Who Gives A Crap: Managing supply and demand in a crisis
Fluctuating market conditions can be challenging. Simon Griffiths shares how Who Gives A Crap managed supply and demand during the run on toilet paper caused by COVID-19.
The COVID-19 pandemic caused an unprecedented run on toilet paper earlier this year. As Australians stripped supermarket shelves in a stockpiling frenzy, manufacturers were forced to ramp up production to enable supply to catch up with demand. Simon Griffiths, CEO of the subscription toilet paper start-up Who Gives A Crap, shares some of the lessons he learnt during that time.
In business, putting all your eggs in one basket is rarely a good idea. Working with multiple suppliers reduces the chance you’ll be caught short if demand for your product or service spikes unexpectedly. That’s what happened to Who Gives A Crap back in March, when daily sales surged 12-fold in the space of a week.
“We contract out the manufacture of our toilet paper and make it a practice to work with five or six different suppliers simultaneously,” Griffiths says. “It helps us to manage supply chain risk and it’s proved to be a handy policy over the last few months.”
Ensuring your key suppliers view your business as a priority can stand you in good stead when demand for your products suddenly exceeds supply. Building strong ties can help prevent your urgent orders being relegated to the bottom of the pile – and your shelves ending up empty as a result.
“We work really hard on supplier relationships and when COVID first appeared in the news, we started talking to our manufacturers daily,” Griffiths says. “By working closely with them, and communicating early, we were able to secure pretty much all of their spare capacity.”
Building a loyal customer base can take a lot of time and dedication. If you’ve spent years earning a reputation for quality and reliability by doing the right thing by your regulars, you should avoid jeopardising it just because your goods are suddenly in extraordinary demand.
“We preemptively marked our online store as being ‘sold out’ early in the panic-buying phase so we could make sure we had enough inventory to fulfil all of our subscriber and business orders,” Griffiths says.
“We promise subscribers they’ll never run out of toilet paper and we mean it. And when it came to one-time purchasers, we prioritised returning customers on our wait list. We didn’t want them being left out because they hadn’t taken out a subscription.”
While surging sales may give your bottomline a boost in the long term, ramping up supply can cause short-term cash flow issues, especially for small- and medium-sized businesses. Understanding your position allows you to act quickly if you need additional finance to help you deal with a spike when managing supply and demand.
Fortuitous timing meant Who Gives a Crap was able to self-fund its pandemic production uptick. “We hold more cash in the business as we come in to the end of the financial year because that’s when we make our big annual charitable donation,” Griffiths explains.
“We put 50% of our profits towards building toilets in the developing world and having that money on hand meant we could ramp up without having to draw down on any external financing. As a high growth, bootstrapped business, that was a proud moment for us.”
However, there are options if you don’t find yourself in a position to bootstrap yourself through the surge in demand. Having a business overdraft on hand means you may be able to easily access the cash you need to meet your commitments while you’re waiting to be paid. Invoice finance, on the other hand, allows you to access a percentage of approved yet unpaid invoices shortly after they’ve been received.
Holding an extensive inventory can be risky and expensive, which is why many businesses have boosted their profits by taking a ‘just in time’ approach to ordering and carrying stock. But, in uncertain times, increasing your inventory can prove prudent practice.
“When there’s additional risk in the market, you need to manage that risk by having a greater volume of stock on hand,” Griffiths says. “At the moment, we’re holding between two and three times our pre-COVID inventory, so we can deal with any unexpected fluctuations in demand. That was helpful when we saw a second wave of panic buying in June and July.”
Due to globalisation, trends which emerge in other countries are often quickly replicated here in Australia. Keeping an eye on the international news and considering whether it’s likely to have local implications can prevent you being caught by surprise.
“We saw the toilet paper shortages in Hong Kong, then Singapore, then Japan in February and wrongly thought, ‘it would never happen in Australia!’” Griffiths says. “That was definitely a mistake. In future, we’ll take note of what’s happening globally and use it to better inform our planning.”
Unexpected fluctuations in customer demand can create headaches for small business owners if they’re not prepared for them. Optimising your supply chain, reviewing your inventory requirements and understanding your financial position can make it easier for your business to navigate the ups and downs of managing supply and demand, and help make the most of a sales surge.
This article is a general overview and should be used as a guide only. We recommend that you seek independent professional advice about your specific circumstances before acting.