Could Toilet Paper Manufacturing Come To A Halt In Two Months? It's Possible If People Don't Stop Panic Buying

Graph showing level of demand on toilet paper compared to other goods.


According to a recent WSJ piece:

https://www.wsj.com/articles/relax-america-the-u-s-has-plenty-of-toilet-paper-11584388168

Toilet paper production could conceivably come to a full stop in 2 months if people fail to come to their senses and cease panic buying. Why?   The mass stockpiling of toilet paper is now forecast to cut  manufacturers' sales down the road, or even destroy their profit margins.    In the words of one manufacturer of a popular brand:

"We've all seen photos of people carrying shopping carts filled with toilet paper out of stores. They probably won't buy more for three to four months. " 

The last sentence portends what the companies all fear is a  "demand shock"  which will strain the system, and indeed could send it off the tracks.   Think of it, the plants and mills are cranking this stuff out 24/7 to try to meet a truly aberrational demand not based on reason or need (i.e. the average couple needs only 2 rolls per week, so 144 rolls in multiple large packages would last them 72 weeks or nearly  1 1/2 YEARS.)

According to the same CEO:

"We purchase large rolls from mills and our equipment cuts and packages them into the designated end product like toilet paper or kitchen towels, depending on the quality of the paper.  

Most mills are operating 24 hours, 7 days a week operations already. They are running on fixed capacity.  It's not like there's an idle machine that can be cranked up to increase production." 

The last point is the most critical for consumers to grasp.   In addition, that this fixed production capacity for the paper plants is offset by a different fixed capacity for retailers like Krogers, King  Soopers or Safeway.  The latter is spelled s-p-a-c-e.  Toilet paper takes up a lot of space, and there is only so much space even in a large supermarket or wholesale operation like Costco.  If these retailers allow all the toilet paper that can be delivered to sit there taking up hundreds of cubic feet of space, there won't be room to store other products people also need.   This is especially given toilet paper is relatively low cost compared to other products that can be stored like toiletries, or meats (in cold storage). 

This condition of limited space for the retail outlets means they can only afford to keep a set amount of inventory on hand. Even if all the toilet paper made by the all  companies could be delivered  expeditiously to retailers  -  who might need the added amounts for desperate shoppers-  there's no way they'd be able to find the space to put it.     It's a simple math problem of cubic feet of supply coming in, and the cubic feet of space to accommodate it. The backlog has meant manufacturers are no longer dispatching as many trucks with the products to the stores, at least until they clear their own inventory.

This has led the same CEO quoted earlier to conjecture:

"What I suspect is happening right now is retailers are tapping into toilet paper inventory that's sitting in their warehouses until they get more shipment from producers."

 But the producers don't want to send any more until the retailers clear their own warehouses out, so companies aren't stuck storing the surplus indefinitely. Or hiring more truckers to deliver it.   That means loss of profits including having to hire more warehouse workers. 

Basically, here's what has happened: The stores had stored TP like many other items according to a "just in time" model. In this frame, the given industry - whether for TP, cold drinks, meats, milk or whatnot - adopts a strategy that aims to produce, ship and stock as few goods as needed, to meet current demand.   Thus, by decreasing the capacity of their distribution centers they were able to save on rent, utilities as well as labor.  Meanwhile, distributors saved on fuel and wages.   Manufacturers also gained by cutting down on capital locked  up in unsold inventory.

The more unsold inventory, the more capital lost.  Again, if people no longer purchase toilet paper after the pandemic ends (because they already have so much of it), the manufacturers will be in a world of hurt via lost capital. 

Basically then, the hysterical run on stores for toilet paper has capsized every aspect of the just in time model.   As one Walmart exec put it to a WSJ reporter (March 24, p. B4, 'Grocers Revamp Inventory Strategies'):

"We had sold three months of supplies in 10 days. Nobody keeps three months worth of anything anymore."

To adjust to the increase in demand grocers have had to make more space for inventory and manufacturers have had to maximize output.  This has assured more than enough toilet paper technically, if people would just back off and cease the hysterical  surplus buying.  (Grocers could help here by limiting purchases to one package per customer)

In the meantime, the manufacturers are re-purposing production, for example to make  less kitchen paper towels and more toilet paper.  But there are ongoing worries concerning a supply chain breakdown and the weak link in the chain appears to be truckers who have to be the main ones delivering it to the retail stores.  To those who may not realize it, truckers are now seeing hell having to meet this punishing demand.  Under orders from trucking companies, they're  often remaining in their trucks with no rest stops (having to use diapers) and also facing nowhere on their routes to grab eats. (One New Orleans trucker admitted to The Times Picayune his wife makes him a large 'vat' of hot gumbo for each trip which he then eats in the cab.)

Consumer products company Kimberly-Clark (KMB), whose retail toilet paper brands include Scott and Cottonelle, said it is taking steps to accelerate production and reallocating inventory to meet current demand.   In a statement to CNN Business, the KMB CEO said:

"We want to assure consumers that we are doing our best to ensure a steady supply of product to stores, and will continue to make adjustments to our plans as necessary,

Another way suppliers are responding to the toilet paper craze: Some are cutting out distribution centers, sending trucks directly to and from paper factories to get product onto shelves more quickly, said Scott Luton, founder and CEO of Supply Chain Now Radio, a digital media company focused on supply chain management.

But less said now,  except in only certain business pages - like in the WSJ-  is that some companies are considering halting their production, certainly by the end of May.  They simply don't trust Americans - stacked to the brim with hundreds of rolls - will go on buying it when the COVID-19 plague ends.

And they don't want to deal with the demand shock of thousands of cubic feet of toilet paper stuck in their warehouses representing millions of bucks in lost capital.   My Psychology Ph.D. niece Shayle (see link below) who mostly gets the TP mania, still had cause to ask:

"Uncle Phil, I get the toilet paper insanity on account of the fecal phobia of so many Americans, but what's with the run on gun stores and ammo?"

I replied: "Didn't you know? Those gun and ammo buyers are getting ready to protect their toilet paper supplies."

So get a grip, people, and no more toilet paper hysteria.

See also:

• What's Really Behind The Toilet Paper Panic Buying...