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U.S. Apparel Suppliers Dwindling

A report by Panjiva, a New York-based firm that helps brands evaluate factories, says the number of foreign factories fell 85 percent in a year.

The number of apparel suppliers shipping to the U.S. dropped 85 percent this year.

WASHINGTON — The number of apparel suppliers shipping goods to the U.S. dropped precipitously in the year ending Oct. 31, falling more than 85 percent in the 12-month period.

There were 6,262 apparel suppliers actively sending shipments to the U.S. at the end of October, down from 43,653 a year earlier, according to a report being released today by Panjiva Inc., a New York-based firm that helps brands evaluate factories.

The report, drawn from U.S. Customs and Border Protection data and other sources, illustrates an accelerating drop in the number of apparel suppliers. The supplier count fell to 22,099 in July, 16,969 in August and 11,513 in September before tumbling to current levels.

Of those still-active factories, 40 percent are considered at risk and have been added to Panjiva’s Watch List, said Josh Green, chief executive officer of the firm. Suppliers included in the listing are those that have suffered a 75 percent or higher year-over-year drop in volume shipped to U.S. customers. The percentage of companies tracked by Panjiva that are on the Watch List also increased in recent months. In August, only 24 percent of suppliers showed steep enough declines in shipment volume to be considered risky, Green said.

“These numbers paint a frightening picture of the state of the world’s suppliers,” he said. “U.S. companies who maintain their customer base through the economic downturn may nevertheless find their survival threatened by the disappearance of their supplier base.”

The apparel industry had a “deer-in-the-headlights moment,” Green said. When faced with uncertainty about the economy, many companies reduced the size and frequency of orders they placed, which is a reasonable strategy for an individual company, he said. Problems arose, however, when that strategy became widespread.

“Put it all together and you have a situation where a lot of suppliers are not going to survive as a result,” he said. “That is bad news for the suppliers. But also, in the long run, it’s bad news for the buyers because when the market does pick back up, the buyers are going to look around and the supply base is not going to be where it was.”

The long-term impacts of a shrinking supplier base could affect the availability of product and the ability of importers to get product to market on time, said Eric Emerson, a trade attorney and partner with Steptoe & Johnson. That kind of uncertainty or variability will put pressure on companies trying to find qualified suppliers, he said.