Short answer: a single origin or supplier becomes a business risk when a supply stop would cost more margin than you can absorb in the time it takes to bring in an alternative. Find out with a concentration review: for each product, its share of your gross margin, the share from the largest origin and the largest supplier, whether a substitute exists, how long an alternative takes to qualify, and how many weeks of stock you hold. Where the exposure is too large, price a second source honestly (qualification cost, price premium, quality variance) and choose between keeping it qualified but dormant or splitting volume. For some origin-linked products no substitute exists; there the controls are stock, contracts and telling customers early.
Single, sole and dual sourcing
Single sourcing means buying from one source although others exist. Sole sourcing means only one source exists. Dual sourcing means buying from two, in whatever proportion. The distinction matters because the remedies differ: single sourcing is a choice you can revisit; sole sourcing is a constraint you manage.
"Source" also has levels. One supplier in one origin, several suppliers in one origin, and suppliers in several origins protect against different failures, as the table further down shows.
Running a concentration review
Do this once a year per product, on one page:
- Gross margin share. Revenue share misleads; a high-volume, thin-margin line may matter less than a small specialty.
- Largest-origin share and largest-supplier share of that product's volume.
- Substitutability. Yes; yes with customer re-approval; or no.
- Weeks to qualify an alternative, from first enquiry to first usable delivery, realistically.
- Weeks of stock cover, including goods in transit that you control.
- Customer dependence. Would a gap lose a customer, or only a sale?
Then estimate the margin at risk in a stop: weekly gross margin multiplied by the weeks you would be without supply (qualification weeks minus stock cover, if positive). A product that is a large share of margin, drawn mostly from one origin, with a long qualification time and short cover, goes to the top of the list.
| Product | Margin share | Largest origin share | Substitute |
|---|---|---|---|
| Product A | High | Near 100% | Yes, with re-approval |
| Product B | Medium | 100% | No |
| Product C | Low | 60% | Yes |
Product A needs a decision; B needs a different kind of protection; C can wait for the next review.
Failure modes, and which second source helps
A second source helps only against failures it does not share with the first.
| Failure mode | Example mechanism | Second supplier, same origin | Second origin |
|---|---|---|---|
| Crop | Poor harvest, pests, quality failure across a season | Rarely | Yes, if seasons differ |
| Policy | Export ban, quota, minimum export price | No | Yes |
| Corridor | Port, canal or route disrupted | No, if same route | Only via a different route |
| Single supplier | Fire, insolvency, lost certification | Yes | Yes |
Policy. Exporting governments can restrict food exports quickly. Under the WTO Agreement on Agriculture, a member instituting a food export prohibition or restriction must give due consideration to importing members' food security and give the Committee on Agriculture written notice "as far in advance as practicable", but that discipline does not apply to developing-country members unless they are net food exporters of the product concerned WTO, Agreement on Agriculture, Article 12. One dated example: on 20 July 2023 India prohibited exports of non-basmati white rice under HS 1006.30.90 with immediate effect, and USDA reported that this category and broken rice together had been nearly 45 percent of India's rice exports in 2022 USDA FAS, GAIN report IN2023-0059. The ban was lifted on 28 September 2024, at first with a minimum export price of US$490 per tonne USDA FAS, Grain: World Markets and Trade, October 2024; USDA later reported that India removed its separate ban on broken-rice exports on 7 March 2025 USDA FAS, GAIN report IN2025-0023, April 2025. Its April 2026 annual continued to describe Indian rice exports as unrestricted USDA FAS, GAIN report IN2026-0019. The point is the mechanism, not the country: a buyer holding contracts for that category needed a second origin, not a second supplier.
Corridor. UNCTAD's Review of Maritime Transport 2025 reported that Suez Canal tonnage remained around 70 percent below its 2023 average, while longer routes increased delays, costs and emissions UNCTAD, Review of Maritime Transport 2025. A second origin shipped along the same route protects against crop and policy failures, not against this one. Longer routes also stretch stock cover, and a late or bunched arrival can leave too little time to clear goods before destination free time ends; see demurrage and detention explained.
