B0294: Supplier Concentration Risk Framework

Context

Context: single-source dependence after a merger makes setting supplier concentration thresholds hard because teams interpret supplier share, lead time variability, and quality defect rate and contract terms, dual-source feasibility, and inventory buffers differently. Without a shared frame, the cost efficiency versus resilience tradeoff stays implicit and accountability erodes. A structured decision record is required so future reviews can challenge assumptions without restarting the debate.

Options

• Option A: Hold current policy and document gaps in supplier share, lead time variability, and quality defect rate while avoiding immediate operational change.
• Option B: Introduce a controlled pilot with contract terms, dual-source feasibility, and inventory buffers checkpoints and escalate if the cost efficiency versus resilience signal weakens.
• Option C: Commit to a full redesign, aiming for structural gains with significant execution complexity.

Decision

Decision: Choose Option B. Validate assumptions for contract terms, dual-source feasibility, and inventory buffers, confirm supplier share, lead time variability, and quality defect rate baselines, and proceed only if the cost efficiency versus resilience tradeoff remains acceptable. Document diversification thresholds and timing, owners, constraints, and review dates to keep accountability clear.

Rationale

Rationale: Option B balances the cost efficiency versus resilience tradeoff while preserving flexibility. It tests whether supplier share, lead time variability, and quality defect rate respond as expected to contract terms, dual-source feasibility, and inventory buffers before committing to a full rollout, reducing the risk of locking in a costly path based on weak evidence. The staged approach also creates learning loops and makes governance confidence easier to sustain over time.

Risks

• Delayed data refresh can mask shifts in supplier share, lead time variability, and quality defect rate and cause late responses to emerging risks.
• Execution slippage can erode confidence and widen cost efficiency versus resilience costs before corrective action is taken.

Next

Next: Assign owners for supplier share, lead time variability, and quality defect rate and contract terms, dual-source feasibility, and inventory buffers, finalize baseline values, and publish trigger thresholds. Schedule the first review checkpoint, define escalation paths, and document stop conditions so the decision can be revisited quickly.