Which indicator best highlights supplier risk due to reliance on a small number of suppliers?

• A. Delivery lead times
• B. Geographic risk
• C. Supplier concentration
• D. Compliance inspections

Answer: (C)

Concentration risk in the supplier base is the main idea here. When a company relies on only a few suppliers for critical goods or services, any disruption—like a supplier shutdown, financial trouble, or capacity shortfall—can stop or slow production. Measuring supplier concentration shows how much of the total spend or essential components come from a small number of suppliers, signaling when the risk of disruption is high. A high concentration means a single supplier issue could have a large impact, so this indicator best highlights supplier risk due to limited sourcing options and drives actions such as diversifying suppliers, dual sourcing, or contingency planning. Delivery lead times reflect overall supplier performance but don’t necessarily reveal how concentrated the supplier base is. Geographic risk looks at location-related exposure, which matters for regional events but not directly the reliance on the number of suppliers. Compliance inspections relate to a supplier’s adherence to standards rather than the breadth of the supplier base.