The Toilet Paper Supply Chain!

Toilet Paper

Our recent trips to Costco and Walmart, in mid March 2020, had one thing in particular in common. Both stores were sold out of toilet paper, with no knowledge as to when more was coming in to the store.

A few weeks ago, in mid February 2020, when the panic was starting to set in with respect to the Coronavirus we saw some people buying a lot of toilet paper. At the time we bought more packages than we should have, just in case, not realizing there was going to be a full blown run on toilet paper.

This seems to be the story everywhere, even on Amazon. Every store is sold out of toilet paper. Why is it sold out? It’s such a common product that’s merely made out of paper. Does it all come from China, where their factories are shut down? Is that the problem?

In light of the current situation we thought it was time to learn more about the Toilet Paper Supply Chain.

Supply

Aside from the current Coronavirus pandemic and the associated crisis level response the supply of toilet paper is virtually never an issue. It is a commodity that is always in stock. Typically 83 MILLION rolls of toilet paper are made per day!

Stores replenish supply on generally stable demand signals and patterns. Demand is generally neither seasonal nor sporadic. Manufacturers make toilet paper based on those demand signals in a very predictive manner.

The majority of toilet paper sold in North America is manufactured in North America. Given that there has not been a massive shutdown in America factories the lack of supply cannot be attributed to temporary factory closures. As it is the manufacture of toilet paper is a highly automated process with relatively few employees required to oversee such an operation anyways.

There is also nothing particularly challenging or unique about the manufacture of toilet paper nor its Supply Chain. Any problems with manufacturing, aside from industry wide factory closures, would typically be resolved very quickly. The paper used for this product is also derived from softwood and hardwood trees which are also not suddenly in short supply, general environmental impact concerns notwithstanding.

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According to the New York Times, about 10% of the supply of giant rolls of paper used in making toilet paper for North America does come from China and India. Certainly disruption in Chinese manufacturing and transoceanic logistics could have caused some shortages.

But that’s not a lot relatively speaking given that domestic manufacturers have the ability to increase capacity, even if just for the short term. One of the largest toilet paper producers in the U.S., Georgia-Pacific, for instance is increasing short term production. Similarly in Canada suppliers are working overtime to meet the short term spike in demand.

In general then the current shortage situation is not attributable to a disruption in supply but rather an extraordinary and sudden shift in demand.

Demand

According to trueplumbers.com the average person uses about 20,000 sheets (or 100 rolls) of toilet paper per year. In the U.S. citizens use about 3 rolls per person per week.

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Of further interest is that about 4 billion people in the world don’t even use toilet paper.

Generally demand is stable. Aside from population growth, whether driven organically or through immigration, there are typically modest increases in annual demand.

So why are stores running out of toilet paper now?

The Coronavirus pandemic has resulted in people becoming sick and dying, people being quarantined, factories being closed, work being disrupted, and normal every day life being upended all over the world.

As the pandemic has spread throughout Europe and North America the number of cases is escalating and accelerating on a daily basis. Governments and companies are taking more and greater measures to require social distancing in the hopes of stopping the spread of the virus and “flattening the curve”.

Travel has been curtailed. Border movement is being restricted. Events are being cancelled. People are working from home. Factories are being closed. Health care systems are being overrun.

And uncertainty prevails.

This uncertainty has translated into fear and panic. In the face of the unknown, with the knowledge that factories and general supply lines have been disrupted, and with the possibility of being quarantined or socially isolated for an indefinite amount of time, people have started to panic.

That panic has resulted in individual consumers scrambling to secure a supply of goods that they find most critical to day to day survival. And one of the items on the top of that list is toilet paper.

So even though day to day consumption of toilet paper has not changed people have elected to stockpile and hoard any supply of toilet paper they can get given a perception that there may be a shortage. This has created a somewhat self-fulfilling situation. There actually is a short term shortage on store shelves now because this level of paranoia has fed on itself. As people have seen less product on store shelves they have become increasing fearful of a lack of supply.

At the same time the travel and tourism industries have experienced an unprecedented drop in demand due to restrictions associated with attempted containment of the Coronavirus. Air travel, hotel bookings, cruise ship travel, and tourism in general will show a reduction in demand, which will also include in a reduction in demand for toilet paper.

In the medium term this demand situation will sort itself out. The current spike in demand, despite no change in actual day to day consumption, means that consumers will start to deplete the stockpiles they have accumulated over time. Once people have acquired their stockpile they will most likely not replenish it beyond their levels of actual consumption.

Additionally as the Coronavirus comes under control demand in the travel and tourism industries will start to return to normal levels.

Supply and Demand in Balance

In time the level of supply and demand will return to a level of equilibrium. Personal stockpiles will be depleted, manufacturers will produce at more predictive levels and consumers will buy product off of fully stocked shelves at any retail location.

The Coronavirus pandemic has created a human response which has totally disrupted the normally stable, and inconsequential, toilet paper Supply Chain.

Who would have guessed that the toilet paper Supply Chain would be a casualty of the global pandemic?

Originally published on March 17, 2020.