What does supplier dependency refer to?

Supplier dependency refers to the reliance of a buyer on a specific supplier for key products or services. This concept highlights the critical nature of the relationship between the buyer and the supplier, emphasizing that the buyer's operations, product offerings, or overall strategy may be significantly reliant on that one supplier's ability to deliver. This can create a situation where the buyer faces increased risk if the supplier encounters issues such as disruptions, price increases, or changes in terms, as there are limited alternative sources available.

Understanding supplier dependency is crucial for buyers to manage their supply chain effectively and to devise strategies that mitigate risks associated with over-reliance on a single supplier, thereby encouraging strategies such as supplier diversification or development of contingency plans.