Zac Rogers, an assistant professor of operations and supply chain management in CSU’s College of Business, has spent a lot of time thinking about what it takes to get things from Point A to Point B. Now, in the midst of the coronavirus pandemic as people stock up on the essentials to avoid repeated trips to the grocery store, many are stuck looking at near-empty shelves and wondering: Why it’s so hard to buy toilet paper?
Rogers – who has delved into complex research topics from sustainability in supply chains to emerging logistics technologies, cyber security and more – has a simple answer:
“Toilet paper is big, it takes up a lot of space, but it’s not very valuable.”
For shipping toilet paper to be cost effective, companies wait until they have enough orders to send a truck fully packed.
“Because of that, you wouldn’t send toilet paper every day. You’d probably send two or three big trucks once a week,” Rogers explained.
In response to spikes in demand in advance of stay-at-home orders, toilet paper companies still need to send large shipments, but much more frequently.
How is Covid-19 reshaping the supply chain?
As many other types of goods are also in high demand, bare shelves in supermarkets mean big business for the transportation industry, and also big changes.
“This is going to be a time of hardship – definitely – but also of innovation.”
Rogers, who previously worked as an operations manager at Amazon, was surprised by the latest data submitted to the Logistics Managers Index, a measure he created along with an inter-university group of supply-chain faculty to track inventory, warehousing and transportation.
The LMI looks specifically at the supply chain and generates a glimpse of a sector of the economy unique from other models.
“If you just look at GDP, all that tells you is what already happened,” Rogers said. “Whereas, if you look at transportation and inventory, when transportation goes up that tends to mean, OK we’re moving a lot of goods forward because we think we’re about to have more sales.”
“For the most part I think we can all agree this has been bad economically. That isn’t necessarily the case throughout the supply chain,” he said.
Rogers sees the LMI indicating that the transportation industry has been stepping up to fill enormous demand from retailers and big-box stores like Walmart, Target or grocery stores.
Transportation capacity, a measure of the amount of trucks available to transport goods, declined significantly in March. With increased demand for shipping services, available capacity in the transportation industry is at its lowest since October 2018.
Inversely, transportation utilization, a measure of amount of space logistics companies utilize in trucks, has increased. This reverses a two-month contraction in utilization, Rogers said.
As the coronavirus outbreak has grown, trucks are being packed full of products such as disinfectant, nonperishable goods, and, you guessed it, toilet paper.
Month-over-month changes in transportation capacity and utilization are tracked by the LMI, in addition to other metrics like the cost of transportation, which is at its highest since January 2019. Values less than 50 indicate contraction, while values greater than 50 indicate growth.
Toilet paper along with the bulk of the food we eat depends only on operations here in the United States. Other goods such as electronics, clothing and plastics often rely on manufacturing from China.
“If the international supply chain is closed for too long,” Rogers explained, “then we will run into big issues.”
If it’s only a matter of essentials, consumers will be OK, Rogers said.
Shipments made from China drastically decreased in the wake of the coronavirus. The port of Los Angeles typically sees about 12 cargo ships per day, now only receives about four, Rogers said.
Cargo ships take about a month to reach the United States from China. Because of this, just as the United States started to see a reduction in imports, consumer demand surged from coronavirus concerns.
“We’re kind of getting hit from two sides,” Rogers said. “We have increased consumer demand at home and decreased international input coming into the west coast from China.”
A ‘resilient’ supply chain
We still don’t know what the coming months will look like, but Rogers is impressed by the national supply chain’s ability to function and even grow during the Covid-19 outbreak.
“I think the supply chain is very resilient,” he said. “In many ways right now it’s been the most resilient part of the economy.”
As we’re starting to see, stay-at-home orders put a strain on many businesses, but this doesn’t mean all sectors have halted operations.
“This breaks a two-year trend of near-constant decreases in the overall index. While there is some evidence to suggest that this spike in logistics activity may not last, for the moment we are reporting significant resiliency across the logistics industry,” the latest report from March 2020 reads.
“There’s still economic activity going on, it’s just shifted,” Rogers said. “And that shift has leaned pretty heavily on the supply chain and on transportation specifically.”
A strong logistics industry means economic activity, at least in some sectors, can still take place.