which data is available, for a 4 percent gain from May and a 30 percent year-over-year gain. This marks the eighth straight month to show a year-over-year improvement after December 2009 snapped a 28-month streak of declining volumes through November 2009.



This year began with sequential gains in December and January, followed by a decline in February. March volumes—came in at 1.07 million TEU (Twenty-foot Equivalent Units), which was up 7 percent from February’s 1.01 million TEU and 12 percent year-over-year. April volumes at 1.15 million TEU—were up 7 percent from March and 16 percent year-over-year. And May hit 1.25 million TEU followed by June’s 1.32 million TEU.



The ports surveyed in the report include: Los Angeles/Long Beach, Oakland, Tacoma, Seattle, New York/New Jersey, Hampton Roads, Charleston, and Savannah.



The report’s authors said that the large double-digit increases in June and July can be attributed to backlogs that accumulated due to a lack of shipping capacity brought on by ship owners removing capacity during the recession, followed by them taking their time bringing them back online when economic activity picked up.



They added that many retailers may actually be transporting more merchandise earlier in the year to avoid further bottlenecks, explaining that this could lead to July becoming the peak shipping month in 2010 as opposed to October, which is more common.



“Shippers and importers have sort of moved ahead of the market by buying early partly out of fear that there was not going to be enough capacity later on, and it seems that they have gotten a head start,” said Ben Hackett, president of Hackett Associates, in an interview. “This is what really drove the May-July figures.



Hackett added that he believes the container shortage is close to an end, with carriers putting vessels back into service that are charged with bringing back empty containers from Europe and North America. And the amount of empty containers moving out of U.S. ports is higher through the first six months of 2010 than it was for all of 2009, according to Port Tracker.



And with various economic indicators taking steps backwards in recent weeks, Hackett pointed out that consumer confidence appears to be moving in lockstep with that trend, as current levels—since June—are in line with August 2009.



Even though the Port Tracker report maintains that July may turn out to be the peak shipping month of the year, Hackett noted that does not mean there will not be growth in the coming months.



In fact, year-over-year projected growth rates are still in double-digits, with July and August projected to hit 1.38 million TEU (25 percent increase) and 1.32 million TEU (14 percent increase, respectively. September is expected to hit 1.32 million TEU (16 percent increase, and October is slated for 1.31 million TEU (10 percent increase. November and December are projected to hit 1.19 million TEU (9 percent increase) and 1.12 million TEU (2 percent increase), respectively.



“We aren’t back to where we were two years ago and consumers aren’t convinced that the recession is over quite yet, but 2010 is clearly going to finish better than last year,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said in a statement. “In the meantime, retailers are monitoring demand very closely and hoping to see increases in employment and other areas that will boost consumer confidence. Cargo numbers this summer are showing unusually high percentage increases, but that appears to be an indication of shortages in shipping capacity earlier in the year rather than sales expectations.”