VICKIE BURLEY, IN FRONT OF FOOD LION, WENT TO 3 STORES TODAY LOOKING FOR TOILET PAPER
March 13. By Dave Yochum. This Cornelius Today reporter saw someone walking out of Publix with what had to be 60 rolls of bathroom tissue, aka toilet paper (TP). No wonder inventories are depleting faster than you can say ho ho I gotta go.
Stores are in an unenviable position: They can sit tight and watch supplies dwindle. They can raise prices to slow down demand, but not when the governor has declared a state of emergency. They can also ration supplies.
It’s getting crazy at the tail end of the TP supply chain. Thing is, human beings are not necessarily rational.
“People hear that others are buying in large quantities, afraid that it will be in short supply in the future, so these other folks buy more as well, and demand becomes high for no apparent
MOFFETT
rational reason,” said Donna Moffett, a business advisor and owner of the Donna Moffett CPA firm on West Catawba.
Rationing by price discourages hoarding and stretches supplies—and potentially angers those who actually need the product.Moffett quickly got to the bottom of the TP situation.When shoppers hoard toilet paper it sends a demand signal through the supply chain to produce more, she said.
Should manufacturers enroll extra shifts at their plants?
“If producers do ramp up capacity…they might eventually send more product into the distribution channel,” Moffet said.
But after the crisis passes, consumers will burn off their “pantry inventory” and that burn down will take time, depressing demand for an extended period, Moffett said.
This of course will lead to overstock in the stores, and signals to cut production.
Will this actually happen in the TP supply chain?
“I’m actually guardedly optimistic because producers know that demand is stable year-over-year, and that this is a temporary spike,” Moffett said.
It will take a lot of convincing for paper companies to add manufacturing capacity right now.
“The best thing to do is to put retailers on allocation, who would likely limit purchases so that shoppers can’t buy themselves a five–year supply anymore, at least until this crisis passes,” Moffett explained.
Of course that’s in a rational world, which isn’t where we’re at right now.
We’ve toured four stores today—Dollar Tree, Food Lion, Harris Teeter and Publix —and spoken to multiple concerned shoppers.
Stockpiling is a reaction to fear, not knowing what’s to come. Costco reports lines from the toilet paper pallets in the back of the store, to the check-out.
We plan to invest in toilet paper stocks before demand bottoms out.
—Dave Yochum covers the bathroom tissue industry for Business Today and Cornelius Today
