The financial crisis has created an supply chain crisis, says The Economist. As demand for cheap goods from China collapses in the West, one by one Chinese manufacturers go bust, which means that many companies are left without suppliers. What used to be a banking crisis is now a manufacturing crisis and may soon be a supplier crisis.
Some die, some survive
Nonethless, it’s not all bad, according to The Economist.Your competiors misfortune may actually be your fortune:
Today’s lack of demand creates the spare capacity that allows customers to find a new supplier quickly if theirs goes out of business.
So, while before demand had the suppliers stretched to the limit, now the lack of demand has resulted in an abundance of leftover suppliers competing fiercly for any available contracts. In other words: a buyer’s market. Or is it?
Fewer suppliers, fewer choices
According to a recent article in BusinessWeek, supplier woes may actually mean fewer choices for shoppers
Companies concerned about the future are cutting back their shipments, which is having a big impact on the supply chain, he said, leaving stores struggling to figure out which vendors are stable and which are not.
Suppliers that survive will focus on their main items and are not going to take chances on new products. Suppliers are likely to go lean, and worse:
Production streamlining and cost cutting by clothing makers could ultimately mean the disappearance of some labels from store shelves.
So, if you had to change your bank recently, soon you may also have to settle for a new favorite shirt,since you ‘old’ favorite shirt supplier is no more. “Change” is coming here, too.
