Tag Archives: shortage

Root Cause Analysis - Incident Investigation

Chocolate Makers Warn of Possible Shortage

By Kim Smiley

Chocolate is one of the most beloved foods, but it may be becoming a little too popular.  Major chocolate makers have warned of a possible chocolate shortage looming in the near future.  According to a recent article by the Washington Post, “The world’s biggest chocolate-maker says we’re running out of chocolate”, the world consumed about 70,000 metric tons more cocoa last year than it produced.  The chocolate deficit is also predicted to get worst.

The chocolate shortage is a classic example of supply and demand in action.  The demand for cocoa is rising at the same time that the supply is dropping.  The price consumers are paying for chocolate is already increasing and is likely to get significantly higher if these trends continue.

So why is demand increasing (beyond the obvious fact that chocolate is delicious)? Part of the answer is that it is trendy to include chocolate in a wider variety of foods such as savory gourmet dishes, liquor and breakfast cereal.  Even the already questionable potato chip has been covered in chocolate to the delight of many.  The increasing popularity of dark chocolate also comes into play because dark chocolate contains significantly more cocoa than typical chocolate. (An average chocolate bar is about 10% cocoa while dark chocolate bars are usually closer to 70%.)  The sheer number of people who are eating chocolate is also growing as chocolate is more widely available worldwide, particularly in Asia where chocolate consumption is increasing rapidly.

While demand continues to grow, supply is decreasing.  Drought in West Africa, where the majority of the world’s chocolate is grown, has impacted the cocoa supply.  The plants are also being attacked by diseases; the most noteworthy is a fungus called Frosty pod, which is reducing the crop further.  The nature of chocolate trees also makes responding to difficult or changing growing conditions challenging because it takes them years to mature.  With the difficulties facing chocolate trees, many farmers are turning to other crops that are more profitable which reduces the production of cocoa.

The end result of higher demand for chocolate will likely be further increases in the price of chocolate.  It’s also likely that chocolate makers will continue to develop candy that includes non-chocolate ingredients such as nuts, raisins or nougats to meet the demand for treats while using less actual chocolate.  Additionally, farmers are working to develop new strains of cocoa that are resistant to disease and drought and/or produce more cocoa per plant, which would increase the supply of cocoa.

A Cause Map, a visual root cause analysis, can be used to show the causes that have contributed to the chocolate deficit. To view a high level Cause Map of this example, click on “Download PDF” above.

Root Cause Analysis - Incident Investigation

Dangerous Combination: Propane Shortages and a Bitterly Cold Winter

By Kim Smiley

Propane shortages and skyrocketing prices in parts of the United States have made it difficult for some homeowners to affordably and consistently heat their homes this winter.   The brutally cold winter many regions are experiencing is also worsening both the causes and effects of the shortages.

A Cause Map can be built to help understand this issue.  Cause Maps are a visual format for performing a root cause analysis that intuitively lay out the causes that contributed to an issue to show the cause-and-effect relationships.  To view a high level Cause Map of this issue, click on “Download PDF” above.

Why have there been recent propane shortages in regions of the United States?  This question is particularly interesting given the fact that propane production in the United States has increased 15 percent in the past year.   One of the reasons that propane prices have dramatically increased is because of a spike in demand.  There was a larger than normal grain crop this fall, which was also wetter than usual.  Wet grains must be dried prior to storing to prevent spoiling and propane is used in the process.  Local propane supplies were depleted in some areas because five times more propane was used to dry crops this year than last.   About 5 percent of homes in the United States depend on propane for heat and the unusually frigid temperatures this winter have resulted in additional increases in propane demand.

In addition to the increase in demand, there have been issues replenishing local supplies of propane quickly enough to support the increased demand.  There have been some logistical problems transporting propane this winter.  The Cochin pipeline was out of service for repairs, limiting how quickly propane could be transported to areas experiencing shortages.  There were rail rerouting issues that impacted shipments from Canada.

Additionally, many are asking questions about what role propane exports have played into the domestic shortages.   Propane exports have quadrupled in the last 3 years.  New mining techniques and improved infrastructure have made exporting propane to foreign markets more lucrative and companies have begun to ship more propane overseas. As more propane is shipped to foreign markets, there is less available for use in the United States.

The propane shortages are an excellent example of supply and demand in action.  Increasing demand combined with decreasing supply will result in higher prices.  Unfortunately addressing the problem isn’t simple. There are very complex logistic and economic issues that need to be addressed, but if people don’t have access to affordable heating, the situation can quickly become dangerous, or even deadly.  In the short term, lawmakers are taking a number of steps to get propane shipped to the impacted areas, but how the US chooses to deal with this issue in the long term is still being debated.