What Toilet Paper Can Teach Us About Supply

Chains
https://www.youtube.com/watch?v=ihd7XJMzdG4&ab_channel=TEDxTalks

Hi my name is Willi and I teach at the Harvard Business School. I'm going to talk to you today
about what we have learned about Supply chains from the global pandemic. 

What do we mean by a supply chain? I mean the entire string of producers and 1……………
providers that start all the way from the raw materials going all the way to the store.

Now sometimes when I asked people did you know where that product came from? Those say
oh I got it Amazon or I got it at Walmart, or I got at the grocery store. Well that's your
2……….. supply chain, okay but we went to look farther back going all the way to the raw
materials and how do they get converted into products. Now I'm going to tell this story starting
with toilet paper.

Well you said well that's kind of funny but when I heard this early in the pandemic about first
Japan and Hong Kong and then Singapore and Australia people 3………….. toilet paper. I said
well this is the perfect thing to write a story about because you really don't need to know a
whole lot about toilet paper to envision what a supply chain would look like. First of all, it is a
product everybody understands, which is good, and the other thing we know about it is
4……………. is pretty kind of stood. It's not like there are seasons of the year when you
consume more toilet paper right? so stable demand. The next thing we know is it's not very
expensive okay but it's actually takes up a lot of 5………….. So that means this product is not
very tradable. Right? products that are tradable are ones that you can make far away from
where they're consumed. You can ship them around the world because for the amount of value
they contain. 6 ……………… costs are relatively small for proportion. With toilet paper not
being expensive and being kind of bulky to ship. What would you really want to do is make it
relatively close to where it's going to be 7…….……….d. So for example, most countries are
self-sufficient in toilet paper. China is the world's largest manufacturer of toilet paper. It's also
probably the world's largest consumer of toilet paper, but they make mostly their own in the US
where the second largest manufacturer toilet paper, and most of it is made within our borders.
Maybe some wood chips will come from someplace like Canada, or maybe South America or
maybe some of the Nordic countries but by large the factories are close to major markets.

Okay well what's the next thing you would think not knowing their stable demand. you could
pretty much guess that factories are going to be sized understanding that this demand is stable. I
think I was I'm not going to put out a lot of capacity if there isn't a season where I have to make
a lot of more a lot more all of a sudden.

so why were we surprised the stores were running out? and you know I got a lot of questions
after I wrote this piece about just cranking up their production. It shouldn’t be a surprise
because demand is 8……….. and you make your capacity decisions based on that. But then the
1
question is “Are people using less of it, because they're not going to officers schools hotels
restaurants?”.

Yes, but this is where the problem is? First of all, it's not easy to ramp up capacity if your
factory has been sized for this stable demand and then you have to transport twice. so if you
have to make twice as much you need twice as many 9………….., even though they may be
not a great distance from the stores you still need more. The next problem is you have to make
the right stuff. One of the things about people not going to hotels and restaurants in schools, so
we didn't need a lot of toilet paper there, but the institutional toilet paper as it's referred to is
different from the consumer product. the consumers tend to prefer X they like softer toilet
paper so they'll you know the manufacturers will have machine set-up to make that multiply or
I'll make it fluffier okay and the institutions they basically one of the 10………….. the next
problem is you have to get the right 11…………. for the right stores. imagine if you're buying
toilet paper at Walmart, it be kind of strange to have in Safeway or Kroger or Whole Foods and
then not only do you have to have the right product in the right packaging, you have to have the
right role count. okay maybe a one pack or four pack or an 8-pack or people you saw people
buy these 36 …………….. (12) packs at Costco. You have all this different variety, so our
real problem was excessive variety, and we’ve seen this during the pandemic with other
products as well.

If you walked in the store sometimes, the store had too much of this flavor not enough of this,
so what's the cause of this problem is that we as consumers have come to expect a lot of
variety. stores talk about stock keeping unit 13…………. so we talked about how many SKUs
of toilet paper do I need to have in a grocery store. and I was talking to one person who is in the
supply chain and said well you know they're almost 60 SKUs they have to deal with. you know
that means sixty different 14………… packages sizes roll count, and get a problem that is
actually very common in the grocery store today. I don't know if you've looked at the
toothpaste shelves lately or any of the personal care products where you have not only a wealth
of brands, large variety of different sizes and a lot of different a lot of different choice.

Well, choice is nice but it comes with a 15…………. .The retailers have to 16…………..
which one of these shoes are going to sell. how many? how fast? then on top of that as we go
back in the supply chain, manufacturers have to forecast which one the retailers are going to
order and guess what the likelihood of everybody getting all those forecast correct is 17……….
…. So when we have a crisis look like what we've been through it kind of lower the water level
and exposes all the 18………….. like all the forecast in. Here's the difficulties of forecasting
correctly. now you can say if everybody in the country only used one type of toilet paper in one
type of package in one brand, and it was the same and hotels and schools as we use it at home.
we might not have seen these shortages because people could quickly 19….…………those
supplies but how much fun would life be like that.

Okay so now you've had your first lesson that supply chain and is he can see you really didn't
need to know a whole lot to make sense of it that's why I wrote this article on toilet paper and
now people think I'm the world's expert in toilet paper.