Dependence on a single supplier is measured by the turnover it can stop

20 October 2026, 09:42

The risk of depending on a single supplier does not show up in purchases. A component can be worth a few euros out of everything bought in a year and, if it is missing, block the delivery of products that bring in a large share of sales. On 20 October the Financial Times reported that the Japanese government has asked the United States to help it persuade China to ease its export controls on yttrium, and that officials in Tokyo fear a severe shortage as early as the end of the year.

A component that weighs little in purchases can stop a whole line

Yttrium is a rare earth: it is used in the coatings that protect jet engine turbine blades from heat, and in the tools with which semiconductors are made. Since November 2025, after a diplomatic rift between Beijing and Tokyo, China has all but halted its exports to Japan, as Reuters reported on 24 September 2026. Mahnaz Khan, of the American think tank Silverado Policy Accelerator, described it to Reuters this way: it is a small rare earth, but it can stop the production of a car or a jet engine.

The same mechanism applies to every business that assembles. A finished product can be delivered only when all its components are there. If one is missing, its price hardly matters: the incomplete product stays in the warehouse, together with the revenue it would have brought in. This is why a ranking of suppliers by amount purchased puts the most delicate supplies right at the bottom: the cheap ones, bought in small quantities, that come from a single source.

Bills of materials show which sales come to a halt

The right measure starts from the bill of materials, the list of materials and quantities needed to make a product. The procedure has three steps: - list the components that come from a single source, or from several suppliers who all buy them from the same manufacturer; - using the bills of materials, find, for each of those components, the finished products that contain it; - add up the turnover those items have brought in over the last twelve months.

The result is the exposed turnover: the share of sales that would stop if that component did not arrive. Next to it goes the contribution margin of the same products, meaning what is left of their revenue after variable costs. It is the sum that would go missing, week after week, to pay rents, salaries and the other fixed expenses while those products are not going out.

An example. A company that builds woodworking machinery has a turnover of €11 million a year and buys from a single distributor a sensor worth 0.4% of its purchases. The bills of materials show that the sensor goes into machines that brought in 40% of sales over the last year. That share of turnover depends on a part that barely shows up in purchases.

The typical mistake is counting suppliers from the invoices

Two distributors with two different company names look like two sources. Often they are not: if they buy from the same manufacturer, or from a single country, when that source is cut off both are left without goods. In the list of single-source components, what counts is therefore the origin of the goods, not the name of whoever issues the invoice. Each distributor is asked who it buys from.

A second mistake is judging a component by its price alone. A part that costs little and has only one source stays good value as long as deliveries continue. A complete assessment sets alongside the price the exposed turnover and the time needed to replace it: finding a second supplier, testing its supply, sometimes having it approved by the customer.

In a company's own accounts dependence is read in turnover and in weeks

For each component with a single source, three numbers are needed: - the exposed turnover of the products that contain it; - the weeks of production that the goods already in stock can cover; - the weeks it would take to qualify a second supplier, that is, to have its supply tested and approved.

When the goods in stock cover fewer weeks than it takes to get a second supplier, for the whole of the difference the deliveries of those products depend solely on the current source. The exposed turnover says how much that dependence is worth; the two measures in weeks say how long it lasts.

That leaves the question to put to one's own figures: what share of last year's turnover passed through a component that comes from a single source?

This article was prompted by a news item published in the Financial Times on 20 October 2026.