Vendor Concentration Calculator

The most dangerous sentence in a supply-chain review is "we have multiple suppliers." Multiple suppliers on a slide can still mean one supplier in reality, if that one holds the overwhelming majority of the volume and the others are token second-sources kept warm but never scaled. Counting heads tells you nothing; you have to weigh the distribution. That's exactly what the Herfindahl–Hirschman Index does — it squares each share before summing, so the big players dominate the score and a long tail of small suppliers barely registers.

The same index that antitrust regulators use to judge whether a market is too concentrated measures whether your supply base is too concentrated, with the same thresholds: competitive below fifteen hundred, concentrated above twenty-five hundred, monopoly at ten thousand. And its reciprocal gives an even more intuitive figure — the effective number of suppliers. A seventy-twenty-ten split has three names but an effective count under two. That reframing ends a lot of comfortable illusions in a single number.

Concentration matters because the largest share is the size of the hole a single disruption can blow in your supply. A sole source is a coin flip on continuity; even a dominant seventy-percent supplier means most of your volume rests on one entity's fab, finances and geography. The cure is diversification, but with sharply diminishing returns — the first split to a real dual-source buys most of the resilience, while the fifth vendor barely moves the index and adds qualification cost and management overhead. Enough resilience, not maximum fragmentation, is the goal.

Use this calculator to measure where you actually stand: enter the shares, read the HHI, the effective number, and your single biggest exposure, and test what an added or rebalanced supplier would do. Then layer on disruption likelihood in the Chip Supply Risk Analyzer and geographic concentration in the Taiwan and China risk calculators.