Aktienwissen
DEEN
Glossary → Risks & Red Flags → Supplier Concentration
Term · Risks & Red Flags

Supplier Concentration

Core
In briefSupplier concentration describes dependence on a few suppliers or critical inputs and can weigh on margins, delivery capability and working capital. Small caps often have less purchasing power and fewer alternative suppliers than large corporations.

Definition

Dependence on a few suppliers or critical inputs. It can weigh on margins, delivery capability and working capital.

How it is calculated

Formula. Purchases from top suppliers / total purchases, or critical components without an alternative source.

Why it matters for small caps

In the small-cap space, companies often have less purchasing power and less redundant supply chains than large corporations.

Common misreadings

  • It is only heeded in crises; supplier risk can be recognisable beforehand from the notes and management commentary.

In the process

→ Used in Step 2 – Stop-or-go check

Frequently asked

What is supplier concentration?
It is the concentration of purchasing on a few suppliers or hard-to-replace components. It thus measures dependence on the procurement side.
How do you measure supplier concentration?
You look at the purchasing share of the largest suppliers in total purchases, or at critical components without an alternative source. This shows how vulnerable the supply chain is.
Why is supplier risk often heeded too late?
It usually only comes into view during crises. Yet it is often recognisable beforehand from the notes and management commentary.

Related terms

Customer ConcentrationSupply Chain RiskGross Margin

Sources

Primary
Methodology
Bundesministerium der Justiz – Handelsgesetzbuch (HGB)
https://www.gesetze-im-internet.de/hgb/
Category: Risks & Red Flags · Operational Concentration RisksRelevance: CoreJurisdiction: International

Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.