How Kimberly-Clark Keeps Costco
in Diapers
 What
is the arrangement between
Kimberly-Clark and Costco concerning
replenishment of diapers?
 Kimberly-Clark has responsibility for
replenishing stock.
 This is a Vendor Managed Inventory (VMI)
relationship
VMI Relationship
 What
does VMI require?
 Sharing of individual Costco store sales
data with Kimberly-Clark
 What additional costs does Kimberly-Clark
bear?
 All costs related to managing Costco’s
inventory except the actual shelf-stockers
 IN some cases VMI can lead to changing
product or package sizes
VMI Relationship
 Better
cooperation between retailers and
suppliers has resulted from:
 Improved computer technology for
transmitting information
 Greater strength of retailers
VMI Relationship
Benefits for Kimberly-Clark:
 Lower supply chain costs, including
reducing warehouse inventory by 50%
 Competitive advantage – leads to
increased sales of its products
 Costco-Kimberly Clark arrangement is not
unique: Wal-Mart and P&G also share
some data to better manage inventory
VMI Relationship
 Besides
a reduction in inventory
management costs another important
benefit of VMI for Costco is:
 Less chance of stockout
 Reduced inventory: went from a month to
two weeks of supply