Scarcity of toilet paper for 6 months
The United States, considered a land of wealth, does not produce enough toilet paper. Long before the pandemic hit, the US retail industry did not keep its shelves full.
Target.com no longer has Bounty-branded toilet paper for delivery this week, although they are still available in some stores. At Amazon.com, a seller has to pay $ 44.95 for a paper bag that normally only costs $ 15. On average, about 21% of household paper products were out of stock in US stores on August 9, according to an IRI study.
This situation may not be improved anytime soon because manufacturers have no plans to improve production capacity. The central part of the machine line needed to make toilet paper also takes years to assemble.
Americans have been facing a pandemic crisis and the scarcity of toilet paper is probably the worst problem. But, the reasons behind these six-month shortages of crisis helped explain why the US’s lack of preparation made the epidemic progress worse.
Image. A customer notices empty paper shelves at a Costco supermarket in Teterboro, New Jersey (February). Photo by Seith Wenig
The root cause: Lean production line!
Scarcity has been ingrained in business strategies at all levels for decades, for a wide variety of commodities, in order to increase profits by minimizing sluggishness. Only produce what can be sold fastest. Put only enough input materials to keep the production line running. Use the number of trucks transported by the correct daily volume. Only store enough stock until the next batch arrives.
The concept of lean manufacturing or just-in-time (JST) was born in the day of Japan’s super-efficient car manufacturing industry in the 70s of the last century and became a cult. to many US CEOs. This philosophy first emerged in Detroit, then spread to other US manufacturers and eventually to other industries from distribution to retail.
The risk of a shortage of goods in an emergency has alarmed experts in dealing with disasters. But these warnings seem to have little effect as investors still reward corporations for keeping costs low by streamlining operations.
Patti Austin, who lives in a fishing village in the state of North Carolina, doesn’t think of the storage system when he saw the depletion of supply in early March: “As you go into the store, the more and more you notice the shelves. The goods become empty, and many goods are not available for a long time. Toilet paper, paper towels, detergent all run out very quickly.
Image. A technician is evaluating the packaging of Bounty tissue at Procter & Gamble’s factory in Albany, Georgia. Photo source: P&G
Ms. Austin, along with nearly 1,000 workers at the Georgia-Pacific factory, which makes Sparkle tissue and is operating 24/7, are looking for ways to increase productivity. With tactics such as cutting down multiple stages to reduce the production switching time between different products, they ended up increasing production by 25% but still not enough to fulfill all orders.
Ms. Coduto usually has to work at the factory from 5 am until late at night. The epidemic reached her area in April. She said, “If there is something that keeps me up all night, it is how to keep everyone safe. You have to question yourself. with everything you are doing and trying not to let that virus get into your workplace. The factory now has a few virus-positive workers and is quarantined it still works.
When goods were filled, shop tissue sales in stores soared with a 150% increase in mid-March. Demand remained 25% higher than before the pandemic, according to Proctor data. & Gamble, which owns the Bounty trademark.
Source: according to tissue manufacturers and retailers.
The supply chain reacted awkwardly to requests from Americans for pandemic products, such as food, antibacterial cleaning papers, and especially masks, which are on alarm. with medical staff.
Each production management method has its own problems, all parties from the producer to the raw material supplier are concerned with the lean production method, along with the distribution mechanism and the channels. Reasonable retail sales will meet normal demand. No one doubted this lean manufacturing system until a day when this well-stocked storage was not enough.
This production system was developed by Taiichi Ohno, an engineer at Toyota, he said that he was inspired by a supermarket visit in the US in the 50s of the last century, where he observed. that goods are only filled on shelves when the customer purchases them to avoid empty or packed shelves.
At that time, it was normal for the quantity of raw materials and finished products in progress to be stored for months. All of those inventories have been paid or financed in advance and there is a cost to stock them.
However, in the 70s of the last century, the car manufacturers from Japan made things change. The just-in-time manufacturing approach allows the low-cost Japanese carmakers to maximize profits by not storing large volumes at the assembly plants, which will raise capital.
American carmakers were provoked by this competition and racing to imitate the production method known as “the Toyota way”. Scholars as well as business leaders celebrate it and there has been a lot of literature showing how to master and implement a “just-in-time” (JIT) lean production system at different industries.
Walmart and retail corporations
In the retail sector, a concrete example of this is Walmart’s decision to reduce inventories in 2006. The company’s managers say this move will free up capital and help the company. manage cost increases by reducing expenses such as warehouse renovation and fuel costs.
Walmart also imposes sanctions against suppliers, penalizing them for delivery too soon or too late. Suppliers who ship goods to Walmart must deliver goods within a defined 2-day frame, which could result in fines of up to 3% of the value of the goods. Other competitors also require that deliveries follow an exact schedule in order to minimize inventory.
Mike Hsu, CEO of Kimberly-Clark, the maker of the Scott tissue brand, says the biggest pressure comes from manufacturers of large paper products, because they need large storage space and storage costs. warehouse is also more expensive. P&G has adopted a strategy to cut production in the early 2000s. Colgate-Palmolive and Kimberly-Clark followed suit and closed many factories producing their consumer goods.
