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ISM 2009: Supplier consolidation may lead to increased risk

New research finds use of common suppliers could be increasing supply chain risk

By Susan Avery -- Purchasing, 5/4/2009 2:45:00 PM

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On the show floor at ISM 2009, CVM Solutions released findings of new research that shows Fortune 500 companies are doing business with a surprisingly small number of common suppliers and warned of potential risk to the supply chain should these suppliers be adversely affected by the economic downturn.

The Chicago-based company conducted the cross-industry analysis using the CVM master supplier database, identifying a core set of 10,500 suppliers that service the Fortune 500. These suppliers represent 80% of these companies’ spending.

If these common suppliers become high risk suppliers, then that risk will likely impact a high percentage of Fortune 500 companies, says Rajesh Voddiraju, president and CEO of CVM Solutions, providers of supplier management tools. The company defines high risk as having a significant probability of failure to some aspect of their business within 12 months. Potential impact could mean interruptions in business operations, financial loss and damage to brand reputation.

This small group of suppliers is the result of years of strategic sourcing and supplier consolidation by purchasing operations at Fortune 500 companies, CVM says.   

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