People are hoarding toilet paper. The truth about the supply chain
New York (CNN Business)The paper towel shortage in the United States didn’t stop in the spring.
Although finding paper towels for sale hasn’t been quite as difficult as it was when the pandemic first hit the United States, finding them — especially at a normal price — still isn’t always easy.
Paper towels have been in and out of stock on Amazon (AMZN), Costco (COST) and local stores. And when paper towels are available, customers can’t always get the brand they want.
Part of the reason for the shortage is people keep hoarding them: there was a massive surge in sales of Bounty paper towels in July, Procter & Gamble (PG) reported, as customers swept them off store shelves.
But the shortage could also have something to do with the way companies produce the paper towels. Lean manufacturing, in which companies make only as much product as they believe customers will buy on a given day — has borne the brunt of the blame for the shortage. Last month, the Wall Street Journal published an article called “Why are there still not enough paper towels?” laying blame primarily on paper towel manufacturers building their operations to keep costs to a minimum.
Lean manufacturing is not unique to the paper towel industry — over the past several decades, it has become prevalent in auto manufacturing, fast-fashion clothing makers and many other industries. But when there’s a run on a product, shortages happen. Paper towel manufacturers were left unprepared, as their operations were not built for a pandemic.
But lean manufacturing alone isn’t to blame, according to the Lean Enterprise Institute, a business strategies think tank. The group noted that you can’t make a paper towel with only 99% of the supplies needed to manufacture them. As supply chains freeze up during the pandemic, paper towel companies have been unable to ramp up production because they don’t always have access to the materials they need.
Paper towels are classified as a functional supply chain product, which means that the product is a basic necessity for most households. When demand fluctuates intensely, as it has during the Covid-19 pandemic, there is often insufficient inventory and capacity to meet the demand, no matter what inventory management system is used, LEI notes.
When you are lucky enough to find paper towels, they’re not always being sold at a normal price. Throughout the pandemic, Amazon (AMZN) has been accused of price gouging. It started in early March when Amazon deleted one million items from the site after being accused of price gouging or false coronavirus advertising.
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