A few weeks ago when CORVID-19 was just making its way across the pond to the United States, I wrote an article addressing some of the myths that were circulating at the time. I have had a few readers ask about one myth I addressed in "Claim 10: We will run out of basic necessities such as toilet paper and hand soap" so I wanted to revisit this for my Midweek Buzz.
To start to explain this phenomenon we are seeing with the supply chain and lack of a few common household goods or even most goods in some areas, I heard a great quote from a supply chain expert the other day, he said: "A perceived scarcity is a real scarcity in a market economy." This is a very interesting way to put what we are currently experiencing. Is there a shortage of toilet paper you may ask, well no the largest toilet paper producers in the United States are now producing toilet paper at %150 of what they were a month ago. However, when the pandemic first starting arriving on our shores, people made a run on the stores and on staples like toilet paper of all things. This was not an expected item to be sought after in bulk by supply chain experts and thus it resulted in a temporary scarcity.
The supply chain management in our country and other established markets in the world operate on a very cost effective just-in-time supply. This means that stores and warehouse clubs do not keep large inventories of products, as they did in the past and even their regional distribution facilities are in a constant influx of rotating stock from the distributor out to the stores themselves "just in time" for the projected need and sale. Thus any rapid change in the supply chain will defiantly put a strain on the system. This combined with shipping ports being restricted, delays in other transit, air cargo being restricted (realize that often times commercial passenger aviation also carry air cargo), and labor and logistic shortages at the actual plants and farms producing the products, has all put a strain on the supply chain effectiveness. So in the interim you can indeed find toilet paper out there if you look (most stores have put a limit on the number you may purchase) even though it is still hard to find online for purchase. For the short term if you really need tp, you may have to settle something else than your Charmin Ultra.
Another case example would be apple juice. The vast majority of the world's food supply is carried on ships, either in containers or on board bulk carriers. Shipping companies, already reeling from shutdowns of some of the world's busiest ports in China, are now having to contend with sweeping lockdowns all over the world, hindering access to ports and making crew changes all but impossible due to travel restrictions. Two-thirds of the apple juice Americans drink comes from China. Delays in transit from ports in China are likely to cause apple juice shortages in the United States, according to a March 13 report by commodities research firm Mintec. Also look at the fact that kids, the number one consumers of apple juice in the United States, are now looking at staying home for the rest of the school year, which means again more apple juice will be sought to serve them at home instead of school (different supply chains). Then it brings us back to our quote "A perceived scarcity is a real scarcity in a market economy." I predict at some point in the United States we will also see a disruption in the supply chain by sick employees in distribution facilities and even the transportation industry.
The good news is Global stocks of staple commodities such as wheat, corn and rice are at healthy levels, said Maximo Torero Cullen, chief economist at the United Nations Food and Agriculture Organization. But logistics bottlenecks need to be identified and resolved quickly to ensure goods can get to where they are needed, and protectionist policies avoided, he added. Top policymakers and leaders from the Group of 20 (also called G-20 which is finance ministers and central bank governors from 19 of the world's largest economies) last week pledged to resole these disruptions in global supply chains and ensure the movement of vital medical supplies, critical agricultural products and other goods and services across borders.
To summarize all of this, what we can do as consumers is by what we need and not try to panic which in turn causes panic buying creating this scarcity talked about above. The products we need will continue to flow as the supply chain adapts to the new normal. With the incomes of many American households seeing a reduction in available cash flow, it is a good time to tighten our spending habits. We all can spend some time looking at how to reduce the grocery budget and learn to make things last longer like our elders did in times of uncertainty.
Be safe take care of each other!
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