How KimberlyClark Keeps Costco in Diapers Hsn Dalg

How Kimberly-Clark Keeps Costco in Diapers Hüsnü Dalgıç Süleyman Onay

Outline 1. Background 2. How to success with Vendor Managed Inventory(VMI) & Advantages 3. Results & Additional Facts

Background

FMCG(Fast Moving Consumer Goods) World Has Been Changed � Retailers consolidation & globalization � Increasing � Shifting balance of power from suppliers to retailers � Increasing � More power of retailers pressure on profits need of effort to keep retailers as the customers for suppliers

An Overview of Kimberly-Clark Company - A giant FMCG Company headquarted in Dallas, Texas - 56, 000 employees in 35 countries worldwide - 2009 Annual Sales of $19, 1 billion - Kimberly-Clark’s Global Brands are sold in more than 150 countries - Well-known family care and personal care products - No. 1 or No. 2 share position globally in more than 80 countries

Kimberly-Clark Brands

An Overview of Costco - A Retail Company headquarted in Issaquah, Washington - The largest warehouse club - 68, 000 US Workers - $61 Billion Company with 500 stores most of which located in the US

Diapers Category - “Pull “ product � Shoppers go specifically to buy � If couldn’t find go another store! - Pressure to keep in inventory for retailers - Price-concious customer wants as cheap as possible - Consumer Confidence: Must always be on the shelf in order to keep loyal - No stock-out or excess inventory

Why Costco is important for Kimberly-Clark � Costco is a giant customer for Kimberly Clark � � Harsh Competition among suppliers � � Need to keep Costco Need a Value Addition � � Only national diapers brand in Costco stores Focus: Cost Reduction + Spot & fix Inefficiencies (Avoid Stock-out) Business models are changing…

How to Success with Vendor Managed Inventory (VMI) & Advantages

Coscto & Kimberly-Clark Partnership � Business models are changing � � Strategic Alliances become more popular & powerful � Multi-faced � Goal-oriented � Long-term � Commitment of many sources Types of Strategic Alliances � Quick Response Strategy � Continuous Replenishment Strategy � Vendor Managed Inventory System

Coscto & Kimberly-Clark Partnership (Vendor Managed Inventory) - Vendor Managed Inventory (VMI) -Inventory policy responsibility to the supplier -Advance information sharing with high level of technology -Became famous with the partnership between P&G and Wal-Mart 1985 -Wal-Mart sales increased at 20 -25% - Inventory turnover improved 30%.

Coscto & Kimberly-Clark Partnership (Vendor Managed Inventory) - Assumption: Suppliers have better position to find and solve the inefficiencies in the supply chain - Responsibility on Kimberly-Clark thru diapers inventory on shelves - Works on past data, analysis on stock levels - Very detailed sales information sharing - Forecasts & shipped - Improved technology - computer link

Advantages � Focus on Core Strengths � Core Strength = Competitive Advantage � Managing the supply chain for diapers is not Costco’s core strength – UNNECESSARY � Reduced � staff in supply chain � inventory holding cost Cost Reduction

Advantages � Technology Flexibility � Better alliance requires advanced technology � Technology changes everyday � Expensive � Need of continuous investment � Leave it to Kimberly-Clark Cost Reduction

Advantages � Less levels of out-of-stock � Out-of-stock = Not available on the shelf � Loss on potential sales � Costco: Category management is based on 2 brands: 1 PL, 1 National Brand Out of Stock = Out of Category � According to P&G, an average retailer loss is 11% of its annual sales

Results & Additional Facts

Results -Kimberly-Clark - Enlarges the program and manages another 44 retailers One company explained that they saved $200 M, another one $75 M -51% increase in net income -Less variety easier tracking: Stopped seperate products for boys & girls -Same principles to its suppliers – 50% reduction over 2 years in storage -Costco -Out-of-Stock ratio is drastically decreased -Efficient cost-reduction -Decreased inventory holding cost -Reduced staff in supply chain management

Results -Consumer -Fewer sizes and less varieties (Unisex Diapers) -Lower Prices - Smaller package sizes: Adaptation according to consumer behavior -More availability on the shelf

Additional Facts � � Important points on accuracy � Point-of-sale � Inventory level � Shipment � Delivery � Customer fill rates Respect to Confidentiality Better Communication Better Cooperation

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