Work out supplier concentration risk instantly with clear inputs, formula shown and shareable results.
Concentration ratios CR1 and CR5 measure how much spend sits with the largest and the top five suppliers. High concentration delivers leverage but creates a single point of failure, while a very low average spend per tail supplier signals a consolidation opportunity rather than a risk.
Concentration ratio
CR1 % = Largest supplier spend / Total spend x 100
Top five share
CR5 % = Top five spend / Total spend x 100
Average tail spend
Average tail = Total spend x (100% - CR5) / (Suppliers - 5)
Not necessarily. It buys volume leverage and reduces management cost, but it demands business continuity planning and a credible alternative source.
A long tail with tiny average spend is a cost problem rather than a risk problem, and is usually the best consolidation opportunity.