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Article | September 27, 2010
Kimberly-Clark: Made-to-order, shipped-to order-strategy boosts bottom line
Branding teams are rolling out more package formats than ever to give their products the best chance of appealing to the widest range of shoppers.
But in the process, the mounting variations in packaging formats are increasing complexity throughout the packaging value chain and bringing about fulfillment challenges that can delay time-to-shelf and invite a host of inefficiencies—and lead to lost sales.
Kimberly-Clark Corp. is one brand owner facing these challenges. The marketer of family-care and personal-care products frequently introduces package innovations that modify both structure and graphics to build brand sales through cartons, flexible pouches, and metal tins with seasonal themes and designs that appeal to niche audiences.
Among Kimberly-Clark's new introductions in 2010 is its U by Kotex brand, using point-of-purchase tactics such as aisle displays like the one pictured on the right. U by Kotex targets 14- to 22-year-old females with fashionable packaging in bold prints. Though this new line of packaging has turned on a new generation of young females to the Kotex brand, it also is representative ofthe resulting complexity that has challenged Kimberly-Clark's ability to timely bring products to market.
The company has responded to the challenge by thinking beyond package innovation. It also has innovated its supply chain, and company officials say this is one place that other brand owners also should review for cutting the unnecessary costs that seem to hinder many new-product introductions. Successful execution of this approach requires cross-functional input, from the creative team to packaging operations to vendors.
Kimberly-Clark calls its approach the "Network of the Future." It sounds like something out of a sci-fi movie, but the objective is very down-to-earth: Give retailers and club stores the products they want, when and how they want them, while also satisfying shopper needs.
Kimberly-Clark is at the leading edge of brand owners that is using contract packagers extensively, preferring to outsource the packaging function while focusing its own efforts on making and marketing consumer products. The company has consolidated its contract packaging and distribution operations into 10 megacenters around the U.S. and Canada, with the following results:
Product volume outflows already are higher, and they will increase as much as 25% in the near future.
More than 80 warehouse sites in the U.S. have been consolidated to 25.
Product orders are arriving at customers' destinations 85% of the time in one day or less. That compares with about 60% under Kimberly-Clark's previous operations approach.
Shipping points have been minimized, leading to better regional product-forecasting accuracy.
"We're getting more pressure from our customers for shorter product runs and special, exclusive packs," Joe DeYoung, Distribution Operations Manager for Kimberly-Clark North American Consumer Products, says in explaining the impetus for Network of the Future. "We believe this is going to set us up to have a strategic advantage over our competitors. We feel pretty good about our product forecasting accuracy three to four weeks out."
Key to Network of the Future is having third-party logistics companies provide contract packaging, warehousing, and distribution services inside Kimberly-Clark's distribution centers. Shelf Impact! recently observed one of those centers in action, in Romeoville, IL.
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