From toilet paper to testing, supply chain innovation could keep the pandemic economy working

There will be many things to remember from the COVID-19 Pandemic of 2020. Some of them will be tragic and heartbreaking, but one that might be recalled with a smile or a shake of the head is the Great Toilet Paper Shortage.

It seemed sudden and inexplicable, but bathroom tissue, once a commodity, became scarce, and store shelves that once stocked a surplus of brands, plys, and sizes were suddenly bare. Many wondered how this could happen: Have we been reduced to hoarding toilet paper?

That’s what it seemed on the surface, but the reality was a little more complex, although perhaps easier to understand: the supply chain broke down.

Sometimes called “the backbone of the economy,” the supply chain, all the links that make it possible to get stuff from suppliers to factories to warehouses to retailers to our homes, abruptly stopped working so well.

As a result, some of us were precariously close to the last few sheets of the last roll.

The Great Toilet Paper Shortage brought to light how much we count on reliable supplies, reliable transportation, and reliable partnerships to make and buy the things we need and love.

Many other products became in short supply due to the pandemic’s impact on the economy. Beef and chicken disappeared from store shelves as processing plants slowed due to the spread of the virus. Paper towels and disinfectant wipes became nearly impossible to find.

Some are still scarce today, and their scarcity has even been life-threatening. Nurses and other health care workers were reusing masks and protective gowns because they didn’t have enough. Swabs and chemical reagents critical to COVID testing ran short, creating a nationwide backlog.

Months into this crisis, testing supplies are still running short, as labs are facing shortages of disposable pipette tips, as well as machines and chemicals. The dwindling supplies are delaying testing results for days.

The pandemic exposed severe flaws in the supply chain, but it may also present opportunities to address those gaps with new designs, new technology, and new partnerships.

Fixing them might improve the economy, create jobs, shore up manufacturing in the U.S., and help us get through the next disaster without as much chaos.

Change and innovation were already occurring, although at a slower rate, in manufacturing, logistics, and other links in the chain. The pandemic amped up the pace, says Mike Venerable, CEO of CincyTech, a public-private, early-stage investment fund.

“Whatever was happening there, just accelerated and went into warp speed during the pandemic,” Venerable says.

Making improvements to the supply chain will have a wide-ranging impact. “It really drives a lot of change,” he says. “It will ripple through the economy.”

Getting products where they need to be, and getting them there quickly and efficiently will drive growth in a variety of sectors, and this region will benefit from that, he says.

“There are companies that will grow as a result of all this innovation,” Venerable continues. “As a region we should benefit because we have strong assets.”

A key asset is the Cincinnati/Northern Kentucky International Airport, where the delivery of goods is a growing business. While restrictions on travel and fears of the virus have caused passenger traffic to drop nearly 60% through July, the airport’s cargo business is booming.

Amazon is operating its Prime delivery service out of the airport while it builds its North American air hub there. And package delivery giants DHL and FedEx also operate large and growing operations from the airport.

CEO Candace McGraw expects that trend to continue as e-commerce continues growing, another trend that accelerated during the pandemic.

“The pandemic has highlighted the importance of maintaining an uninterrupted supply chain and the ability to get products to market quickly,” McGraw says.

The toilet paper shortage happened because the supply chain, which, when working without interruption, usually ended with a fresh package of your favorite brand at the grocery store, could not respond fast enough to a sudden shift in demand, explains Lora Cecere, founder of consulting firm Supply Chain Insights.

With so many people working from home and staying in, there was a drastic increase in use of the bathrooms at home and a massive decrease at the workplace.

As anyone knows who has used the office loo, the bathroom tissue at work is different than the stuff we use at home. The commercial product uses a different design and different manufacturing equipment than the home brands.

It can take two weeks to a month for manufacturers to respond to traditional purchase information from retailers so they can replenish the stock. When demand shifted so quickly, manufacturers didn’t get the word in time. When they did respond, they couldn’t move enough of the product fast enough because of the constraints of the shipping and warehousing infrastructure, so a bottleneck occurred.

“What is significant for me is that no major manufacturer of toilet paper redesigned the supply chain to improve flow,” Cecere says.

It’s in the potential redesigns that opportunities can occur.

Another rapid change was the explosion in e-commerce as stores closed and people opted to shop from home. Online sales nationwide jumped 76% in June compared to June 2019, according to Adobe Analytics.

That helped keep companies like Verst Logistics healthy even as the rest of the economy slowed down. Verst, based in Walton, Ky., is a family-run company that employs about 1,900 people in five states, operating distribution centers and delivering products in seven states and Canada. Verst was able to benefit from the pandemic-fueled explosion in e-commerce.

“Our top and bottom lines are actually healthier,” says CEO Paul Verst.

He says his customers, which include Cincinnati-based grocery chain Kroger, have told him to expect the growth in e-commerce to persist.

Not only will established companies like Verst will benefit from the renewed focus on supply chain effectiveness, so will startups.

Growing the supply chain ecosystem is a focus of Blue North, the startup accelerator that grew out of Northern Kentucky Tri-ED. The group has partnered with The Worldwide Supply Chain Federation and REFASHIOND Ventures, an early-stage fund that invests in supply chain technologies, to launch a local chapter of the Federation. The partnership promises connections across the network of companies that collaborate with the Federation.

Blue North is working with Startup Junkie, an accelerator in Northeast Arkansas, which is home to Wal-Mart, logistics firm J.B. Hunt and Tyson Foods, one of the world’s largest food processors, says Brit Fitzpatrick, Blue North executive director. It is also working with Epicenter Memphis, a startup accelerator in that city, home to FedEx.

“We’re creating a super hub that allows us to bring in and share these connections across ecosystems,” Fitzpatrick says. “Ultimately, we are looking to position Northern Kentucky as the number-one supply chain ecosystem in the U.S.”

Some startups in the region are already driving change in the ecosystem.

A downtown-based startup called Frayt is sort of the Uber of commercial delivery, contracting with drivers who make on-demand deliveries for businesses.

Plus-MFG, based near the airport, is a six-year-old metal fabricating company that says it has technology to produce metal parts faster, safer, and cleaner than traditional methods.

Erlanger-based Bluegrass Masks has developed an industrial-grade face mask designed to be sturdy yet comfortable for workers who need to wear them all day long.

ConnXus has developed a suite of software to connect suppliers with buyers, especially corporations seeking to diversify their suppliers. (The company was recently purchased by Silicon Valley-based Coupa Software).

Innovation in the supply chain acts as an economic multiplier, Fitzpatrick says, citing REFASHIOND Ventures. Every dollar invested in supply chain innovation leads to more than a dollar of total economic production, she says.

A few months ago, talking about the supply chain could cause one’s eyes to glaze over. Today, we know how its efficient operation affects all of us, from toilet paper purchases to testing and equipment that will help us overcome this pandemic.

This is the first in a three-part series on how COVID-19 will change the Cincinnati Region with expanding supply chain innovation, retooling jobs and small business adaptation. It is made possible with funding from Google's Journalism Emergency Relief Fund.

Read more articles by David Holthaus.

David Holthaus is an award-winning journalist, Cincinnati native and father of three. When not writing or editing, he's likely to be bicycling, hiking, reading or watching classic movies.
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