Costco
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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 power of retailers Shifting balance of power from suppliers to retailers Increasing pressure on profits More 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 -Shifting from one-month supply to 2-weeks supply 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 THANK YOU!
