Carbon Dioxide Shortages Bite, Highlighting Procurement & Supply Chain Issues

The carbon dioxide shortage has gone from being a bit of a humourous news story in the UK to a really serious matter for many businesses, who are now seeing real problems that will affect revenue and profit.

Carbon dioxide is used in carbonated drinks, beers and soft drinks, as well as in the meat processing industry and other areas of food manufacturing.

The Food and Drink Federation has warned that “choice will be eroded" this week for shoppers in the UK. Their spokesman said on the BBC Radio 4 Today programme: "We will see fewer chicken dishes, fewer pork and bacon dishes. We'll see probably less carbonated drinks and certainly bakery and other things that benefit from what's called modified atmosphere packaging, which is plastic packaging with a tray underneath and a dish of food in them."

Luckily however in pubs it is only beers delivered under pressure that are affected - Wetherspoons said they were running short of beers including John Smith's, Amstel and Moretti as well as Strongbow cider. No problem for real ale served from cask by hand-pump or gravity, I’m pleased to say.

Coming back to the cause of the problems, the gas is produced as a by-product from other chemical processes such as fertiliser manufacture. The problem is that several plants have entered largely planned short-term shutdowns at the same time, reducing supplies dramatically.

So here are a few procurement observations.

- Are larger buyers getting priority over smaller in this case? It is important to understand just how important you are to your suppliers; when something like this happens, you will find out, but it is good to understand that in advance of problems!

- Materials or indeed services that seem pretty inconsequential, and wouldn’t get much focus in your Kraljic analysis, can suddenly look very “strategic” when you can’t get hold of them! Maybe CO2 was identified as a “bottleneck” item by some, but we would bet that many firms and buyers never really thought about the consequences of supply failure.

- Which plays into risk management of course. It would be fascinating to know if supply chain risk management platforms – such as that offered by riskmethods – picked up those factory shutdowns and gave clients early warning of the problems.  As we’ve said before, even if there is a problem, knowing about it before your competitors can provide real competitive advantage.

- Category management strategies should have addressed issues such as single or multiple supply for the product, optimum stock holding levels, whether the suppliers of CO2 should be part of an SRM (strategic relationship management) programme and so on. Presumably specification is not a huge issue here, CO2 we assume is CO2, but are there alternatives?

- This has also highlighted another interesting “procurement with purpose” CSR-type issue – maybe it will come up at our Pub Debate on Thursday (still a few places left, so book your place now via this link). The head of campaign group Compassion in World Farming (CIWF) wants the UK government to ban the use of CO2 in slaughterhouses, saying it is a myth that using CO2 to kill pigs and poultry is kinder.

All interesting points, and again we’re seeing procurement and supply issues hitting the front pages. It’s a shame it only seems to happen when there is a problem, but let’s hope this is another chance for procurement professionals to demonstrate their worth to their organisations.

Voices (2)

  1. Rosemary Marshall:

    The real scandal is the use of CO2 in slaughterhouses for stunning purposes. This gas is highly aversive to animals especially pigs, causing fear, and tremendous burning sensations for the wretched creatures. One would have thought that if we really were a nation that cared for animals this would be an area where the scientific advise of 20 years ago would have been followed. There are other alternatives available. It appears that, as usual, we prefer not to think about this consequence of our inflated demand for meat.

    1. Peter Smith:

      Rosemary, I do agree. As I get older, the more I feel that I should be a vegetarian (i do eat less meat these days), and we owe it to our fellow animals on this planet (at the very least) to make their deaths for our selfish needs as pain free as possible. I should say that my colleague Nancy Clinton has been vegetarian for animal welfare reasons since long beofre it was common or fashionable, and I’m ashamed to say I thought she was a bit weird in that regard when we first met back in the last century. Now i realise she was a. morally right and b. ahead of her time.

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