Collaboration with customers and suppliers to ensure

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collaboration with customers and suppliers to ensure coordinated action. Simi- larly, a company concerned with dependence on a complex supply network could work on flexibility in sourcing by identifying alternative sources, flexibility in manufacturing by reducing lead times, and anticipation by 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. 15 SUPPLY CHAIN VULNERABILITY FACTORS Our framework includes six major vulnerability factors, each broken into subfactors. Vulnerabilities are typically inherent to the business and difficult to avoid. VULNERABILITY FACTOR DEFINITION SUBFACTORS Turbulence Environment characterized by frequent changes in external factors beyond the company’s control Unpredictability in demand, fluctuations in currencies and prices, geopolitical disruptions, natural disasters, technology failures, pandemics Deliberate threats Intentional attacks aimed at disrupting operations or causing human or financial harm Terrorism and sabotage, piracy and theft, labor disputes, special interest groups, industrial espionage, product liability External pressures Influences, not specifically targeting the company, that create business constraints or barriers Competitive innovation, government regulations, price pressures, corporate responsibility, social/ cultural issues, environmental, health and safety concerns Resource limits Constraints on output based upon availability of the factors of production Raw material availability, utilities availability, human resources, natural resources Sensitivity Importance of carefully controlled conditions for product and process integrity Restricted 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 quality Connectivity Degree of interdependence and reliance on outside entities Scale and extent of supply network, import/export channels, reliance on specialty sources, reliance on information flow, degree of outsourcing NOTE: 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 REVIEW WINTER 2015 SLOANREVIEW.MIT.EDU R I S K M A N A G E M E N T CAPABILITY FACTOR DEFINITION SUBFACTORS Flexibility in sourcing Ability to quickly change inputs or the mode of receiving inputs Common product platforms, supply contract flexibility, supplier capacity, supplier expediting, alternate suppliers Flexibility in manufacturing Ability to quickly and efficiently change the quantity and type of outputs Product/service modularity, multiple pathways and skills, manufacturing postponement, changeover speed, batch size, manufacturing expediting,

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