Lockdown supply chain problems
The lockdown due to Covid-19 (Coronavirus) has led to a variety of Operational Research contributions and ideas. It is interesting to be on the sidelines and watch.
One of the first problems for retailers was stockpiling - and toilet rolls disappeared off the shelves very quickly. The first analysis of this (from an O.R. perspective) was that there are two types of supply chain for toilet rolls. One serves the domestic market, and delivers domestic sized, soft paper. The other serves the commercial market and delivers larger rolls of poorer quality paper. Lockdown meant that the former was being stretched as people worked from home, and the two supply chains could not merge.
A similar change in domestic arrangements affected the fast food industry, which relied on people buying food on their way to or from their workplace, or during the day. Demand for sandwiches dropped by over 80% in many parts of the U.K.. On social media, there were groups of home cooks vying with each other to produce the nearest approximation to the fast food sold by several well-known chains of "restaurants".
A collection problem has also emerged in waste disposal, again because of non-overlapping distribution chains. With so many offices closed, the supplies of waste printer paper from offices has dropped, with adverse consequences for the recycling sector. Domestic waste paper is of lesser quality, and there has not been so much of it. However domestic waste now has a significantly higher content of packaging, as more shopping has moved online.
So here are three commercial sectors where lockdown has changed behaviour. If you were working in any of these areas, how would you forecast the "new normal"?
According to a supply chain blog I follow, another factor exacerbating the domestic toilet paper shortage, at least in the US, is that because the product is very low margin, producers have to run at close to 100% of capacity (three shifts per day) to be profitable. So ratcheting up production during the lock-down would require expensive capacity expansion ... which would probably come on line about the time the lock-down was being lifted and people returned to using the 'loo' at the office, gym or restaurant.
ReplyDeleteThank you Paul; yes, I had heard the same report about capacity, because there is no great seasonal variation in the demand for the product. This morning's radio had an interview with a brewer, who has had to cut production, which means that the industries which rely on waste yeast from his brewery have had a reduction in supply. Another supply chain problem!
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