New data from the Panjiva research team. Interestingly, our analysis of the U.S. shipping data through March seems to back up U.S. Treasury Secretary Tim Geithner’s recent claim that “the decline in world trade may be abating.” Specifically, from February to March, there was a slight increase in the number of companies shipping to U.S. customers (up to 120K in March, versus 118K in February). That’s the good news.
The bad news is that there is still a tremendous amount of risk in the system. At the end of March, as usual, we took a look at significant manufacturers, and we found that 30% of these companies qualified for the Panjiva Watch List, as a result of suffering a 50% or greater decline in volume shipped to U.S. customers during the most recent three month period, versus the same period a year ago.
Also, 40% of significant U.S. buyers have an active relationship with at least one Panjiva Watch List manufacturer.
The comparable numbers for February were similar: 29% of significant manufacturers were on the Panjiva Watch List, and 40% of significant U.S. buyers maintained an active relationship with at least one Panjiva Watch List manufacturer.
Bottom line… There’s some chance we’ve hit bottom, but it’s quite clear that we’re not remotely out of the woods yet.
Last week, President Obama warned that the United States is unlikely to return to its role as a “voracious consumer market.” If he’s right, the effect on global manufacturers is likely to be profound. Panjiva’s latest analysis of February shipping data illustrates this point.
From January 2009 to February 2009, in just a single month, the number of global manufacturers shipping to the U.S. dropped 10%, from ~131K to ~118K.
In case you’re wondering if it’s a seasonal thing, it’s not. In 2008, from January to February, there was a very slight increase in the number of companies shipping to the United States (from ~147K to ~148K).
At some point, the numbers have to start painting a rosier picture. However, for now, it seems clear that the global economy has not yet hit bottom.
- Watch List manufacturers are those that, during the most recent three month period, suffered a 50% or greater decline in volume shipped to their U.S. customers, versus the same period a year prior.
- Significant manufacturers are those that have sent 10 or more shipments to the U.S. by boat in the last 12 months, and at least one shipment by boat to the U.S. in the last three months. As of the end of February, there were ~93K significant manufacturers. (Note that this number is different from the number of companies that shipped to the U.S. during February. Not all significant manufacturers shipped in February, and not all companies that shipped in February are significant.)
- Significant U.S. buyers are those that have received 10 or more shipments by boat from overseas manufacturers in the last 12 months, and at least one shipment by boat from overseas manufacturers in the last three months. As of the end of February, there were ~78K significant buyers.
Questions? E-mail us at email@example.com.
Thought I’d share some of the recent mentions of Panjiva across the web.
“One in four major Chinese manufacturers shipped less than half as much to U.S. customers in November through January than they did a year earlier, [Panjiva CEO Josh Green] said.”
“Panjiva data shows that 132 of the Big Three’s overseas suppliers wound up on Panjiva’s watch list at the end of January 2009″
“Yesterday, Panjiva came out with news that paints a dangerous and ugly picture when it comes to the financial viability of global suppliers.”
“What can you do about supplier disappearing acts? I’d recommend a heathy dose of supplier risk preventive medicine to start, using both internal performance and quality related information as well as proactive third-party content from providers like Panjiva and D&B.”
Supply & Demand Chain Executive
“Panjiva analysis shows nearly half of large U.S. buyers doing business with troubled global manufacturers; ‘they never even tell you they are in trouble…they just disappear’”
After the announcement that Rick Wagoner is being forced out, the Panjiva team decided to take another look at shipments to GM from their global suppliers. About 10 days ago, we described the drop in shipments to GM from September of 2007 to January of 2009. It turns out, from January to February of this year, there was a further 6% drop in shipments to GM. Compared to February of last year, the number of shipments to GM is off 42%.
Methodological note: though this graph looks much the same as the previous GM graph (i.e., massive drop-off), there is an important difference. It turns out that we have data on shipments to GM’s Mexican operations, and this time around, we included these shipments in our analysis… Hence, more shipments across all time periods.
Today, the Wall Street Journal announced that the domestic auto suppliers are getting help. The Panjiva research team is looking into these domestic auto suppliers. In the meantime, take a look at the data on the Big Three’s relationships with their overseas suppliers. Indeed, shipments from overseas suppliers to the Big Three have dropped precipitously:
- In July of 2007, Ford received received 914 shipments from overseas suppliers. By January of 2009, this number had dropped to 514 shipments… a 44% decline from its July 07 peak.
- In September of 2007, GM received received 223 shipments from overseas suppliers. By January of 2009, this number had dropped to 84 shipments… a 62% decline from its September 07 peak.
- In November of 2007, Chrysler received received 342 shipments from overseas suppliers. By January of 2009, this number had dropped to 38 shipments… an 89% decline from its November 07 peak.
(If you compare January 09 to January 08, the declines are 25%, 50%, and 71%, respectively.)
