DC Velocity - September 2009

verticalfocus CONSUMER GOODS

about 30 miles from Seattle and serving the Pacific Northwest, is slated to open toward the end of 2009. All together, the nine centers will provide approximately 6. 4 million square feet of space.

The sites, all operated by third parties, range from 470,000 to 1. 8 million square feet. Because of their size, each facility can carry the complete K-C product line, making it possible for retailers to order everything they need at once and receive all of it in full truckloads. The new centers are also all equipped with the same warehouse management system.

K-C’s mega-DC network

Seattle (opening late 2009)

Toronto

Scranton

Chicago

Kansas City

Redlands

Atlanta Graniteville

Dallas

In it for the long haul

In the past four years, Kimberly-

Clark has reduced its public warehouses from 70 to 40, with further cuts planned once the Seattle distribution center opens, Jamison says. Products can now reach 90 percent of K-C’s retail customers within 24 hours, compared with 65 percent before. The company has cut the number of vehicle miles traveled by 24 million miles, and its fuel consumption has declined by 22 million gallons since it put the new network in place. Intermodal shipments are up 20 percent, with 35 percent of K-C’s products now moving by rail, Jamison says. The company declined to provide information on the cost savings.

The new distribution network has made K-C’s supply chain more efficient and productive, according to Jamison. “In the past, when we had overflow and ran out of space, we’d seek different public warehouses to just dump inventory into,” he says. “When the overflow was reduced, the need for the warehouses would dissipate.” The move to the mega-DCs, along with the long-term agreements that accompanied K-C’s occupancy, signaled to its suppliers, carriers, and customers that the company was “in it for the long haul,” Jamison says.

The program has yielded ancillary benefits in packaging and material handling. K-C’s seven third-party logistics service providers (3PLs) have become adept at “ co-pack-ing,” in which products are custom-configured to meet the merchandising needs of individual retailers. K-C and its vendors have also changed the way product promotion displays are built and delivered. Traditionally, the company shipped finished products to an outside packer, which assembled the displays and returned them to K-C for delivery to the retailer. Now, these packers are located inside the big distribution centers; the promotional displays are assembled and make just one trip as part of a regular truckload delivery.

Inside the distribution centers, loads are picked by lift

trucks equipped with pressurized clamps. This method does not require the use of pallets, meaning that K-C can fit more product into each truckload while avoiding the cost of pallets, says Michael Marlowe, vice president, regional operations for Kane Is Able Inc. Kane, a Scranton, Pa.-based 3PL, manages Kimberly-Clark’s mega-centers in Scranton, Kansas City, and Chicago.

Marlowe says companies seeking to partner with K-C will need to show they can do more than simply manage transportation. Instead, they need to function as a one-stop shop. The ability to perform a broad range of tasks “is becoming a criterion for selection by Kimberly-Clark,” he says.

Better late than never

The changes K-C has made to its distribution network are not groundbreaking. In fact, the manufacturer is not even the first in its industry to re-engineer the way it brings goods to market. Rival Procter & Gamble Co. has already consolidated its global distribution network. Unilever, another competitor, has done the same in North America.

Better later than never, maintains Herb Shields, president of HCS Consulting, a Northbrook, Ill.-based firm that advises consumer packaged-goods companies on supply chain strategy. Shields, a 20-year veteran of the personal care field, applauds Kimberly-Clark for taking needed steps to simplify its network, a move he believes will minimize, though not eliminate, distribution problems.

“There is no way to remove all risk from the supply chain, but decreasing complexity as K-C did makes it easier to react,” Shields says. “They recognized the current strategy was not performing as well as it had, and wisely did a strategic analysis of possible new models. To their credit, the new model is much better.” ;