CVM Solutions LLC, a leader in enterprise supplier management solutions and owner of the CVM Master Supplier Database, unveiled data that showed Fortune 500 companies are doing business with a surprisingly small number of common suppliers and warned of the potential risks to the supply chain should any of these suppliers be adversely affected by the economic downturn. Announced at the Institute for Supply Management conference being held this week in Charlotte, N.C., the findings of this comprehensive, cross-industry supplier management analysis have broad implications to all global enterprises operating today.
CVM recently completed a detailed cross-industry analysis using the CVM Master Supplier Database, which includes hundreds of data points per supplier including customer/supplier spend levels. The CVM Master Supplier Database and subsequent cross-industry analysis has provided CVM with the ability to track and monitor supplier trends and risks that could affect a supplier’s ability, or inability, to support their customers. Through this analysis of the data, CVM identified a core set of 10,500 suppliers that are recipients of 80 percent of Fortune 500 spending. In addition, only 110,000 suppliers make up 95 percent of the total spend. CVM was also able to identify a relatively small set of suppliers with significant spend, 16,060, that are common among the Fortune 500.
Based on this analysis by CVM, it appears that years of strategic sourcing and supplier consolidation has created a dangerously small group of suppliers that receive most of the Fortune 500 companies spend. If these common suppliers become “high risk” suppliers, then that risk will likely impact a high percentage of Fortune 500 companies. CVM defines high risk suppliers as having a significant probability of failure to some aspect of their business within 12 months. The potential impact of this increased supplier risk could mean interruptions in business operations, financial loss and damage to brand reputation.
“It’s a near-daily occurrence: Companies of all sizes in all geographies are going out of business, which has a ripple effect both upstream and downstream. Additional measures and due diligence are needed in today’s economic turmoil to identify in advance suppliers at risk in a multi-tier supply chain,” said Mickey North Rizza, research director at AMR Research.
“It was surprising to discover from our research that such a relatively small group of suppliers were beneficiaries of such a large portion of Fortune 500 spending. And, we believe these findings should signal a strong warning to large enterprises that the current economic storm is posing great harm to their supply chain by concentrating the risk across fewer and fewer suppliers,” said Rajesh Voddiraju, president and CEO of CVM Solutions.
