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For decades, citizens of developed nations have had the luxury of going to the local supermarket or big box store for an amazing plethora of choices. We never had to think about where or how our ground beef, toilet paper and wine arrived at that location. We never gave a thought to the cows, logs or grapes that originated those items. That 2-ply plush, quilted toilet paper was just there, completely divorced from the log it once was. Covid-19 has disrupted the supply chain, and shortages now leave the grocery stores with empty shelves. Welcome to Supply Chain Management.
For anyone with the thinnest knowledge of consumer goods, this was foreseeable. My background is consumer non-durables with Procter & Gamble. My husband also is former P & G. Our son is a Logistician. It’s the family business.
Here is a very simple video on supply chain management:
Or, to put it even more simply, how shit stuff gets made and gets where it needs to be when it needs to be there.
To understand how the supply chain disruption began, let’s begin with the first sign we saw: toilet paper. The average lay person thought that the empty aisles in the toilet paper section meant that people were hoarding. That’s not what happened. It was the abrupt change in demand. There are two kinds of toilet paper. There is the consumer toilet paper, and there is the toilet paper made for offices and the hospitality industry. Will Oremus wrote an easily understandable explanation for Medium.com:
Talk to anyone in the industry, and they’ll tell you the toilet paper made for the commercial market is a fundamentally different product from the toilet paper you buy in the store. It comes in huge rolls, too big to fit on most home dispensers. The paper itself is thinner and more utilitarian. It comes individually wrapped and is shipped on huge pallets, rather than in brightly branded packs of six or 12.
The paper isn’t made isn’t made in the same factories or by the same machines. The abrupt change meant that there were/are shortages of the consumer toilet paper and a glut of the commercial toilet paper.
What the population of developed nations like the United States don’t understand is how delicately our supply chain is balanced. Everyone involved in the supply chain relies on accurate forecasting and steady market demand. Unlike our expert scientists and epidemiologists, those involved in consumer goods like toilet paper, ground beef and wine pay a price when they are wrong. No profits, no pay, no work.
When you see a picture of logs (above), don’t just see the logs. See the toilet paper, packaging, furniture, homes and many other things made from those logs.
What else got disrupted? We read about Florida farmers plowing crops under or leaving them to rot in the fields. From NBC Miami:
Florida leads the U.S. in harvesting tomatoes, green beans, cabbage and peppers this time of year. While some of the crops are meant for grocery stores, many farmers cater solely to the so-called food service market — restaurants, schools and theme parks — hit hard as cities and states have ordered people to stay home and avoid others.
The loss has created a domino effect through the farming industry, Florida’s second-largest economic driver. It yields $155 billion in revenue and supports about 2 million jobs.
Think about everything that happens in and around Florida. Disney World is shut down, cruise ships aren’t leaving, restaurants and schools shuttered. And, when people stay home they don’t necessarily eat fresh veggies. I know. Try and find a family sized Stouffer’s Grandma’s Chicken and Rice Vegetable bake in the frozen foods section. Or, a can of Hormel’s Chili with Beans in the canned goods section. Consumers change not only where they eat but what they eat in a panic.
Yesterday, Wendy’s announced that they were pulling their signature hamburgers off of the menu at some locations. Why? Wendy’s touts their burgers as fresh, never frozen. The Covid-19 quarantine mandated at the Federal, state and local levels has disrupted meat processing. Victory Girls’ Nina wrote about what she saw out West. WPXI in Pennsylvania reported on the problems in the area it serves:
Meat packaging facilities nationwide are COVID-19 hotspots, but for plants in Pa., the data is especially tough.
Twelve positive coronavirus cases have been reported out of the Smithfield Plant in Arnold, Channel 11 News confirmed through the meatpackers union. That’s an increase of six cases since April.
The CDC says Pa. has 22 meat processing facilities affected by coronavirus and 858 workers who have been sickened. That’s the most reported by any state by a long shot.
Victory Girls’ Darleen noted the disconnect between our urban dwelling brothers and sisters and the food supply. That is certainly part of the problem. Drs. Fauci and Birx sit in their offices and analyze the false projections given to them. They don’t see the bigger picture.
That really torques me off. They can recite “Flatten the curve.” and “We are all in this together.”, but we are not all in this together. They pay no price for being wrong again and again. As Darleen noted, we must open the country up. Right now, we have disruptions to the supply chain. We can avoid famine if we move smartly.
Each step in the supply chain relies on the step before. Any disruption causes delays down the entire system.
I hope I have made the supply chain understandable and not bored you to tears. You may not think about it, but you rely on the supply chain. And, if you make a consumer good, process meat or drive a truck, you are an integral part of the supply chain.
Featured Image: Dominique Archambault/Flickr.com/Creative Commons Attribution-NonCommercial-NoDerivs 2.0 Generic (CC BY-NC-ND 2.0)
GWB says: Everyone involved in the supply chain relies on accurate forecasting and steady market demand.
The key here is a system focused on efficiency more than resilience. Because efficiency saves money and resilience casts money. Many have long said that efficiency experts should have been run out of town on a rail. This might finally make that come to pass.
those involved in consumer goods … pay a price when they are wrong.
Unfortunately, so do the consumers who rely on that supply chain.
cater solely to the so-called food service market
But that raises the question: why can’t they shift?
Wendy’s announced that they were pulling their signature hamburgers off of the menu at some locations.
They’re not gone yet where I am. But I was told I could only order a single. (They had loads of other stuff lined out on their menu, too – like salads. You know, that might have been made with all those fresh veggies from Florida?)
Any disruption causes delays down the entire system.
Primarily because it’s been ‘optimized’.
