Toy Suppliers Disappearing?

Josh Green | February 10, 2009
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On Monday, Bloomberg reported that lots of Chinese toy suppliers went out of business in 2008.  Not surprising, given the various product safety incidents of the last few years, as well as the general economic downturn.  The real question is, what lies ahead  for toy suppliers, and the companies that work with them?

To answer this question, the Panjiva research team took a look at shipments whose commodity description included the word “toys.”

  • From October of 2007 to October of 2008, we saw a 10% decline in the number of companies sending “toys” shipments to American customers.
  • From November of 2007 to November of 2008, we saw a 13% decline in the number of companies sending “toys” shipments to American customers.
  • From December of 2007 to December of 2008, we saw a 25% decline in the number of companies sending “toys” shipments to American customers.

Obviously, this is not an encouraging trend.  In the months ahead, we’ll be keeping an eye on those companies that are still active.

In the meantime, if you want to browse through the 13,000+ companies that have shipped toys to the United States, check out Panjiva’s search results for “toys.”

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Reducing Supply Chain Risk – A Data Driven Approach

Josh Green | February 6, 2009
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These days, we’re receiving lots of questions about risk, how to identify it, and how to manage it.

Over at Supply Chain Management Review, you’ll find some initial thoughts on how to use data to identify and manage risk.  Specifically, I explore the strengths and weaknesses of financial data, operational data, and on-the-ground intelligence.  Not surprisingly, the most innovative companies are finding creative ways to leverage each of these classes of data as they seek to manage risk.  Read more.

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Chinese Factories Have “Deferred Reopening”

Josh Green |
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In today’s New York Times, there’s an interesting article by Keith Bradsher about workers in China that are struggling to find jobs as exports falter.  Citing information from an industry association, Bradsher writes that “many plants have deferred reopening for up to three weeks for lack of orders from the United States and Europe.”

Will “deferred reopenings” turn into permanent closures?  We’ll see in the months ahead.  In the meantime, the Panjiva research team took a look at how Chinese factories fared through the end of 2008.

  • From December of 2007 to December of 2008, we found that there was a 10% decline in the number of Chinese companies (Hong Kong and Mainland) shipping to American customers.
  • From November of 2008 to December of 2008, in just a single month, there was a 6% decline in the number of Chinese companies shipping to American customers.

My hunch is that the worst is yet to come.

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The Downturn Is Going Global

Josh Green | February 3, 2009
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Panjiva’s latest analysis confirms that weakening demand in the U.S. is having economic repercussions around the globe.  Our research team took a look at changes in the number of companies — across all industries — that are shipping goods to U.S. customers.  The numbers are not encouraging:

  • In October of 2007, approximately 179 thousand companies shipped to U.S. customers.
  • In December of 2008, approximately 156 thousand companies shipped to U.S. customers.
  • Thus, in a little over a year, there’s been a 13% drop in the number of companies shipping to U.S. customers.

We also took a look at the companies that are still serving American customers, and, again, the numbers were not encouraging:

  •  12% of the companies that shipped to U.S. customers in December suffered a massive decline in the volume shipped to their customers (50% decline in volume from Q4 of 2007 to Q4 of 2008).

More soon.  In the meantime, here’s a video summarizing our findings:

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Panjiva In The News

Josh Green | December 15, 2008
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A week ago, Panjiva released data showing that the economic downturn is decimating suppliers around the world, and we introduced new tools to help companies cope with the associated risk.  We appreciate the interest so many people have shown (see links to some of the coverage below).  We’ll be back with much more in Q1.  In the meantime, stay tuned for guest posts from a member of Panjiva’s technical advisory board.

