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