This message was sent to you by Royce Dugan. 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 Read the full article here:
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