Delayed exports clog the pulp and toilet paper supply chain
- Some big box stores are again limiting the amount of toilet paper and other paper products customers can buy as suppliers struggle to overcome logistical barriers to exporting raw materials.
- Costco has reinstated purchase limits on key products, including toilet paper and roll towels, amid rising demand, CFO Richard Galanti said on an earnings call last Thursday . The Sam’s Club also said on its website that “some items like paper products” may only be available “in limited quantities” due to high demand.
- The restrictions come as supply chain bottlenecks disrupt the flow of wood pulp, the raw material used in toilet paper and other products. Suzano, the world’s largest supplier of wood pulp, said it expects exports to be delayed in the next quarter due to port congestion and a lack of shipping containers.
As suppliers face logistical challenges, retailers like Costco and Sam’s Club are taking action to prevent customers from hoarding and creating another demand-driven shortage.
“Stores like Costco are proactive,” said Ronalds Gonzalez, co-director of the Tissue Pack Innovation Lab at North Carolina State University. “But there is no reason for shortages to occur until buyers buy more than they need.”
The fabric supply chain has always been stable and predictable, Gonzalez said. But wild swings in demand have now forced retailers and producers to scramble to keep up. Manufacturers like Procter & Gamble and Georgia Pacific increased capacity after a wave of panic buying at the start of the pandemic, only to see demand collapse as customers scoured their inventory.
The signs indicate a recovery in demand. Procter & Gamble, the country’s largest manufacturer of toilet tissue, has once again decided to ramp up production, the Wall Street Journal reported in August.
But the slowdown in exports of raw materials like pulp poses a challenge for companies looking to increase their supply. Suzano said shipments of wood pulp have been delayed and export volumes have been “negatively affected” by port congestion and higher demand for bulk breaking vessels.
Leonardo Grimaldi, commercial director of Suzano pulp, said export delays are starting to present challenges for growers ahead of the peak season. Customers who expect demand to pick up will want to have raw materials positioned correctly so they “can speed up their machines and production,” he said.
As demand increases, the price of wood pulp rose 50.2% in August from the previous year, according to the Bureau of Labor Statistics Producer Price Index. Costco is facing rising commodity prices and is seeing “an increase in pulp and paper products, some items up 4-8%,” Galanti said on the earnings call. The retailer is experiencing shortages of various products and faces delivery delays ranging from 2 weeks to 3 weeks.
While it is not clear whether increased demand will lead to another storage spree, RISI Tissue director Esko Uutela said he did not expect another wave of panic buying. , and that he also did not anticipate purchasing limits being reinstated in large-scale stores.
“Activity is picking up as people restock, but this may only be temporary,” Uutela said. “I don’t think these issues are so much related to the growing number of new COVID cases and panic buying, but more to logistical issues. “
This story first appeared in our weekly newsletter, Supply Chain Dive: Procurement. Register here.