What qualifying a second source actually costs
Diversification is not free, and the costs arrive before any benefit:
- Qualification. Specification alignment, samples, laboratory tests, supplier assessment (which can often be done without travel, within limits), and a first order at trial size, usually with worse freight per tonne.
- Documents and approvals. A new origin changes the certificate of origin and can change health, phytosanitary and destination-registration requirements; see the document set behind one shipment.
- Payment terms. A new supplier may not extend the terms an incumbent gives; see how much advance payment is reasonable.
- Price premium. The alternative is often the second-choice price for a reason.
- Quality variance. Different origin, different colour, flavour, particle size or moisture. Customers may need to re-approve, and blending or reformulation costs money.
- Management time. Two relationships, two sets of documents, two quality files.
Qualified-but-dormant
A dormant source is approved but not bought from: specification agreed, samples tested, documents on file, a small order placed once to prove the chain. Upkeep is modest: a sample refresh each season, certificates kept current, a call before each season to confirm availability.
Its weakness is that it is dormant for everyone. When the main source stops, other buyers call the same alternative. Expect a price premium, a partial allocation and a lead time before the first shipment. Its approval also decays: a crop year changes the product, certificates expire, and a supplier who never receives orders stops prioritising you.
Split volume, and what the incumbent will ask
Buying, say, 80 percent from the incumbent and 20 percent from a second source keeps both chains running. The second supplier knows your specification and documents and can scale up faster in a stop. The split also gives you a live price benchmark.
The incumbent will ask something in exchange. Expect the loss of a volume discount, a request for longer commitments on the remaining volume, or lower priority in a tight season. The second source will want a minimum volume to take you seriously. These costs recur every year, disruption or not.
A seasonal alternate, buying from a second origin only in the months when its harvest is fresher, is a middle way where harvest calendars differ.
When the origin is part of the product
For some products the origin is part of the specification. JECFA, the FAO/WHO expert committee, lists gum arabic (INS 414) as sourced from Acacia senegal and Acacia seyal WHO, JECFA database, gum arabic. An additive specification names species, not countries, so a second origin may be possible technically. But a customer's specification or approved-supplier list may name an origin, a species or a grade, and its product may behave differently with another. The same applies where colour, flavour or oil content is what the customer approved.
Where no accepted substitute exists, the options change:
- more stock cover, held where you control it, costed as carrying cost;
- several suppliers and routes within the one origin, which protects against supplier and some corridor failures;
- forward contracts with documented force majeure terms, read before you need them;
- customers told early, with an agreed allocation rule for a shortage.
Worked example: dormant versus split
Hypothetical teaching example. All figures are invented; the origins are unnamed on purpose.
A trader sells 2,000 tonnes a year of Product A at 550 CU per tonne, 1,100,000 CU, with a gross margin of 66 CU per tonne: 132,000 CU a year, or about 2,538 CU and 38.5 tonnes a week. All of it comes from Origin 1. The trader holds 6 weeks of stock. Scenario: Origin 1 supply stops for 20 weeks. A second source from Origin 2 costs 5 percent more, 27.50 CU per tonne.
No second source. Weeks 7 to 20 have no product: 14 weeks of margin (132,000 ÷ 52 × 14) = 35,538 CU lost.
Qualified-but-dormant. Qualification costs 8,000 CU once, and upkeep 2,500 CU a year. In the stop, the first shipment arrives in week 9 and covers 60 percent of volume.
| Loss item | CU |
|---|---|
| Weeks 7–8, no product | 5,077 |
| Weeks 9–20, 40% of volume missing | 12,185 |
| Premium on the 60% supplied | 7,615 |
| Total margin lost | 24,877 |
It saves 10,661 CU against doing nothing. The first year costs 10,500 CU; later years 2,500 CU. After year one, it pays if a stop like this is more likely than about one year in four or five (2,500 ÷ 10,661 = 23%).
