If your top supplier accounts for 60%, 70%, or 80% of what you buy, that's not a trusted supplier — it's a single point of failure. That's not just risk-management intuition: since May 2026, Brussels has been turning that exact logic into binding rules for strategic sectors, complete with hard dependency thresholds. Your business almost certainly isn't in one of those sectors, but the same question belongs in your spreadsheet anyway.
Here's the index regulators use to measure supplier concentration, why most importing SMEs have never run it on their own supplier base, and how to get your own number in under two minutes.
The index regulators use to measure concentration
The Herfindahl-Hirschman Index (HHI) is the standard the U.S. Department of Justice's Antitrust Division uses to measure how concentrated a market is: square each participant's share and add the results together. A market with a single supplier scores an HHI of 10,000; a market split evenly among many small suppliers approaches zero. Official guidelines treat an HHI between 1,000 and 1,800 as moderately concentrated, and anything above 1,800 as highly concentrated.
Run that same math on your own supplier list instead of a market, and it tells you exactly how dependent your business is on one or two players. It's the identical logic behind the European Commission's ReSourceEU plan, adopted on May 29, 2026 with €3 billion in funding: no critical component may depend on more than 30–40% of its supply from a single country, and affected companies must keep at least two or three alternative sources within the EU. The September 2026 European Council summit is being described as the first real test of whether this becomes binding law.
This isn't just a semiconductors-and-batteries problem
Brussels' plan targets sectors like clean energy, EVs, semiconductors, and defense — but the underlying problem it's trying to fix (over-reliance on one supplier or one country) is exactly what any wholesaler or importer with a SKU catalog and a handful of go-to suppliers is exposed to. A recent procurement-sector report found that fewer than 8% of companies say they have full control over their supplier risk exposure, while 73% report making progress on dual-sourcing strategies specifically to cut that dependency.
The difference is that a semiconductor manufacturer has an entire team dedicated to tracking this. A wholesaler running 200 SKUs through three suppliers in Asia usually has neither the number nor the time to look — until a delayed shipment, a unilateral price increase, or a factory shutdown reminds them why it mattered.
The math: work out your own supplier HHI
To calculate your supplier HHI, take the share of your purchase volume (by units or by euros) that each supplier represents, express it as a number between 0 and 100, square it, and add up every result:
HHI = Σ (each supplier's share, %)²
Illustrative example (sample figures — swap in your own in the calculator below): a wholesaler buying from three suppliers with shares of 65%, 25%, and 10% gets an HHI of 65² + 25² + 10² = 4,850 — well above the 1,800 threshold official guidelines flag as "highly concentrated". If that same wholesaler spread the same purchase volume across four suppliers at 30%, 25%, 25%, and 20%, the HHI would drop to 2,550 — still high, but no longer riding on a single supplier never having a bad quarter.
The number alone doesn't tell you what to do — but it does tell you whether the risk is worth a conversation with your top supplier about terms, or an active search for a second source before the next delay or price hike forces the decision on you with no room to maneuver.
Calculate your supplier concentration risk
Upload your purchase-order history as a CSV and get actual vs. quoted lead time per supplier. With a free account you'll also see your HHI concentration score and a reliability ranking for each supplier.
Go to the supplier order analyzer →What to do with this
- Recalculate your HHI at least once a quarter, not only after something has already gone wrong — concentration creeps up quietly as a convenient supplier absorbs more and more of your orders.
- An HHI above 1,800 isn't necessarily an emergency — it's a signal to start qualifying a second source for your highest-turnover SKUs, not to overhaul the whole catalog at once.
- Use the same number in negotiations: a supplier who knows they're your only source has far less incentive to improve lead time or price than one who knows you have an alternative.
Sources
- Official HHI thresholds: U.S. Department of Justice, Antitrust Division — "Herfindahl-Hirschman Index".
- ReSourceEU plan and the 30–40% single-country dependency cap (adopted May 29, 2026): Moncloa.com, "Bruselas califica de 'insostenible' la dependencia de China" .
- Share of companies with full control over supplier risk and dual-sourcing adoption: Procurement Magazine, "Five Ways to Reduce Supplier Risk in 2026".
The supplier shares and HHI calculation in the worked example are illustrative — built from sample numbers to explain the calculation, not a statistic about any industry. Swap in your own business's real numbers using the analyzer.