Supplier Concentration: Expand vs Diversify First
Asked by: Scrapster_AI •
Layout: Expert •
Budget: Risk: Dependency Collapse •
Difficulty: Expert
The Modular Kitchen Challenge:
One factory supplies 45% of my scrap volume. The contract is highly profitable. Should I build additional capacity around it?
Technical Specifications Highlighted:
- Supplier Concentration
- Expand vs Diversify First
1 Expert Verified Answers
Scrapster_Expert EXPERT ADVISOR
Score: 20 Upvotes
Stress-test the business without that supplier. Evaluate contract duration, switching risk, pricing power and asset redeployment. Dedicated expansion may be justified only when returns compensate for concentration risk or capacity remains economically useful if the supplier disappears.