We all remember the toilet paper shortage from the early days of the pandemic. Many were quick to blame it on hoarding, but as journalist Will Oremus explained in his viral article What Everyone’s Getting Wrong About the Toilet Paper Shortage, the truth was more complex. In a self-fulfilling prophecy, reporting on the shortage drove panic-buying, which made the problem worse.
Hoarding wasn’t the initial cause of the problem. People were purchasing more toilet paper because they were only using their washroom at home. Washrooms at workplaces, schools and restaurants were empty. However, the toilet paper that goes through these two separate pipelines, consumer and commercial, are completely different products with distinct supply chains. Consumer paper is usually 100% virgin fibre and commercial has some recycled fibre as well, so their raw materials don’t even come from the same mills.
When usage shifted from commercial to private spaces, there wasn’t an easy way for the two supply chains to respond to changing demand. Commercial paper isn’t packaged to be sold to consumers and even if it were, suppliers don’t have relationships with stores.
On the consumer side, the problem was exasperated by a specific issue—value. A 12-pack of double rolls costs roughly the same as a can of salmon but takes up about 40 times as much space, making it very costly to store in abundance. Prior to the pandemic, the demand curve for toilet paper was predictable and steady, so stores relied on consistent, just-in-time deliveries to keep their shelves full. This worked well until the demand curve took a sudden turn.
Systems that have these types of interdependent links are said to be tightly coupled. This can leave a system vulnerable to disruptions that cause a cascading effect. In economic systems, profits are often gained by finding efficiencies, whether that’s internally at existing companies or at new ones formed to exploit an inefficiency in the market. This creates a highly interdependent web of connections, which isn’t an inherently bad thing. It’s even somewhat invisible until there’s a global pandemic or more recently a blockage in the Suez Canal.
On a smaller scale, an individual business can face a similar issue. Let’s say there’s an employee who’s the only one who knows how to do their particular job and one day they’re hit by a bus. Without their specialized knowledge, how will the work of that role get done? Will someone have to be brought in temporarily? How long will it be until the gap affects other areas of the company?
In Meltdown: Why Our Systems Fail and What We Can Do About It, Chris Clearfield and András Tilcsik examine this kind of system failure and how to prepare for it. One clear tactic is to build some slack into the system. In the case of toilet paper, this would mean keeping a larger stock on hand despite the significant downside of storage costs. In the case of the hypothetical business, it’s making sure every employee has someone who can act as their backup in an emergency.
Clearfield recommends that decision-makers try viewing their organizations as a system, especially in instances of change. When introducing new efficiencies, carefully weigh the potential trade-offs rather than assuming more efficiency is a pure benefit, and make sure to give yourself some slack.