Supply Chain and Toilet Paper—What You Need to Know
By Chris Oleksy, Founder and CEO, Oleksy Enterprises and Next Life Medical; CEO, Emergent Respiratory | 06.04.20
COVID-19 has had a rapid, life-changing impact on the world—the amount of lives lost, financial assets destroyed, and healthcare systems strained is alarming.
COVID-19 has had an immediate, life-changing impact on the world. The amount of lives lost, financial assets destroyed, and healthcare systems strained is alarming. Its true impact will never truly be fully understood or accepted but the scope of its threat to the world’s healthcare supply chains is beginning to emerge.
I’ve been a connoisseur of supply chain practice for almost 40 years. My teams and I have traveled to many countries, including many of those severely impacted by the virus sourcing virtually every type of raw material on earth. I’ve sourced reagents from jungles, copper from mines, chicken bones and pig hearts from Midwest farms, and sheep blood from Colorado. But I never dreamed that one of the most scarce commodities to source would be toilet paper.
This realization made me wonder how the world’s toilet paper supply chain went so awry. After donning my supply chain hat and marinating some ice cubes, I began thinking through the toilet paper supply chain (a dirty job, but someone had to do it). Applying the ANSI standard Supply Chain Operations Reference (SCOR) model, I mulled over the Plan-Source-Make-Deliver elements but got stuck on the first item. All good supply chain practitioners know that good planning begins with good forecasting. And good data is a key component of accurate forecasting. Case in point: The planning data for toilet paper raw materials last September—three months before the virus first surfaced in China—was inadequate. In fact, it was not even on the radar. Why would it have been?
It was virtually impossible for anyone to have predicted the pandemic (though many experts claim to have been warning of such an event for years). Thus, in the absence of good data, supply chain best practices suggest that bad planning data be buffered with various “elements” in case something comes about. There are many elements or approaches to buffering the unexpected, such as duplicate capacity, expedited shipping, back up suppliers, and inventory. Early in my supply chain career, I attended a workshop at the Georgia Institute of Technology to study the use of economic profit/economic value models for supply chain configurations. I learned how to model the various elements and determine the best economic approach to configuring supply chain solutions. And in more than 40 years of supply chain practice, I’ve found, more times than not, the most cost-effective buffering element to be inventory.
Inventory is one of the simplest ways to guard against the unexpected. Upon returning from the Georgia Tech workshop, I presented a model to Dow Corning executives showing the carrying cost of inventory vs. the cost of duplicating capacity if a major product line was incapacitated for two months. The technology to re-create the line existed but the cost to do so dwarfed the economic value of carrying inventory. For the past 30 years, the cost of capital has been so cheap that it usually always is more economically viable than duplicating supply chains. I did a similar exercise at Medtronic when the company had trouble firing up a green site plant. There were many elements that needing buffering so an inventory buffer was put in place to jump-start operations. The president of my division issued a stark warning to me: “You had better be right,” he said, “or I’ll dull the spear I take from my management on your heart first.” Six months later, he pulled me aside after a key quarterly meeting to admit that I was indeed right.
The main takeaway here is that inventory is not always the enemy. I have found it to be one of the most misunderstood and under-utilized buffering elements of my 40-year supply chain career; at some point, medtech professionals have come to believe that inventory is bad. It’s not a silver bullet, certainly, but considering the interconnected world in which we live, it makes sense to evaluate the economic costs of carrying inventory.
With that said, let’s create an economic profit model for carrying extra toilet paper inventory. For argument’s sake, I’m estimating that four 48-count packs of Quilted Northern would last about six months for a family of four. The four packs would cost about $80, amounting to a 0.05 percent return (for a total carrying cost of 40 cents). So, a long-term supply of toilet paper (additional inventory) costs less than a dollar. Is it any surprise that I have not yet run out of toilet paper?
Besides exposing the shortcomings of the world’s toilet paper supply chain, the COVID-19 pandemic also has highlighted the unavailability of good, factual data—a serious limitation that needs correction. Indeed, COVID-19 was impossible to predict back in September, but as the virus traversed the globe, it became increasingly difficult to get good factual data in order to properly plan, source, make, and deliver goods. There have been few sources of data that have not been agenda-driven.
Remember the division president who challenged me on the value of inventory? Well, he also taught me to exercise “controlled paranoia” when conducting business—to always be a bit paranoid about what could happen every day. As a result, I watch the morning news every morning to assess if there is anything that could affect my business. One morning not too long ago, I heard a news report about a COVID-19 disaster in the making where a major customer is located. As soon as I got to the office, I called this customer and asked if there was anything I could do for him. The customer, reassuringly, said “Don’t believe what you are seeing on TV. It isn’t true.” This same kind of conversation has occurred dozens of times in the last few months.
Owning a company within the respiratory arena has been eye opening for me. We have fielded some very desperate calls from customers during this pandemic, the likes of which we probably won’t ever encounter again. I’m incredibly proud to own a business that can help patients in their time of need by supporting front line healthcare workers. The truly eye-opening aspect of this whole ordeal, however, is the amount of misinformation being generated. There are days when news reports make it seem like I should shut down my manufacturing plants and suppliers because only ventilators will save coronavirus patients from dying. Other times, I’m considering increasing production because I’m hearing that a non-invasive remedy like our Porto2vent is a better treatment than invasive ventilation for COVID-19 patients. Consequently, I rely on my customers to tell me the truth. I praise them for not only being front-line heroes, but also helping us navigate how to best help them.
The coronavirus pandemic is not going away anytime soon. That is a fact, whether the world likes it or not; and yet sadly, it is one of the few solid facts that is coming out of this crisis. Data to help suppliers plan, source, make, and deliver products during these uncertain times has been scant, as the quest for media ratings and profit have made it extremely difficult to find the truth. Professionals in all industries (but especially medtech) need a source of “agenda-free” data should crises like COVID-19 occur. Business owners, CEOs, and supply chain professionals rely on the media for useful, objective data to help navigate incidents. Is our data being exasperated because it’s an election year? President Trump calls it fake news. I call it agenda-based. Regardless of the name and the reason, we need to somehow find our way back to the facts.
And one of the most important facts is this: Inventory is not evil. In fact, inventory can be good; don’t ignore its value. Oddly enough, more times than not, it’s usually the cheapest of items. That five-cent part can cause the most harm when it runs out.
Another important fact: Nations and the world as a whole must find other sources of data and rely less on the media. Listen to customers first and then possibly use non-agenda-based think tanks, consultancies, or other avenues.
Perhaps President Trump can create a movement to uncover better sources of data—a “Fact-80” program (80 days to decrease reliance on the media and get back to the facts). Until we find an alternate source of good, reliable data, we are all going to be carrying a lot more inventory to buffer the unexpected. Starting with toilet paper.
Chris Oleksy is founder and CEO of Oleksy Enterprises, Next Life Medical and Emergent Respiratory. He can be reached at email@example.com or firstname.lastname@example.org.