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Large companies cut back on the number of suppliers

The largest companies have trimmed the ranks of their suppliers by 15 percent, according to one vendor of supplier management software.

Supply Chain Quarterly Staff
By Supply Chain Quarterly StaffAug 23, 2010
Supply Chain Quarterly Staff
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Fortune 1000 companies consolidated the ranks of their suppliers in 2009 by 15 percent, according to a study conducted by CVM Solutions, a vendor of supplier management software. Those companies cut 366,356 suppliers in 2009 from the approximate 5.2 million they used in 2008, company executives said during a webcast held earlier this month.

Last year, Fortune 1000 companies used 4.9 million unique suppliers. Interestingly, only 309,790 suppliers—or 6 percent of the total—were used by two or more of those companies in 2009. The software vendor said that supplier consolidation continues to increase primarily because smaller, independent suppliers are discontinued or go out of business, and because mergers reduce the number of parent companies as larger companies acquire smaller suppliers.

"The findings of our 2010 study show that the overall number of relevant and highly used suppliers is significantly smaller than many believed," said Mike Anguiano, chairman of CVM Solutions. "Despite the disappearance of certain suppliers, a new crop of suppliers was 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."

Source: August 10, 2010 webcast and press release

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