Financial Times:

http://www.ft.com/cms/s/o/30c89a2e-c620-11dd-a741-000077bo7658.html

New York Times:

http://www.nytimes.com/external/gigaom/2008/12/08/08gigaom-panjiva-31244.html

Wall Street Journal:

http://blogs.wsj.com/runway/2008/12/08/the-daily-thread-abercrombies-sales-down-luxury-brands-modify-focus-uk-retail-sales-expected-to-drop/

CNN/Fortune:

http://money.cnn.com/news/newsfeeds/gigaom/startups/2008_12_08_panjiva.html

Forbes:

http://www.forbes.com/global/2008/1222/007.html

Gartner:

http://blogs.gartner.com/andrew_white/2008/12/10/%E2%80%9Cthere-is-information-gold-in-them-there-data-hills%E2%80%9D/

ARC Advisory Group:

http://www.arcweb.com/Domains/SCM/Lists/Posts/Post.aspx?List=7ae600da%2D7f89%2D41bb%2D8e5d%2D9838766ca24a&ID=154&RootFolder=%2FDomains%2FSCM%2FLists%2FPosts

About.com:

http://logistics.about.com/b/2008/12/05/finding-the-right-supplier-for-your-business.htm

GigaOm:

http://gigaom.com/2008/12/08/panjiva/

Ars Technica:

http://arstechnica.com/news.ars/post/20081210-downturn-hitting-tech-semiconductor-sector-hard.html

WWD:

http://www.wwd.com/business-news/us-apparel-suppliers-dwindling-1880152?justin=1880152

InformationWeek:

http://www.informationweek.com/news/internet/ebusiness/showArticle.jhtml?articleID=212300220

CIO:

http://www.cio.com/article/469565/Big_Supply_Chain_Troubles_in_China

SpendMatters:

http://www.spendmatters.com/index.cfm/2008/12/11/Supplier-Insight-That-Counts-Panjiva-Aims-High-Part-1

SupplyChainDigest:

http://www.scdigest.com/assets/On_Target/08-12-10-3.php?cid=2135

Logistics Management:

http://www.logisticsmgmt.com/blog/930000493/post/1790037779.html

Supply & Demand Chain Executive:

http://www.sdcexec.com/web/online/SourcingProcurement-News/Panjiva-Analysis-Shows-Economic-Downturn-Decimating-Global-Suppliers/27$10872

SupplyChainNetwork:

http://www.supplychainnetwork.com/?p=419

IT Governance, Risk, and Compliance:

http://itgrc.wordpress.com/2008/12/11/how-risk-management-tools-may-revert-decline-of-global-suppliers/

Enterprise Irregulars:

http://www.enterpriseirregulars.com/EI/34167

Alibaba:

http://news.alibaba.com/article/detail/apparel-news/100028342-1-apparel-industry%2527s-global-supply-chain.html

Home Textiles Today:

http://www.hometextilestoday.com/article/CA6621622.html

IT Professionals Database:

http://www.itpd.eu/panjiva-panning-for-gold-in-numbers

Sea Cargo Air Cargo Logistics:

http://scacli.blogspot.com/2008/12/apparel-industrys-global-supply-chain.html

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Is It Just China?

Josh Green | December 10, 2008
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On Monday, we released data showing the extent to which the economic downturn is decimating the global supply base.  Specifically, our analysis showed that there are fewer suppliers actively serving the U.S. market, and, of those that are active, many have suffered an alarming decline in the volume shipped to U.S. customers.

We’ve received questions about whether this is a China-only phenomenon.  The short answer is no.  Some statistics:

World: We saw a 72% drop-off in the number of active apparel suppliers from July to October.  Of those that remain active, 40% are on Panjiva’s Watch List, as a result of suffering a huge decline in the volume shipped to U.S. customers in the most recent three month period.

CHINA:  The comparable statistics for Chinese suppliers look much the same.  We saw a 69% drop-off in the number of active apparel suppliers from July to October.  Of those that remain active, 45% are on Panjiva’s Watch List.

Bottom line: the data suggest that this is not a China-only problem, but nor have Chinese suppliers been spared the pain that the global supply base is feeling.

Check out a related article over at MarketWatch.

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The Panjiva Watch List & The Panjiva Pain Index

Josh Green | December 8, 2008
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To get a sense of the impact of the economic downturn on global suppliers, the Panjiva research team took a look at the shipment data that we track, clean, and analyze on a continual basis using our proprietary algorithms.  The data suggest that the economic downturn is decimating suppliers.  Consider what we found in the apparel industry, a bellwether of global trade:

  • In October 2007, there were 43,653 companies that were actively serving the U.S. market.  (For these purposes, we consider a company “active” if it has shipped to a U.S. customer in the preceding three months.)
  • By July 2008, the number of active suppliers had dropped to 22,099.
  • By October 2008, the number of active suppliers had dropped to 6,262 — a 70% drop in just three months.
  • Of the 6,262 suppliers that were active as of the end of October, 40% suffered a year-over-year drop of 75% or more in volume shipped to their American customers.

