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Density tends to help supply chains until it hurts supply chains.

Density of demand supports high volume distribution at lower per unit costs and, potentially, higher revenues. Dense demand allows for concentration of resources that can be managed more efficiently and effectively.

Dense consumer markets often feature rapid fluctuations in demand. Example: Greek yogurt went from being 1 percent of yogurt sales in 2007 to capturing 44 percent of the market in 2013. Social networks, especially in younger, more affluent, urban markets can fuel sudden shifts.  Agile supply chains can benefit.  Others will be left far behind.

Concentration also causes congestion, George Stalk and Petros Paranikas write in Harvard Business Review:

Longer commute times are just one sign that congestion is creeping into our lives. Highways and bridges are in desperate need of repair, making travel slower—and more dangerous. Our overburdened air-traffic-control system struggles to deal with increasingly crowded skies. Port congestion is a growing problem, exacerbated by the new super-size container ships that take far longer to unload than older, smaller ships. “Expect delays” has become the recurring theme of our transportation system.

Functional and geographic concentration of processing and logistics to reduce delays and facilitate efficiency and agility can increase other risks.  The benefits of "logistics clusters" have been persuasively demonstrated by Yossi Sheffi and others.  The potential pit-falls are too often discounted.  Putting all one's eggs in a single basket increases systemic vulnerability no matter what.