Nearly two-thirds of respondents to an exclusive Packaging World reader survey say their companies are seeking to reduce the number of their packaging suppliers. However, nearly a third of respondents say their companies expect to make no changes in the number of their suppliers.
This information comes from a detailed survey mailed to more than 1ꯠ selected PW readers and tabulated earlier this year. The questionnaire and the results from 111 responses were assembled and tabulated with the assistance of Market Research Support Services (Roselle, IL). Half of the questionnaires were mailed to readers with purchasing department titles, the remainder to others with titles in general company management.
The results reported here are not presented as being representative of either all manufacturers or of PW’s readership. All surveys were mailed to individuals at medium- to large-size companies. However, the responses used in this analysis closely match the geographical breakdown of all PW readers.
Of the total survey sample, 64.5% reported that their companies plan to reduce the number of suppliers (Chart 1), and Midwest companies appear to be the most aggressive about this. Just fewer than 75% of Midwest survey participants say their companies plan to reduce the number of vendors, and only 4.3% of them say their company plans to enlarge their vendor base.
That’s in contrast to respondents from the West. Although 43.8% report plans to drop the number of vendors, 37.3% say their companies have no plans to change the number of suppliers. However, 18.3% of Western companies will be looking to increase the numbers of suppliers.
There’s almost no difference among company plans when the survey asked about vendors for materials, machinery or services.
For those relatively few respondents at companies that plan to increase their vendor base, only 37.5% reported this as a stated goal. However, all of these companies have, in fact, added more vendors. Just 12.5% of these say this is a change in policy at their company.
This contrasts with those who say their companies plan to reduce their number of vendors. Nearly 81% say that fewer vendors is a clear goal, and 87.9% report their companies had used fewer suppliers in the last year (Chart 2). However, just 66% of respondents in the South say it’s clearly a company goal, compared to 85.7% of respondents in the West.
Progress toward fewer vendors is most evident in the Midwest, where 97% report fewer suppliers. That’s compared to 71.4% in the West, where more than a quarter of respondents report no change in number of vendors thus far.
Few or fewer?
The survey attempted to quantify the goals of the respondents’ companies. Here, the answers were somewhat less clear, but it’s obvious that company plans vary a bit (Chart 3). The greatest percentage of the companies seek to bring the number of packaging vendors down to “about five” (29.7%), but each of the target answers garnered at least a fifth of the responses.
Because of the sample size, Market Research Support Services says there is little true statistical difference between any of these responses. What the numbers do say, however, is that the move toward fewer vendors is serious. For example, 50% of the respondents from the South say their companies are hoping to trim their supplier base to just one or two, and 43% of respondents in the West reported the same. In the Midwest, however, only 9.1% of the companies planned to cut the number of suppliers that far.
For the most part, the even distribution of answers was true for all types of vendors. But some 45% of respondents hoped to cut materials vendors to three to five, while nearly 60% of respondents wanted to do the same for machinery suppliers.
More than just pricing
Next, the survey asked participants to write in the reason or reasons that each company wants to decrease the number of vendors. Naturally, the answers were wide-ranging because respondents were not provided a list of factors. However, despite the specific words used, most participants’ companies sought a price advantage (Chart 4 on p. 43). The specific answers put into that category included “price or buying leveraging,” “better price” and “price reduction.”
In creating this report, the author kept “cost control” as an answer separate from those who looked for better prices. This is because many of the answers included under “cost control” perceived the benefit as more of a purchasing system control, or broader than simply reflecting the prices received from fewer vendors doing more business with the company.
However, had “cost control” been combined with the next two most frequent answers, “improve efficiency” and “simplifying purchasing,” the total of these three responses would have been nearly equivalent to that of “price advantage.” “Improved inventory control” “technology advancements” and “consolidates billing” were other responses. Just a single respondent answered that the move to decrease the number of suppliers was due to “staff too small.”
Supplier mergers important
Finally, those respondents whose companies are decreasing their vendor base explained that mergers among suppliers were definitely important factors in their company strategy (Chart 5 on p. 43). Two-thirds of all respondents answered that consolidation among suppliers was important or very important, while only 8.3% responded that it was unimportant.
How the participants viewed this factor varied considerably by region. All of the respondents in the West and nearly 92% of respondents from the East said supplier consolidations were important or very important to their company’s efforts at cutting down the numbers of vendors. Participants from the South were less influenced by this factor. The survey continued with an exploration of partnerships between manufacturers and suppliers that is covered in a separate report.
See sidebar to this article: Purchasing gains big with reduced vendors
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