[Opinion] The Fundamental Difference Between the Shortages of Tissue Paper and Masks

Due to the impact of the novel coronavirus infection (COVID-19), the author, who was conducting MBA classes online, received a message from a student. The student, studying inventory and demand forecasting in the author's Operations Management class, became curious after seeing the overseas toilet paper shortage. While masks worldwide showed hoarding, sell-outs, and shortages, toilet paper shortages and sell-outs were occurring only overseas, excluding South Korea. The student was curious why such a phenomenon was happening abroad but not in South Korea after seeing news reports about the overseas toilet paper shortage.

The author has also been very interested in observing this phenomenon. The author even had in-depth discussions on this issue with a mentor who is a university professor. The conclusion of these discussions is that South Korea is accustomed to social immunity. We live in a divided country. Therefore, there is already some degree of immunity to crisis situations, and having overcome the MERS outbreak, we have developed social immunity. This can also be easily understood from the fact that Japan does not react as severely to earthquakes of moderate intensity compared to other countries.

Furthermore, toilet paper is like the last bastion of a civilized society. Although it is possible to manage bathroom needs without using toilet paper, doing so would undermine the dignity of people living in a civilized society, so it can be seen as a defensive mechanism prior to basic needs such as food, clothing, and shelter.

However, social immunity or this civilizational defense mechanism alone cannot fully explain the difference between overseas and South Korea, nor can it entirely explain the difference in sell-out phenomena between toilet paper and masks. The difference between the mask sell-outs that occurred in South Korea and the demand for toilet paper that did not experience such sell-outs should be viewed from the perspective of inventory management related to demand and supply.

All companies manage inventory. They also manage production capacity. Production capacity ultimately means the amount that can be supplied, and the difference between this supply amount and consumer demand creates inventory. Not all factories sell products directly to consumers. Goods move through a few to dozens of stages of wholesalers, retailers, and distributors. Since problems may arise during this process and uncertain situations may occur on both demand and supply sides, companies make decisions to hold safety stock as a compromise.

When even this safety stock is depleted, shortages occur. At this point, suppliers either decide to increase supply or decide to ignore demand. The difference between the mask and toilet paper shortages lies here. Toilet paper suppliers decided to ignore demand, while mask suppliers decided to increase supply. However, the effect of these decisions will be similar. In both cases, the shortages of toilet paper and masks will naturally resolve over time.

The reason the author makes this prediction is quite natural. The reason toilet paper suppliers decided to ignore demand is that the demand at this time is special demand. The true demand for toilet paper did not increase during the COVID-19 outbreak; rather, consumers made preemptive purchases. In other words, the increase was not due to an increase in consumers' physiological needs but because they bought in advance and will not make additional purchases once the situation calms down, instead using up the stock they already have. Therefore, suppliers increasing production capacity or raw material purchases now to increase supply will contribute to higher inventory costs later.

This stems from the fact that toilet paper is a daily necessity. For most daily necessities, the annual usage amount is very consistent compared to other products. The situation with masks is somewhat different from toilet paper. Masks were not originally daily necessities, but due to increased fine dust and the spread of this infectious disease, the government has stepped in to manage them, making masks a daily necessity. As a result, new companies are entering the mask industry, and demand is actually increasing. However, it is clear that once the COVID-19 situation settles, this will also naturally adjust according to supply and demand logic.

Changhee Kim, Professor, Department of Business Administration, Incheon National University

This content was produced with the assistance of AI translation services.