collaborationwith customers and suppliers to ensure coordinated action. Simi-larly, a company concerned with dependence on a complex supply network could work on flexibility in sourcingby identifying alternative sources, flexibility in manufacturingby reducing lead times, and anticipationby recognizing early warning signals of possible disruptions. Based on the re-sults of their SCRAM analysis, managers can develop a portfolio of capabilities to address im-portant resilience gaps and strengthen overall competitiveness.15SUPPLY CHAIN VULNERABILITY FACTORSOur framework includes six major vulnerability factors, each broken into subfactors. Vulnerabilities are typically inherent to the business and difficult to avoid.VULNERABILITY FACTORDEFINITIONSUBFACTORSTurbulence Environment characterized by frequent changes in external factors beyond the company’s controlUnpredictability in demand, fluctuations in currencies and prices, geopolitical disruptions, natural disasters, technology failures, pandemicsDeliberate threatsIntentional attacks aimed at disrupting operations or causing human or financial harmTerrorism and sabotage, piracy and theft, labor disputes, special interest groups, industrial espionage, product liabilityExternal pressures Influences, not specifically targeting the company, that create business constraints or barriersCompetitive innovation, government regulations, price pressures, corporate responsibility, social/ cultural issues, environmental, health and safety concernsResource limits Constraints on output based upon availability of the factors of productionRaw material availability, utilities availability, human resources, natural resourcesSensitivity Importance of carefully controlled conditions for product and process integrityRestricted materials, supply purity, stringency of manufacturing, fragility of handling, complexity of operations, reliability of equipment, safety hazards, visibility of disruption to stakeholders, symbolic pro-file of brand, customer requirements for qualityConnectivity Degree of interdependence and reliance on outside entitiesScale and extent of supply network, import/export channels, reliance on specialty sources, reliance on information flow, degree of outsourcingNOTE: A company is indirectly vulnerable to disruptions that affect its multiple tiers of customers and suppliers. The framework can also be used to assess the resilience of selected external organizations.
84 MIT SLOAN MANAGEMENT REVIEWWINTER 2015SLOANREVIEW.MIT.EDUR I S K M A N A G E M E N TCAPABILITY FACTORDEFINITIONSUBFACTORSFlexibility in sourcing Ability to quickly change inputs or the mode of receiving inputsCommon product platforms, supply contract flexibility, supplier capacity, supplier expediting, alternate suppliersFlexibility in manufacturingAbility to quickly and efficiently change the quantity and type of outputsProduct/service modularity, multiple pathways and skills, manufacturing postponement, changeover speed, batch size, manufacturing expediting,