U.S. companies now use fewer overseas suppliers

Preliminary results from a study by the data-analysis firm Panjiva confirms what many have suspected: U.S. companies cut their global supply base last year in response to the worldwide economic downturn.

Panjiva, a provider of sourcing data and analysis based in New York City, New York, USA, analyzed trade data for waterborne shipments coming into the United States. After examining that data from the fourth quarter of 2007 through the fourth quarter of 2008 across all industries, analysts found a 13-percent decline in the number of suppliers shipping parts or products to the United States during that period.

In addition, Panjiva said that 12 percent of overseas suppliers to U.S. companies suffered a 50-percent decline in shipment volume in the fourth quarter of 2008 compared to the same quarter in 2007. The drop was the steepest at the end of 2008, when suppliers shipping to the United States saw a 5percent decline from November to December.

"These numbers, while not surprising given the economic climate, provide a glimpse into the challenges global suppliers will face in the first half of 2009," said Panjiva CEO Josh Green. He said that he also forecasts a significant drop in the total number of shipments to the United States and expects to see a number of global suppliers close their businesses this year. "As a result, companies must work to drive risk out of their global supply chains by identifying suppliers who are failing and creating alternative sourcing strategies," Green added.

For more commentary on this topic, see Panjiva's blog.