Michael Levitt, former Secretary of the US Department of Health and Human Services in 2016, said he faced a dual crisis that year: the bird flu crisis and pre-public fear. spoiled foods and consumer products imported into the United States. At the time, he called the syndrome Albertsons syndrome, which describes the condition when consumers clear essential goods at supermarkets at the onset of the crisis.
Mr. Levitt recommended that governments, businesses and individuals stock up on necessary goods. Jay Leno, the speaker on “The Tonight Show”, in response to a reporter’s question, teased him that even the most conservative can start hoarding milk powder. and tuna.
In a recent interview, Mr. Levitt said, “It’s easy to dodge the preferences if you think it will never happen. Pandemic events happen on a regular basis, but the distance between them. far enough away and leading the leaders to assume it will not happen during their tenure.
The rules are ignored
You may be blaming the JIT model, but the truth is that companies that adopt this lean storage model largely ignore the principles on which the system is based. First of all, this model requires contingency plans for production stagnation or sudden demand spikes. In addition, manufacturers must always increase relationships with backup suppliers to ensure factories always have enough raw materials.
Wally Hopp, of the Ross School of Business at the University of Michigan, says, “There are a lot of theories about these lean models, but companies seem to have ignored them. So we have a system called them. lean but also fragile “.
In the case of tissue manufacturing, the risk of shortages does not come from foreign manufacturers as in the case of masks this spring, nor is it due to a shortage of resources. raw materials. Pulp remains in abundance, partly because demand for press printing has decreased. The main problem lies in the lack of spare production capacity.
Napkins are produced in a way that has been around for more than a century. Manufacturers supply pulp to machinery systems that compress them, roll them and dry them using the Yankee drying system, a system that also uses the “creping” technique using blade to cut each layer of paper according to the required thickness.
This system produces large rolls of paper (base roll) weighing up to 6,000 pounds (more than 2.7 tons), and is moved by an automated system. Here, the paper is perforated and embossed to make them more durable and absorbent. Finally, they are coated with corrugated iron and cut into rolls.
Rick McLeod, a manager at P&G’s customer care division, said a major part of the system would fail if it waits for too long, such as inactive when demand returns. usual level. The industry cannot switch production from toilet paper to other household products because companies cannot make both and are agile enough to do so.
P&G CEO David Taylor said: “It takes a lot of money and time to produce toilet paper. You cannot keep production at 30% or 40% of your capacity. Costs. will not allow you to get the right price for your customers’ needs ”
Although P&G has no plans to build a new plant, it relaunched the stalled equipment production line at its Albany, Georgia facility, last March. P&G says it has deployed its engineers across the country, which normally takes up to two months in just two weeks. Once the mechanical system is activated, air travel is canceled. So P&G used its jets to bring engineers home.
Shortages of toilet paper improved in the summer as consumers have stockpiled enough for them to use at home. However, demand for this commodity remains very high as people use more during the epidemic season, exacerbated by the lack of disinfectants.
Georgia-Pacific, maker of the Brawny and Sparkle brands, said it is considering converting some of the toilet paper production lines to roll tissue production to meet long-term needs. But like other manufacturers, they have no plan to build their own tissue paper factory. Investing in additional production capacity requires making predictions of population growth. Tissue rolls are also not a popular export because of the high cost of shipping.
The proportion of products that are out of stock in stores as well as online in the US has increased dramatically during the pandemic. Source: IRI CPG Supply Index
Paper towels are usually transported by truck, and the conveying line has also been designed for maximum efficiency, minimizing latency. As CHRobinson Worldwide’s CEO Bob Biesterfield said that as the number of goods shipped to the stores increased dramatically this spring, many trips returned with nothing to carry. usually. Therefore, many carriers no longer respect their commitments but instead push prices up, chasing prices in the spot shipping market.
The last leg of your inbound journey – from regional distribution centers to stores – is more troubling. Centers as well as shops only have a limited number of discharge points. As a result, even when the manufacturer has enough stock or can meet high demand for other items, their truck fleet still has to deal with long queues waiting to be unloaded.
In March, Erik Hysong, owner of Buckboard Freight forwarding, which handles freight forwarding for a Costco distribution center in Salt Lake City, said, “It’s a crazy sight. Normally there are only 350 cars a day, but now twice that number.
Although supply chain tensions have eased in recent months, shipping capacity has been stretched to the limit as some sectors of the U.S. economy shift to online and generate transportation of industrial products.
Some managers of food and leather goods manufacturers say they have recognized the old practices that are hindering their ability to react during the epidemic and that they have actually become less lean.
Kellogg, which is currently running short of products such as Pringles breakfast cereals and snacks, said it is investing to expand its shipping capacity. Meanwhile, Georgia – Pacific has just added loading and unloading doors.
One supermarket chain owner said: “We would rather have canned vegetables, bottled water or tissue rolls available at our distribution centers than save some cash somewhere. “.
Refer to the Wall Street Journal