These massive drop-offs in shipments from suppliers are indicative of diminished Big Three expectations about future sales. Not to be underestimated is the impact that these drop-offs will have on suppliers. Many of the Big Three’s overseas suppliers (132) were on Panjiva’s Watch List as of the end of January, as a result of suffering a 50% decline in volume shipped to U.S. customers in the most recent three month period versus the same period a year ago. That’s about 16% of the Big Three’s overseas suppliers.
Those charged with assisting the auto industry are right to worry about the health of suppliers. Even if consumer demand picks up, the Big Three will not survive if their supply chains disappear. However, it’s not just domestic suppliers that are in trouble right now — overseas suppliers are in trouble too.
PDF: Panjiva Analysis of Big Three Imports
Remember when American officials were worried about the safety of Chinese exports? How quickly the tables have turned. Chinese premier Wen Jiabao is “worried” about the “safety” of America’s most dangerous export: U.S. Treasury bonds.
Five months ago, I wrote about the parallels between China’s product safety crisis and America’s financial crisis. Today, there’s not much discussion about the safety of Chinese exports. Wouldn’t it be nice if, five months from now, no one’s worried about the safety of U.S. Treasuries?
Last month, we released data that highlighted the impact of the economic downturn on manufacturers around the world. This month the Panjiva research team focused on U.S. buyers, in order to get a sense of how many are exposed to significant risk by virtue of doing business with troubled manufacturers.
Specifically, we focused on the most active U.S. buyers — those receiving 10 or more shipments in the last year. It turns out that more than 1 in 3 of these buyers maintains an active relationship with an overseas manufacturer that is on Panjiva’s Watch List (as a result of suffering a 50% decline in volume shipped to U.S. customers during the most recent 3 month period, versus the same period a year ago).
- 28% of significant manufacturers (those sending 10 or more shipments to U.S. buyers in the last year) are on Panjiva’s Watch List.
- 38% of significant buyers received a shipment from a Watch List manufacturer within the last three months.
- 47% of significant buyers received a shipment from a Watch List manufacturer within the last six months.
As we look higher up the food chain, the numbers are even scarier:
UPDATE, 9 AM — I just shared these numbers with a supply chain manager at a major retailer; he responded:
“Interesting. Seems reasonable though given the number of suppliers I’ve seen go bankrupt recently…the worst part is they never even tell you they are in trouble or gone…they just disappear…”
Pessimistic, if not terribly surprising, 2009 predictions from the World Bank:
- Global economy will shrink for first time since World War II
- Global trade will shrink for the first time since 1982
If 2009 turns out the way that the World Bank predicts, it will be the year which illustrates both the success and failure of 20th century globalization. The success was in stitching the world’s economies together, so that a rising tide would lift all boats. The failure was either of imagination of or of will. Either we couldn’t conceive that all boats might sink at once — or we couldn’t muster the political will to create a mechanism for effectively responding to a global economic meltdown. Politicians will likely claim it was the former, but I think it was the latter.
Very interesting piece by The Economist on “The Collapse of Manufacturing.” It lays out the argument against government intervention to support failing manufacturers. The core macroeconomic point is right: “sectoral aid does not address the underlying cause of the crisis—a fall in demand, not just for manufactured goods, but for everything.”
However, I think the piece understates the risk that the widespread disappearance of manufacturers will further diminish aggregate demand. As factories disappear, workers lose their jobs and companies that depend on these factories go out of business — so even more workers lose their jobs. This growth in unemployment puts a damper on demand, further reinforcing the global economy’s downward spiral.
Nevertheless, there’s only so much recovery money to go around, and The Economist is probably right that there are better ways to spend this money than on failing manufacturers. That, of course, doesn’t provide much comfort to those who depend on manufacturers for jobs or for supplies.
It’s been a busy few weeks at Panjiva. We launched coverage of all industries, released new data showing the effect of the economic downturn on the global supply chain, and began working with a great new customer — The Home Depot®. Thought I’d share some snippets from the press coverage we’ve received:
“Josh Green, chief executive of Panjiva, said the number of Chinese suppliers shipping to US customers in December was 10 per cent lower than in December 2007.”
“The second dimension of the merchandise problem could affect product availability in stores, said Josh Green, CEO of Panjiva, a firm that advises leading U.S. retailers such as Home Depot on supply chain risks.”
“[W]e took a look at the suppliers that were still active as of the end of 2008… [C]ompanies [that] suffered a 50% or greater decline in the volume shipped to their American customers.. are on Panjiva’s Watch List, as they are in the greatest danger of going under.”
“Panjiva is not just innovative, it’s revolutionary.”
Supply Chain Management Review
“However, there’s good news for supply chain managers who are willing to confront risk head-on. While risk can never be eliminated, it can be significantly reduced through the intelligent application of information.”
“Green said of the firms he tracks, the number of global suppliers shipping to the U.S. dropped 13 percent in December compared with October 2007.”
“And sleuthing for answers has become a whole lot easier. Companies such as Panjiva provide tools which allow companies to identify overseas shippers, products and destinations.”