It makes sense to give your best suppliers a good chunk of your business. But if you rely too heavily on a small number of suppliers, you can really paint yourself into a corner.
Many of peers appear to be doing just that. A new benchmark report from CAPS Research revealed some troubling findings about supplier dependency.
Here’s what the report discovered:
- Only 18% of companies have a formal policy that limits how much business they can give to one supplier, and
- Less than 50% of companies track supplier dependency.
To avoid becoming too dependent on a single supplier, experts suggest that companies draft a policy which limits the amount of business you can give one supplier to around 35%.
Readers, does your company have a limit on how much business you can give a single supplier?