Essay on UK CO2 Shortage: Operations and Supply Chain Management

This essay examines the 2018 carbon dioxide (CO2) shortage in the UK, a crisis that significantly impacted the food and beverage industries. It explores the causes of the shortage, including factory shutdowns, high natural gas prices, and reduced ammonia production, and details its effects on production, retailers, and end-users, such as the closure of KFC outlets and supply disruptions to pubs. The essay applies supply chain management theories and models to analyze the situation, including economic models for demand forecasting and the economics of scale. It also discusses strategies for mitigating risks, such as flexible supply bases, backward integration, and the importance of supplier evaluation, warehouse facilities, and alternative suppliers. The analysis emphasizes the need for companies to improve their supply chain management to prevent future disruptions, ensuring a smooth flow of materials during crises.

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Operation and Supply Management
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Shortage of carbon di oxide in UK

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Carbon di oxide is mainly used in the drinks and food processing industries; it can be found in
soft drinks, cider or beer and also used in preserving items like salads and poultry items. The
shortage of gas in UK leads to manufactures and end users in trouble and reason behind this
problem is ineffective supply chain. The sources through which this gas is produced are limited
that are bio-ethanol plants, European filter plants, and two plants in UK out of five plants are
currently operating. The main cause that has been highlighted through analysis is problem in
supply chain, in UK out of five suppliers currently two are operating, whereas the medium or
source of getting CO2 in UK is only through these plants due to that many of the big firms felt
the impact (Mikhailova, 2018). The production and operation of the big firms affected due to
shortage of gas because these firms have one supplier to supply gas that lead to stoppage of
production or slowdown in their production process, because of that supply of some product in
the market is low and demand of the products are more than the supply (D'Eusanio, et al., 2019).
There are too many factors behind the shortage in supply of CO2; Firstly many factories across
Europe shut down at the same time, secondly natural gas prices are higher that leads to limited
production in the UK, third factor is that the fall in prices of ammonia influenced fertilizer
producer to import it from other countries instead of producing it in home country, so that leads
to decrease in production of CO2 as this gas is by product from the fertilizers producers.
The shortage of CO2 impacted many of the firms in UK, mainly to the beverages and food
industry. The gas is used in preserving food, to make things frozen in transportation and to make
frizzy drinks. Further the end users that are customers are not getting the products on time and
due to that consumption of these products reduce in the peak time that is in summer (Busch &
Shrivastava, 2018). In the UK market there was shortage of chicken due to inadequate supply of
CO2 and due to that most of the KFC branches were closed. Most of the poultry plants are facing
problem of shortage of gas due to that 60 percent of poultry processing could be affected in
upcoming days in UK. Due to shortage, supply of the drinks in approximately 1000 pubs in UK
could be cut off within few days all these pubs are operated under Wetherspoons. Gas shortage
in Europe seen at the highest level due to warm weather and World cup, that time demand of
drinks and beers are more than normal days (Cambridge, 2018).

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Companies like Coco-Cola paused there production process because of gas shortage and this
signifies that supply of drinks in the market is going to decline in few days. Prices of most of the
product has increased, Pepsi Max increase their prices by 8 percent. Short supply of gas
impacted many of the users including retailers and end users, even this impacted the production
of goods such as drinks, poultry items and frozen items (Hotten, 2018).To ensure regular and
uninterrupted supply of gas, and it is needed to build an effective supply chain management. The
methods and model of supply chain management are discussed below that will be helpful in
overcoming the problem of shortage of gas in the UK.
In considering the above case of shortage of CO2 in UK, this shortage impacted on the flow of
goods in the economy and in UK market. Consumers are facing trouble in order to get the drinks
and poultry products. Prices of some products increase due to higher demand and low supply of
the product in the market. KFC shut few outlets on temporary basis because chicken is not
supplied on the outlets as carbon di oxide is needed in order to frozen and preserve poultry items
(Hotten, 2018). Drinks in pubs are not supplied due to interruption in production and operation
chain of the companies. This interruption in supply chain due to raw material shortage affected
the company’s profit and sales.
Supply Chain for CO2 gas
Source: (Fredendall & Hill, 2016)
By products from
chemical processes
Power Generation
Plants
CO2 Produced
(Suppliers )
Transported
through ships,
pipelines
Network and Hubs
Purified and
Stored(transporta
tion and storage) Preserve foods
To make fizzy
drinks
Big firms(coco-
cola, Pepsi)
Used in Industry
(Buyers)
Buy fizzy drinks
End users
Pay for products
Raise demand
Consumers