Split 80/20. Same 8,000 CU qualification. Every year: 11,000 CU premium on 400 tonnes, 2,200 CU of quality variance (1 percent of that volume's value, for blending and claims) and 8,800 CU of lost volume discount (1 percent on the incumbent's 1,600 tonnes): 22,000 CU. In the stop, the second source reaches 70 percent of volume within the stock cover: 14 weeks with 30 percent missing lose 10,662 CU, and the premium on the extra 50 percent (the first 20 percent is already in the annual cost) is 7,404 CU, 18,066 CU in all. That saves 17,472 CU against doing nothing.
Split saves more in a stop but costs 22,000 CU every year, more than the 17,472 CU it saves even if the stop happened every year. On margin alone, dormant wins here. Split is justified only by what the margin figure leaves out: a customer who would leave during a 14-week gap, or the value of a live price benchmark. Write that judgement down rather than letting the arithmetic decide it silently.
Now suppose Product A were origin-specific and customers would not accept Origin 2. Neither option exists. The trader's choices are stock cover, several suppliers within Origin 1, and an early conversation with customers.
Reviewing the decision on a schedule
Put the concentration review on the calendar: annually, and before each season's contracting. Re-run it when a trigger occurs: a product's margin share rises sharply, the largest supplier changes owner or certification, an exporting government announces a measure, or a route's transit times move. A decision taken after an event is taken at the worst prices.
Common mistakes
- Measuring concentration by revenue instead of margin.
- Treating a second supplier in the same origin as protection against policy or crop failure.
- Assuming a dormant source will have capacity when every buyer calls it.
- Ignoring the incumbent's price response to a split.
- Qualifying a substitute the customer has never approved.
- Reviewing only after a disruption.
Limits and what to recheck
The example's premiums, costs and probabilities are invented; real ones depend on product, season and market. Export measures change quickly: check the exporting government's current notices and official summaries before relying on any example here. Shipping-route conditions cited are from UNCTAD's 2025 review. Contract force majeure and customer specifications are matters for your own legal and quality review. More guides in Sourcing & Supplier Management.
FAQ
What is the difference between single sourcing and sole sourcing? Single sourcing is choosing one supplier when alternatives exist; sole sourcing is having only one available. The first can be changed; the second has to be managed with stock and contracts.
What is dual sourcing? Buying the same product from two sources, either both active (split volume) or one approved and held in reserve (qualified-but-dormant).
How do you measure supplier concentration risk? For each product, compare its share of gross margin with the share from its largest origin and supplier, then estimate the margin lost between a stop and the arrival of an alternative, after stock cover.
Next step
Take your highest-exposure product and record its gross margin, weeks of stock cover, largest origin and supplier, and the time needed to qualify an alternative. Compare the cost of a supply gap with the cost of keeping a second source approved or splitting volume, and record which option you choose and why.
Resources
- World Trade Organization — Agreement on Agriculture, Article 12: Disciplines on Export Prohibitions and Restrictions — https://www.wto.org/english/docs_e/legal_e/14-ag_02_e.htm (accessed 23 September 2026)
- USDA Foreign Agricultural Service — India: India Bans the Export of Non-Basmati White Rice (GAIN IN2023-0059) — https://www.fas.usda.gov/data/india-india-bans-export-non-basmati-white-rice (accessed 23 September 2026)
- USDA Foreign Agricultural Service — Grain: World Markets and Trade, October 2024 — https://apps.fas.usda.gov/PSDOnline/Circulars/2024/10/Grain.pdf (accessed 23 September 2026)
- USDA Foreign Agricultural Service — India: Grain and Feed Annual (GAIN IN2025-0023, 2 April 2025) — https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Grain+and+Feed+Annual_New+Delhi_India_IN2025-0023 (accessed 23 September 2026)
- USDA Foreign Agricultural Service — India: Grain and Feed Annual (GAIN IN2026-0019, 2 April 2026) — https://www.fas.usda.gov/data/gain-report/2026/04/Grain%20and%20Feed%20Annual_New%20Delhi_India_IN2026-0019.pdf (accessed 25 October 2026)
- UNCTAD — Review of Maritime Transport 2025 — https://unctad.org/publication/review-maritime-transport-2025 (accessed 25 October 2026)
- WHO — JECFA database: gum arabic — https://apps.who.int/food-additives-contaminants-jecfa-database/Home/Chemical/865 (accessed 23 September 2026)
