1. How Kimberly-Clark Keeps Costco in Diapers Hüsnü DalgıçSüleyman Onay

2. Outline 1. Background 2. How to success with Vendor Managed Inventory(VMI) & Advantages 3. Results & Additional Facts

3. Background

4. 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

5. 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

6. Kimberly-Clark Brands

7. - 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 An Overview of Costco

8. 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

9. Why Costco is important for Kimberly-Clark  Costco is a giant customer for Kimberly Clark  Only national diapers brand in Costco stores  Harsh Competition among suppliers  Need to keep Costco  Need a Value Addition  Focus: Cost Reduction + Spot & fix Inefficiencies (Avoid Stock-out)  Business models are changing…

10. How to Success with Vendor Managed Inventory (VMI) & Advantages

11. 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

12. 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%.

13. 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

14. 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

15. Advantages  Technology Flexibility  Better alliance requires advanced technology  Technology changes everyday  Expensive  Need of continuous investment  Leave it to Kimberly-Clark Cost Reduction

16. 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

17. Results & Additional Facts

18. 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

19. -Consumer -Fewer sizes and less varieties (Unisex Diapers) -Lower Prices - Smaller package sizes: Adaptation according to consumer behavior -More availability on the shelf Results

20. Additional Facts  Important points on accuracy  Point-of-sale  Inventory level  Shipment  Delivery  Customer fill rates  Respect to Confidentiality Better Communication Better Cooperation

21. THANK YOU!