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Kimberly-Clark's future: Made to order, shipped to order

This venerable product marketer’s ‘Network of the Future’ creates supply chain efficiencies by planting 3PLs in its DCs. Single-day delivery is at 85% and volume is up 25%.

PDQ TRAY. Third-party logistics services are helping Kimberly-Clark push its new U by Kotex Curves brand through its distributio
PDQ TRAY. Third-party logistics services are helping Kimberly-Clark push its new U by Kotex Curves brand through its distributio

Its name is “Network of the Future.” Kimberly-Clark Corp. (K-C)’s multiyear plan to reinvent its supply chain sounds like something out of a sci-fi movie, but its 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.

Several years into the effort, K-C is finding success by introducing greater reliability and flexibility to its packaging value chain. The company has consolidated 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% by the project’s seventh year.
• 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 K-C’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 the Network of the Future operation is having third-party logistics companies (3PLs) provide contract packaging, warehousing, and distribution services inside K-C’s distribution centers (DCs). A few consumer packaged goods (CPG) companies are beginning to embrace the service-in-the-DC model as another way to achieve lean contract packaging through better logistical efficiency. The model saves costs and increases speed-to-market, among other benefits, by reducing the number of times products are touched as they move through the supply chain.

Changes were inevitable

For years, K-C previously operated two separate distribution networks for its products. One network handled family-care products such as Kleenex brand facial tissue and Scott brand bath tissue and towels while the other one focused on personal-care products including Huggies brand diapers and Depend brand incontinence products. Sites in each of these networks operated near K-C’s facilities, but not necessarily close to the company’s customers.

Inefficiencies in the old approach became obvious about five years ago as K-C began to add more products. Across K-C’s stable of brands, the number of SKUs doubled over a 10-year period. As a result, the supply chain had become exceedingly complex and difficult to manage.

Beyond changes in package design, warehouse capacity limitations prevented K-C from storing all the SKUs at any of its facilities because none of them was set up to accept both personal-care and family-care products. Consequently, retailers and club stores were required to order separately for these products; the shipments arrived at stores in separate truckloads. In addition, it became increasingly common for K-C to search for other sites to handle its overflow-space needs. The use of many facilities created a logistical challenge. These and other logistics matters made product forecasting difficult at K-C’s warehouses, challenging production planners to make the right products in the right quantities within each region.

More recently, other challenges have added further layers of concern for K-C and other national brand owners as retailers and club stores refine their own merchandising strategies and also begin to impose their own harsher requirements on supply chains. Here are three areas of concern:

1. Shelf space for national brands is diminishing or disappearing entirely from some categories. Retailers are grabbing extra shelf space to increase the selection of their own brands and cater to frugal consumers’ desire to hunt for bargains.
2. Retailers are changing the mix of products in their stores more frequently than ever to build their outlets as a destination “brand.” The idea is to entice shoppers to return continually in search of new and unexpected “treasures.”
3. And in February, Walmart introduced a four-day deadline for suppliers to ship products to its DCs after orders have been placed. Walmart said it would assess a “reimbursement” fee equaling 3% of the cost of products sold for companies that deliver less than 90% of their merchandise each month within the retailer’s guidelines.

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