Description
Toilet paper demand from retailers is up 25% due to the pandemic.
Even though manufacturers are already operating their mills 24/7, the capacity may be constrained as the workforce is reduced to prevent the virus spread.
Demand may or may not be an issue, depending how long the panic buying associated with the pandemic lasts. As of the date of this post, most retailers reported being able to resupply stores from their warehouses. Some manufacturers are shipping directly to retailers to cut lead time and restock their warehouses.
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There are two major questions confronting the mills: Can the mills increase capacity if the pandemic lasts multiple months? Will demand drop because consumers overbought and bullwhip the mills?
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Notes from the Professor
To answer this question, we must consider asking if the increase in demand temporary or long term will be. We already know that mills are at full capacity, therefore not in a position to react as quickly as demand in increasing. Reviewing demand planning, sales and operation planning would be helpful. Since toilet paper maintains a stable demand from week to week, this calls for a level production strategy, which optimizes the efficient operations of the mills. the best way to analyze sales and operation planning is through forecasting.
Running at full capacity and requiring more essential work is a tall task for a company to continue running their production, not to mention following the guidelines a company has to follow to prevent any fees for the excessive employees working in the same area. Having other companies contribute like distilleries can alleviate the burden. Toilet paper is always in demand, however, with the pandemic crisis, the demand has only risen and having a production strategy for toilet paper is required.
It was not that people need more toilet paper during a pandemic, a person still will usually use the restroom the same as they did before. It was a domino effect that caused the shortage, with higher demand. Somewhere a person decided to hoard toilet paper and others followed. Then the domino effect kicked in, word got out that people where hoard toilet paper and people began to panic and started buying as much as they could.
The cost of the workers would have to be less than the potential profit of the paper products. We understand that people are buying more paper today, but they are not necessarily using it at an increased rate. If they are only stock piling, that means they are front loading and will not need to buy paper in the second half of the year. Now, assuming most people are working from home which necessitates more use, that may equal profits high enough to justify affording the increased labor.
Since there is no telling how long this pandemic will last and if there will be another wave of increased results leading to another lock down people are going to continue to panic buy. In addition, there is a change in circumstances therefore people are going though more toilet paper than usual in my opinion.
