How Kimberly-Clark Keeps Costco in Diapers

1
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

2
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 Costcos inventory
  except the actual shelf-stockers
• IN some cases VMI can lead to changing product or
  package sizes

3
VMI Relationship

• Better cooperation between retailers and
  suppliers has resulted from
• Improved computer technology for transmitting
  information
• Greater strength of retailers

4
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 PG also share some data to better
  manage inventory

5
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