Kimberly-Clark Keeps Client Costco in Diaper

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Case: Kimberly-Clark Keeps Client Costco in Diapers

  1. Why are major retailers moving toward relationships in which the supplier manages inventory levels at the retailer?

Traditionally, the retailer handles the replenishment process, and the supplier has no clear information on the demand side or advance warning about out-of-stock situation. As a result, the supplier tends to maintain a certain level of safety stocks as a "buffer" in order to facilitate sales and the customer would also keep some safety stocks in case of none-supply. This results in long supply chain and lacks of flexibility.

Through supplier managed inventory programs, suppliers get to know the actual supply and demand and thus can deploy better logistic plans to response the fluctuating market situation. For example, suppliers now can make better decisions on how to deploy goods across various customer locations based on different consumer preferences, which not only helps to decrease transportation and storage costs but also leads to higher customer service levels and flexibility.

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  1. When should a company handle its logistics needs in-house, and when should external sources be used?

The adoption of supplier managed inventory program depends on the specific conditions of the company and how much control over the distribution channel the company has. For example, on a domestic supply chain, there is only very limited uncertainty, supplier only need to focus on the POS data and local traffic situation to plan their replenishment but for companies that operates on an multinational environment with multiple origins and diverse concentration of suppliers, the coordination work usually takes more than simply handle ...

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