How to Build a Supplier Diversification Strategy

The pandemic exposed the fragility of single-supplier supply chains for businesses of every size. Supplier concentration is a risk that needs to be managed deliberately.

Assess Your Current Concentration

Map what percentage of your product cost comes from each supplier. If any single supplier represents more than 50% of COGS, you have a concentration risk that warrants attention.

Develop Backup Suppliers for Key SKUs

For your top-selling SKUs, identify at least one backup supplier who can produce to your specifications. Qualify them through a sample process and understand their lead times, MOQs, and pricing.

Geographic Diversification

Single-country manufacturing creates geopolitical and logistical concentration risk. Developing relationships with suppliers in alternative countries — even for a portion of volume — provides optionality when tariffs or disruptions affect your primary source.

The fix: Identify your top three SKUs by revenue. For each, confirm whether you have a qualified backup supplier. If not, make qualifying one a Q1 priority.