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Supply chain management is the process that integrates activities of production with each other
that starts with getting the right suppliers that supply products, services and information that add
value to end product to satisfy the customers or stakeholders (Hugos, 2018). To ensure the
regular supply of CO2 gas companies should opt for the economic model to forecast the demand
of material required in upcoming years. Companies in future should opt for the method of
economics of scale. Purchasing the raw material in bigger lots is beneficial for the company it
allows to take advantage of economies of scale at a stage of supply chain management
(Giannakis & Papadopoulos, 2016). The economics of scale can be achieved by the buyers of
raw material as they purchase gas in larger lots and store it, ordering in larger lots helps in
reducing the transportation cost and also firms can get quantity discounts. When purchasing is
done in bigger lots and consumption is in smaller amount the inventory level in an organization
can be maintained through this method that will be helpful in dealing at time of crisis or shortage
of raw material. Maintaining average inventory and re ordering at this level can make the supply
chain management more effective.
In this era of Just in Time, carrying more inventory ensure the smooth supply of raw material at
the time of crisis and there should be multiple sources or suppliers with the companies a in case
of gas shortage, many companies faced problem related to supply of gas that interrupted their
production and the output in the market. Companies should opt for flexible supply base method
in order to overcome the major disruption in supply chain so that various alternatives can be
available to them or the companies which require CO2 in bulk quantity should opt for the
backward integration strategy and start their own plant to produce CO2. This method helps in
handling the demand fluctuation of a product and to maintain continuous supply of the raw
material when any crisis happen (Fahimnia, et al., 2015).
Companies can be prepared to face the issues like shortage and disruption in supply chain
through their effective and efficient supply chain and production method. Firstly company
should double check their supplier’s ability to deliver on time and whether they have ability to
deliver material at the time of crisis that planning help in overcoming the future shortage.
Checking out and evaluating supplier’s supply chain is the good strategy before finalizing the
supplier (Heizer, et al., 2017). Proper warehouse facilities in order to facilitate bulk buying as
when manager gets to know that there will be crisis they can store material to ensure smooth

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supply chain. Use PESTEL analysis for identifying macro factors that will affect the supply
chain so that steady actions can be taken to overcome that problem, monitoring all this
environmental factors ensure uninterrupted supply chain. Lastly, company should build a list of
alternative suppliers, in the case existing supplier is not able to fulfill the orders alternative
suppliers can fulfill it. Improvement in logistics, warehousing and production process helps in
overcoming all the problems related to material shortage and make supply chain more effective
(Ivanov, et al., 2017). Further, the re order level of inventory and average inventory to be stored
should be altered as to implement the method of economics of scale so that cost of ordering and
cost of carrying can be reduced and safety stock can be maintained that ensure continuation in
the production even at the time of shortage of material.
Conclusion
Shortage of CO2 affected the production and flow of goods in the UK. Most of the companies
shut their operation and production for temporary basis in order to avoid unnecessary cost. The
main factors behind this shortage were closure of plants at same time across Europe that produce
carbon do oxide gas, reduced prices of ammonia and at present few operational plants in the UK.
All these factors interrupted the supply of CO2 to the market. Companies faced many problems
due to shortage because of ineffective supply chain management as companies should have
analyzed this shortage and responded by changing their operational activities or supply chain
model. Companies can opt for economics of scale method that includes bulk buying and
reduction in cost of production because of bulk buying companies can get additional discounts,
carrying cost of material can be reduced and ordering cost is less as compare to buying in smaller
lots. So all that changes in operation can ensure effective supply chain management in the
company and ensure smooth flow of material during crisis or shortage.

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References
Busch, T. & Shrivastava, P., 2018. The global carbon crisis: Emerging carbon constraints and
strategic management. New York: Routledge.
Cambridge, E., 2018. Why is there a CO2 shortage in the UK, what is causing it, when will it end
and what happens if we run out of carbon dioxide?. [Online]
Available at: https://www.thesun.co.uk/news/6639642/co2-shortage-running-out-carbon-dioxide/
[Accessed 10 July 2019].
D'Eusanio, M., Zamagni, A. & Petti, L., 2019. Supply Chain Management: Methods and Tools.
Journal of Cleaner Production , 62(18), pp. 12-21.
Fahimnia, B., Tang, C. S., Davarzani, H. & Sarkis, J., 2015. Quantitative models for managing
supply chain risks. European Journal of Operational Research, 247(1), pp. 1-15.
Fredendall, L. D. & Hill, E., 2016. Basics of supply chain management. s.l.:CRC Press.
Giannakis, M. & Papadopoulos, T., 2016. Supply Chain Sustainability: A risk management
approach. International Journal of Production Economics, Volume 171, pp. 455-470.
Heizer, J., Render, B. & Munson, C., 2017. Operation Management. US: Pearson Education.
Hotten, R., 2018. CO2 shortage: Why it really matters for the UK's food and drink supply.
[Online]
Available at: https://www.bbc.com/news/business-44613652
[Accessed 10 July 2019].
Hugos, H. M., 2018. Essentials of supply chain management. New York: John Wiley & Sons.
Ivanov, D., Dolgui, A., Sokolov, B. & Ivanova, M., 2017. Literature review on disruption
recovery in supply chain. International Journal of Production Recovery, 55(20), pp. 6158-6174.
Mikhailova, A., 2018. What caused the UK's carbon dioxide shortage?. [Online]
Available at: https://www.telegraph.co.uk/news/2018/06/22/caused-uks-carbon-dioxide-
shortage/
[Accessed 10 July 2019].

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