All credit to this post goes to Will Oremus and his story ‘What everyone’s getting wrong about the toilet paper shortage’.
Am I really going to talk about toilet paper? YES. Yes, I am. As mentioned on this blog last week, Economics is a passion of mine. And this, having a lot to do with economics, is something I find interesting.
If you’ve been living on planet earth at all during the past month, you’ll likely have noticed a distinct lack of toilet paper… everywhere. First it was being written off as panic buying. Photos circulated the web of people purchasing hundreds of rolls of toilet paper at a time, and bragging about it to their social media profiles. Others got caught in viral videos fighting over it in grocery store aisles. If you weren’t quick to run to the store, you might not have even found it at all.
Leaders and celebrities, people of influence and grocery store owners encouraged everyone to calm down, stop panic buying and start thinking rationally. Store after store after store promised there was no issue with the supply chain and there wasn’t a shortage, ‘we just weren’t prepared for the entire country to go out and panic buy hundreds of rolls at a time’.
This didn’t just happen here in Canada, it seemed to be happening across the world. For weeks jokes have been flying that ‘corona virus doesn’t give you diarrhea’ and though the large-scale panic buying mania has largely subsided, the toilet paper aisle is still bare.
The other aisles have been restocked. And, in a lot of cases other aisles have been restocked two or three times over at this point. But somehow, even with limits of how much someone can purchase, the toilet paper aisle is still empty.
The fact of the matter is, panic buying aside, COVID-19 has created an increase in demand for toilet paper. It is… somewhat of an essential in most homes in 2020 around the world. Could we live without it? Probably. Do we want to live without it? No.
Think back to a pre-COVID world. Times were calm. Large chunks of the population were in school or at work for 6-12 hours (or more) a day. And even after they returned home, they might opt to go out for dinner. Take their kids to hockey practice, or have some sort of an event that would keep them out of their home for even longer during the day.
The ‘residential’ toilet paper supply chain is built to work 24 hours a day, 7 days per week to produce precisely what was needed pre-COVID. The residential toilet paper supply chain is not built to function for the high demand of most of the world staying home 24 hours a day, 7 days of the week.
People aren’t going to the bathroom more now than pre-COVID. What has changed is that people are going to the bathroom more at home.
In his piece, Oremus explains that there are two distinct supply chains for toilet paper. Manufacturing plants that make the toilet paper that winds up in our grocery stores are not the same manufacturing plants that create the toilet paper that winds up in schools, in office washrooms, in the mall washrooms, and so on and so forth. For instance, Charmin is making toilet paper for the home but they are not in the business of making the large scale, industrial style single-ply toilet paper you find in public washrooms. They’re different products, made from different materials in different assembly lines in different manufacturing plants.
So, as we around the world are seeing empty shelves, still, when we wander the toilet paper aisle in our local grocery stores, there’s a large subsection of the economy that could very well have a surplus of toilet paper sitting around in storage closets and warehouses. This is because the ‘commercial’ toilet paper supply chain doesn’t need to supply commercial businesses and public facilities with toilet paper when these businesses and facilities aren’t open and people are staying home.
As of today, April 7th 2020, the residential supply chain for toilet paper is not meeting demand the commercial supply chain for toilet paper doesn’t seem to have a demand.
What’s the answer?
There isn’t really one.
Toilet paper is a relatively value-less product from a manufacturing standpoint. From the manufacturing perspective you make it, you ship it to the grocery store and then you make more. You don’t make heaps of it at a time to create massive stockpiles for times of higher demand because firstly, it is not going to bring any extra value to your company, and secondly it has a shelf life.
I know that’s a weird concept to think about, toilet paper having a shelf life, but overtime toilet paper does break down.
Essentially, if you’re Charmin or Royale or any of the big players… or even the small players, it’s not going to serve the company well to create more than what demand requires.
Are Charmin or Royale or any of the players in the toilet paper manufacturing industry going to up their game or double production for the foreseeable future? Maybe. Some might try. But there is a possibility that they don’t bother. COVID-19 doesn’t come with a ‘this is how long you have’ notification. From a business perspective, there are countries already ready and trying to open back up their schools, economies and lives. It’s a very real possibility that a lot of these companies continue producing for the demand they’ve always been producing for, forcing society to adjust.
If any company does try to adjust to meet this new demand in grocery stores then in two, three or four months time they could be out a considerable loss when the world rebounds and starts going back to work and school and hockey practice. They’ll have a hyper productive assembly line to create for demands that are no longer there. Which is taking a massive gamble on a relatively worthless product in a very unstable world.
Are the commercial manufacturers going to switch their production to create the stuff sold in grocery stores? No. Bottom line, they don’t have the infrastructure, the machinery, or the supply chain opportunities to do so. They also don’t have the relationships with grocery stores to sell their products and put their products on shelves.
Could you get your hands on some of the commercial product for your home? Possibly. If you’re savvy or have business connections. If you’re a regular joe like the most of us, it might be difficult. You might have better luck just phoning the store before you go to ask when their toilet paper is being restocked.
Bottom line, Oremus summed up pretty nicely nearing the end of his piece:
If there’s any good news, it’s that we can stop blaming these shortages on the alleged idiocy of our fellow consumers.Will Oremus, Marker
This shortage of toilet paper could go on for months. While panic buying might have started the shortage, increase in demand is what has kept this shortage going.
You will see shelves restocked and new product making it through the supply chain during that time. But, there is a very real possibility the shelves will be restocked only to be emptied again and again and again. The increase in demand will be difficult to meet in the current COVID world.
What a year it’s been so far. Had you told me three months ago that toilet paper would simultaneously be one of the most worthless and most valuable products available on the market, I’d have probably laughed in your face.
I just know this shortage is going to wind up in a textbook eventually. Economic professors everywhere are already planning it.
If anyone has read this, I strongly recommend reading What Everyone’s Getting Wrong About the Toilet Paper Shortage by Will Oremus. Not only does he explain it a lot more professionally than I do, he mentions some other supply chains that will likely see disruptions over the next few months.