Why is there the huge disconnect between sides of these supply chains, though? How much is rigid (but efficient!) logistics, and how much is lack of leadership? How much is “don’t care to bother” (how many corporate farmers are relying on bailouts/insurance, like in flood years?) and how much is “regulations won’t let me”? How much is a much too efficient system (corporatized and made huge) and how much is too many speed bumps in the system?
THAT is the analysis I would like to see.
Scott says: Good post Toni, people should have to learn such things in school (i know, i know). And GWB makes a good point about analyzing why the disconnect in the supply chains.
One other thing I’d like to see is determining why these processing plants are such hotbeds for outbreaks of the Wuhan lung rot. The thing is, the answer might be one that isn’t politically correct, which is why such an investigation will probably never take place. That being said, it’s one that really should, because we can’t make the supply chain more resilient if we don’t clearly and properly identify ALL the failure points, politics and correctness be damned.
Chancellor says: Ex P&Ger here, too. More years ago than I care to admit.
Will Oremus’ analysis was only partly correct. Yes, the AFH (Away From Home) toilet paper is made to different specs than Consumer. But, no, not all AFH paper is made in larger rolls – virtually all the hotel toilet paper is single roll, individually wrapped rolls made to same width and diameter specs as consumer (though far nastier in quality specs like softness). And, no, not all producers have only one or the other capability – in fact, two of P&G’s largest competitors, Georgia Pacific and Kimberly-Clark, have major presence in both consumer and AFH markets. They also have mills that can produce either type of toilet paper.
All that said, you’re right about consumer increasing and AFH decreasing. But there was some early hoarding going on, too. That seems to have settled down for the most part now.
Having the plant does not mean having the machinery. It also does not mean that you don’t have issues further up the chain – bleached paper, for instance – or the quality of wood pulp and the bleach – or something else.
I worked for an irrigation company, which produced everything from consumer level for DIY, contractor products, golf course builders, farmers, etc. About one fifth of the production machinery was idle at any one part of the year, as demand for various products cycled. Late fall and winter, farm product machinery was in full bore use, as farmers repaired equipment and/or made capital investments with the crop payments in. Spring and early summer, production for contractors and DIY outlets got going full tilt, while agricultural went down (stocks for the light immediate repair demand had been built up as possible).
I worked there, though, during the heady days of the mid-oughts – the very first thing I worked on was a tool to get a handle on the immense surge in demand for non-agricultural products. The capital machinery wasn’t there; the plant space to put new machinery in wasn’t there; the trained operators weren’t there. It took them over a year to adjust. (All three were in short supply – you don’t get them on Amazon Prime…)
Another thought on toilet paper – where demand is relatively steady, following population figures. I am sure that the makers have SOME excess capacity over the “normal” demand, for things like restocking customers after something like a hurricane panic buy. But this time, the “hurricane” is nation-wide, and is lasting for months. That they can’t keep up is not surprising.
Oh, I would note (here in Southern Arizona), some suppliers of restaurants have managed to shift their products into stores – which undoubtedly involved renegotiating contracts, finding suppliers for the relabeling (restaurant labels are NOT the same – particularly missing the retail UPC). Just bought two restaurant sized cans of marinara sauce the other day at Fry’s (Kroger’s). On the other hand, they’re not stocking all that much of it; I happen to have a family of five, and will happily put the amount not used in one meal into Mason jars. Not a situation or possibility for the majority of urbanites.
GWB says: missing the retail UPC
There’s a big issue. But it should not be a show-stopper. It will slow down your checkout procedures (and might flummox some young clerks who are already stymied when something won’t ring up properly), but it shouldn’t stop them. (Or slow down your stocking as you use a label maker to print out a UPC and slap it on each item as it’s shelved. I wonder if any stores still have those moldering in an office supply locker somewhere?)
Charles N. Steele says: The breakdown of supply chains is real and a very serious problem. A non-technical explanation of the complexity of supply chains is Leonard Read’s beautiful short “I, Pencil.”
https://fee.org/resources/i-pencil/
I disagree, though, that “hoarding” isn’t an issue with, for example, toilet paper. The shortages are the perfectly predictable result of price controls, whether imposed legally or just threatened. Moral posturing about “price gouging” followed by complaints about “hoarding” is a worthless substitute for flexible free market prices that signal actual changes in demand and supply and thus encourage better (“efficient”) allocation of factors of production.
The complaints about “efficiency experts” and “efficiency over resiliency” make no sense whatsoever. Imagine two competing firms with production processes, one using just-in-time production and inventory methods, the other with “resilience;” big inventories, more expensive production, one-size-fits-all outputs… do you really think the latter survives any sort of market test? It survives in the Soviet economy, but the whole economy collapses because of its alleged “resilience,” comrades.
GWB says: one-size-fits-all outputs
Where the heck was that in my comment? I never said that and don’t advocate it.
And, yes, in a circumstance where the only thing that matters is shaving a few pennies off the bottom line, the “efficient” business wins. That shouldn’t be the only thing that matters in the market, however.
And there has been very little screaming about “price gouging”, except for the few folks who actually tried to create an artificial shortage, then profit from it. And I have seen prices rise during this fiasco.
Charles N. Steele says: I should add, the supply chain problems are rooted in the tampering with prices by governments, the regulatory constraints, and the insane idea that a government planner (or any other would be central planner) can distinguish between “essential” and “non-essential” activities.
The forced closures of businesses have caused real losses. These additional constraints have blocked businesses from responding “efficiently,“ that is, in ways that would minimize the economic and human damage.
[…] It’s all because of the supply chain. Remember the beginning of the PANDEMIC, the run on toilet paper? That was partly due to panic buying. It was also due to an abrupt in buying habits. Since people […]
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