Vendor concentration is the proportion of a business's spending that goes to a single supplier.
The trade-off
Concentrating spend earns better pricing, better terms, and priority when supply is short. Those are real advantages and they are why concentration happens.
The cost is that the business has no ready alternative. A price rise, a supply shortage, a change of terms, or the supplier failing all land with nothing in place.
Why it is the mirror of customer concentration
Customer concentration is the risk of losing revenue from one place. This is the risk of losing supply from one place, and it behaves identically: fine until it is not, and not gradually.
The difference is that customer concentration is widely understood as a risk and vendor concentration is generally not, because the relationship feels like an advantage right up to the point it is tested.
What it actually threatens
Price. A supplier who knows they are the only source prices accordingly, and the effect lands in cost of goods sold where it looks like inflation rather than a negotiating position.
Availability. Where they are short, the business is short, and there is no second account to fall back on — see stockout risk.
Terms. A supplier changing from thirty days to payment on collection creates an immediate working capital problem.
Reducing it without losing the benefit
A second account opened and used occasionally, so it exists and has trading history when it is needed. It does not need to be a large share; it needs to be live.
Knowing the alternatives for the items that matter most, rather than for everything.
Both are cheap in advance and unavailable in a hurry — see vendor management.