chain strategy from supporting
manufacturing to serving the specific needs of its retail and grocery customers. As a first step, the company
reconfigured its North American distribution network to position its warehouses closer to those
customers. Before the
reconfiguration, Kimberly-Clark used 120
facilities of various
types, and it shipped
from 60 to 70 locations to fulfill all customer orders. The
shipping location was
dictated by the order’s
product mix, not
geography. As a result, orders could
be shipped from multiple locations
to the same customer, and forecasting and maintaining the proper mix
of products at any given DC was
difficult.
By 2008, Kimberly-Clark had
reduced the number of warehouses
it used to 30 multiproduct facilities
strategically located near its customers. The reconfiguration
involved a combination of opening
new, larger distribution facilities—
items. Today, 20 of the 30 warehouses and distribution centers ship
directly to customers.
Because the reconfiguration
placed more warehouses and DCs
closer to Kimberly-Clark’s cus-
tomers, the company was able to
increase order frequency and reduce tran-
sit times for many of them. That paid off
not just for the customers but for the man-
ufacturer, too. “We realigned our DC net-
work and streamlined it to bring inventory
and costs out of the system and make our-
selves more responsive to customer needs,”
says Michael Kalinowski, the company’s
manager of supply chain analysis. “We
used to view our supply chain as ending
once we delivered to the customer’s door,
but now we’ve extended that to the cus-
tomer’s retail location, and in some cases,
right to the shelf.”
BECOMING ONE WITH DEMAND
The ultimate objective of any change in
supply chain strategy is to increase company profits. Kimberly-Clark viewed a
demand-driven supply chain as being critical to achieving that objective. The Great
Recession of 2008–2009 brought additional
“energy” to that focus as Kimberly-Clark
sought to reduce its inventory holdings to
free up working capital, says Scott
DeGroot, the company’s director of supply
chain strategy.
To become a truly demand-driven supply chain, Kimberly-Clark would have to
incorporate demand-signal data—
information about actual consumer purchases—into its plans for resupplying retailers
with products. In 2009, the company made
some limited use of downstream retail data
in its demand-planning software, but it
continued to rely for the most part on historical shipment data as the basis for its
replenishment forecasts. But forecasts
based on historical sales are prone to error,
because they cannot predict spikes in consumer demand. Such errors left Kimberly-Clark with excess safety stock and unsold
inventory.
To address that problem and improve
forecasting, Kimberly-Clark conducted a
pilot program with the software vendor
Terra Technology aimed at incorporating
demand signals into its North American
operation. The pilot proved successful, and
in 2010, the consumer products giant purchased and implemented Terra
Technology’s multienterprise demand-sensing solution. Initially, Kimberly-Clark
only ran the software’s forecast engine,
using its own internal data. Since 2011,
PHOTO COURTESY OF KIMBERLY-CLARK
