Dividends and Toilet Paper shortages

One of the big stories about the virus was a shortage of toilet paper and people beginning to buy more than they normally would need. It was a good story because the shelf space at the local markets was bare. In a recent Washington Post post

In turns out there are practical reasons why the shortage exists. It goes back to the supply lines. There are two distinct markets of toilet paper – the institutional and the retail. For the institutional market, the washrooms in the offices, the factories, warehouses rely on one ply toilet paper in the large roles. There is normal production of the those spools of toilet paper and the margins on the production are not high. The supply system to the institutional market is different than the retail market.

The second market is the 2 ply or 3 ply, we buy for our homes. Normally the two markets are in syc, however with the stay at home orders, the demand for the 2 ply and 3 ply went up, while the manufacturers did increased production it was not enough to keep the spaces full.

The manufacturers have a problem – how much toilet paper do they produce given the market will automatically change once restrictions are taken off. When people return to institutional uses of toilet paper, the demand for local toilet paper will fall. If you have noticed over the years, every week there seems to be a sale on toilet paper or the margins are thin as the companies fight for market share.

Linking to dividend paying stocks, all supply and distribution systems work until they do not as they are disrupted. When you watch the news, enjoy the problems but examine the supply lines or think logistics to see the solutions.

There are more questions than answers, till the next time – to raising questions.

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