To help companies spot suppliers that are at risk of failing, we are establishing the Panjiva Watch List.  This list includes each supplier that has suffered a year-over-year drop of 75% or more in volume shipped to their American customers.

Also, we will continue to track the industry-wide stats.  So that we can quickly communicate whether things are getting better or worse, we are introducing the Panjiva Pain Index – a number that gets higher as things get worse.  The Panjiva Pain Index is calculated by averaging two numbers: the percentage of suppliers previously considered “active” that became “inactive” in the last month, and the percentage of “active” suppliers that are on the Panjiva Watch List.

In August, the Panjiva Pain Index stood at 24.  The percentage of companies that went inactive was 23, and the percentage of companies on the Watch List was 24.

In September, the Panjiva Pain Index stood at 37.  The percentage of companies that went inactive was 32, and the percentage of companies on the Watch List was 41.

In October, the Panjiva Pain Index stood at 43.  The percentage of companies that went inactive was 46, and the percentage of companies on the Watch List was 40.

Questions?  Comments?  Let us know.

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The Effect of the Downturn on the Quota Conversation

Josh Green | November 26, 2008
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Two interesting articles by James Morrissey:

1) The first notes that Chinese authorities are providing assistance to struggling factories — and that this assistance is leading some to call for action against China when quotas disappear at the end of this year.

2) The second notes that the Bush Administration sees no reason to keep quotas in place for China — since China has not yet filled its 2008 quota.

Of course, the economic meltdown is behind both of these stories — it’s why China hasn’t shipped enough to fill its quota (no one’s buying!), and why Chinese authorities feel the need to provide assistance to factories (no one’s buying!).

In the weeks ahead, the Panjiva team will be researching just how bad things are for factories around the world. More soon.

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Responding to Cost Increases In China / IndustryWeek

Josh Green | November 24, 2008
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Over at IndustryWeek, you’ll find Panjiva’s thoughts about how to respond to price increases in China.

Given all the trouble that Chinese factories are having, are price increases really still a problem?  So far, yes.  Declining demand is leading to factory closures (see previous post), NOT downward pressure on wages.

Our IndustryWeek piece evaluates three strategies for responding to cost increases:

  1. Identify the “New China” (i.e., look to new countries)
  2. China is the New China (i.e., look at new regions within China)
  3. Leverage your suppliers’ networks (i.e., authorize subcontracting)

Would welcome your thoughts, here or over at IndustryWeek.

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Who’s Looking for New Factories?

Josh Green | November 20, 2008
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Today, I was asked, “Given the state of the economy, who’s looking for new factories?” Based on what we’re seeing at Panjiva, here’s the answer (factories, take note):

Growing companies

Yes, there are companies that are growing despite the problems in the economy. These companies are looking for factories to supplement the production capacity that’s been available to them, and they are looking for factories that can help them introduce new products. These customers, though hard to find, will be the most sought-after by factories.

Entrepreneurs

There are always entrepreneurs looking to get new businesses going. Some may be wary of starting a business in the current economic environment. On the other hand, these days being an entrepreneur isn’t much riskier than being, say, a banker… So expect to see a fair number of people taking the entrepreneurial plunge. Traditionally, factories have avoided working with entrepreneurs, because entrepreneurs place smaller orders and their growth is anything but certain. However, in this environment, order-starved factories will be more willing to work with entrepreneurs.

Companies under margin pressure

As I’ve noted in previous posts, lots of companies are facing significant margin pressures, thanks to declining consumer willingness to pay and increases in the prices of their inputs — particularly when their goods are manufactured in southern China. Some companies are trying to protect their margins by moving production to new, lower cost geographies. Plenty of factories will be interested in attracting business of this kind, but they shouldn’t be surprised when these companies move again, when yet another geography offers lower prices.

So, yes, there are companies that are looking for new factories. However, there’s no doubt that factories around the world are having to cope with smaller orders and fewer inquiries from potential customers. A painful situation, to be sure. More on this in future posts.

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