John Haystead
DALLAS—Driven by increased competition and concurrent demand to maximize per-customer sales while minimizing shipping costs, many contamination control, disposable apparel suppliers are broadening their product lines. Some are also acquiring or partnering with other suppliers to provide one-stop/one-vendor shopping. The result may be a significant change in the make-up of the disposables marketplace as manufacturers strive to meet the head-to-toe apparel needs of their customers.
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Many disposables companies are pursuing business strategies aimed at capturing a larger share of the disposable-apparel market across all user industries. The potential opportunities are huge. In 1999, The McIlvaine Co. (Northbrook, IL) measured the total worldwide cleanroom disposable apparel market at about $490 million, and the overall cleanroom glove market at $515 million, both of which are projected to grow at least 10 percent annually over the next 4 to 5 years. And, as noted by Bob McIlvaine, the market is still very fragmented, “with even the largest suppliers owning only a relatively small share of the total. There will be more acquisitions as the larger companies configure themselves to amass greater market share.”
One example is Kimberly-Clark's (Dallas) recent acquisition of glove-maker Safeskin (San Diego), making it together with Allegiance Healthcare Corp. (McGaw Park, IL) a head-to-toe-capable, disposable-apparel supplier.
Already a leading supplier of disposable apparel and other products to the healthcare sector, Kimberly-Clark's acquisition of Safeskin rounds out its product offerings, generating both marketing and business efficiencies.
“There's logical consolidation going on across the board in this industry — at the end-user level, at the distributor level, and within the supplier community,” observes Kevin Leak, marketing vice president at VWR Scientific Products (Westchester, PA). The trend is evident in Europe, where consolidation is further driven by the formation of the European Union, combining many previously fragmented national markets. Because most major end users are operating facilities in multiple EU member nations, they can gain economies of scale and management efficiency by working with the same supplier across multiple locations, streamlining purchasing procedures and reducing costs associated with ordering from different manufacturers or distributors.
Still, as Paul Hornbey, purchasing supervisor at NEC Semiconductors (West Lothian, Scotland), notes, NEC tends to do as much “cherry-picking” as one-stop shopping, so “the strategy of suppliers to broaden their product lines may or may not impact us.” Hornbey observes that “although you would expect a cost advantage with one-stop shopping, in fact, it's not necessarily there. Such other factors as level of service, local supply, and competitive quality are also important.”
Lorna Stephen, purchasing officer and cleanroom commodities specialist at NEC, echoes this view noting there are pluses and minuses to the one-stop shopping paradigm. “While there's certainly tremendous benefit for a commodities buyer to be able to go to one company and know that every product comes from the same source, there's also incentive to shop around for the best deal. We will still always go to whatever supplier has the product we want at the best price or service level that we need, and in that case we won't be influenced by one-stop-shopping opportunities.”
Last summer, several competing semiconductor companies with facilities in the United Kingdom formed an investigatory group to look at ways to combine and standardize on common disposable products and suppliers. The companies, which include National Semiconductor, NEC, Philips, ESM, Zetex, and Mitel, are members of the UK's National Microelectronics Institute (NMI), whose purchasing forum has begun examining approaches. According to Stephen, “In addition to better pricing and service, the objective of the forum's work is to achieve some level of product standardization, making it easier to compare products based on detailed specifications.”
“It's still unclear how successful such a multiple-company purchasing approach would be,” however, says Keith Findlay, UK cleanrooms sales manager at Metron Technology Ltd. (Basingstoke, Hants, UK). “While price advantage is a strong driver for customers looking for single suppliers for a wide range of products, or to acquire as many products as possible from the same suppliers, distributors don't represent every manufacturer, and in many cases customers are reluctant to change.” However, as a global supplier, consolidation is a mirror of Metron's strategy. Another consideration noted by Findlay is that distributors also have close, long-term working relationships with certain manufacturers, “making it an extremely sensitive issue were they to begin offering an additional supplier's product.”
Overall, Findlay describes the consolidation trend as “not unbeneficial” to distributors, though he points out that acquisitions or realignments could lead to one supplier being pitted against another within the distribution network. In the case of the Kimberly-Clark/Safeskin arrangement, this was not a factor, however, because Metron already represented both.
Another concern raised by observers is that vendor consolidation and the emergence of head-to-toe suppliers may ultimately lead to a bypassing of the distribution network altogether. Leak of VWR says this isn't going to happen, however. “Manufacturers simply don't have the required brick and mortar infrastructure in place to handle distribution. Distributors will always provide value to manufacturers, allowing them to deal with only several large distributors rather than 100,000 customers. Likewise, the value to users is that they can obtain a wide variety of products in a timely manner from a single source at competitive pricing, without having to make an up front investment in a large amount of inventory.”