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Risk in Context

Supply Chain Back to Basics and the Carbon Dioxide Shortage

Posted by David Tate 17 July 2018

The recent carbon dioxide (CO2) shortage affecting businesses across the food and drink industry is expected to have long–term effects despite the resumption of supply. Experts at the Food and Drink Federation, the main industry body, suggest that even though production has resumed at a number of sites, the length of the supply disruption will cause long-lasting impact[i].

CO2 is widely used in the food processing and drinks industries playing a critical role at multiple points in the food chain. It is used as a way to stun livestock before slaughter, in the food manufacturing industry; processors add it to packaging to extend the shelf life of items such as salads, bread products, meat, and poultry; and in the drinks industry, CO2 is added to beer, cider, and soft drinks. Distributors also need it to create dry ice, which is used to keep products chilled while they are in transit[ii]. The CO2 shortage is a good example of how a small element of a process can be pervasive across an entire sector, and cause wide-reaching business interruption when supply is disrupted.

Building Resilience

Building a detailed understanding of the whole supply chain is essential for responding to the unexpected. In a dynamic operating environment, which is open to shock and interruption, companies should:

  • Determine current production processes and incorporate them into the value chain map in order to align supply chain flows with the value chain components.
  • Take time to map, understand, and assess the risks related to each component of the supply chain on the basis of internal/external taxonomy, including both the upstream suppliers and downstream logistics providers.
  • Ensure that risk connectivity and level of exposure are identified.
  • Understand what pinch points and single points of failure could occur, and identify the contingency plans that are in place to address them.
  • Determine what contingency measures are available to ensure supply chain resilience and individual suppliers’ continuity.
  • Engage with tier-one, tier-two, and tier-three suppliers to be able to identify, assess, and exert control over the risks arising within these outsourced elements of the supply chain.
  • Build relationships of transparency and trust with your suppliers and seek long-term strategic partnerships — this is critical when a shock incident occurs.

A greater understanding of your suppliers is critical for competitiveness, reputation, and for the protection of your balance sheet.

 

[i] Food and Drink Federation. CO2 Shortage Statement, available at https://www.fdf.org.uk/news.aspx?article=8034, accessed on 11 July 2018.

[ii] The Guardian. CO2 Supply Issues May Trigger Meat Shortage, Processing Industry Warns, aavailable at https://www.theguardian.com/business/2018/jul/02/co2-supply-issues-may-trigger-meat-shortage-processing-industry-warns, accessed on 11 July 2018.

Related to:  Retail & Wholesale

David Tate