Kimberly-Clark connects its supply chain to the store shelf
In its quest to achieve a demand-driven supply chain, Kimberly-Clark turned to software that generates shipment forecasts based on point-of-sale data. Now the consumer products giant can better serve some of its customers with a lot less inventory.
For the past six years, Kimberly-Clark Corp. has been on a mission to connect its supply chain to the store shelf. The manufacturer of personal-care products wanted to create a demand-driven supply chain that would make and warehouse only the precise amount of inventory needed to replace what consumers actually purchased.
The company had good reason to make this one of its top priorities. "If we align our activities to what's happening on the shelf, we can take a lot of cost, waste, and inventory out of the system," explains Rick Sather, Kimberly-Clark's vice president of customer supply chain for North America consumer products.
That's easier said than done, of course. The roadblock for Kimberly-Clark was that its store shipments were based on historical sales forecasts, which were not very accurate predictors of future sales. To match shipments with actual demand, the company would need to use point-of-sale (POS) data from consumer purchases as the basis for replenishments to grocers and retailers.
Toward that end, the manufacturer began using software that utilizes sales data to generate forecasts that trigger shipments to stores. To date, only three of Kimberly-Clark's largest customers are participating in the program, but the results have been notable. These demand-driven forecasts, which are more accurate than the historical sales forecasts, let the manufacturer better serve those customers but with much less inventory.
Shifting focus
Based in Irving, Texas, a suburb of Dallas, Kimberly-Clark makes such well-known personal-care products as Kleenex facial tissues, Huggies diapers, and Scott's paper towels. Its worldwide sales exceeded $20 billion in 2011.
Back in 2006, company executives decided to refocus Kimberly-Clark's supply 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 place 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 satisfy all customer orders. The shipping location depended on the product mix of the order. As a result, different product mixes resulted in different shipping locations for 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 facilities—some of which handle Kimberly-Clark's full product line—and repurposing some existing sites. For example, a few of the distribution centers began supporting a smaller group of customers, or they switched to shipping only promotional items. Today, 20 of the 30 warehouses and distribution centers now ship directly to customers.
Because the reconfiguration placed more warehouses and DCs closer to Kimberly-Clark's customers, the company was able to increase order frequency and reduce transit times for many of them. That paid off not just for the customers but for the manufacturer, too. "We realigned our DC network and streamlined it to bring inventory and costs out of the system and make ourselves more responsive to customer needs," says Manager of Supply Chain Analysis Michael Kalinowski. "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 customer'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 Director of Supply Chain Strategy Scott DeGroot.
To become a truly demand-driven supply chain, managers knew, 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 errors, 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 that aimed to incorporate 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, however, it has been using actual retail-sales data to drive both replenishment and manufacturing.
Three retailers, which account for one-third of Kimberly-Clark's consumer products business in North America, currently provide point-of-sale data. That information is fed daily into the solution's engine, which then recalibrates the shipment forecast for each of those retailers. Each day, the software evaluates any new data inputs from the retailers along with open orders and the legacy demand-planning forecast to generate a new shipment forecast. That forecast, in daily buckets, covers the current week plus the next four weeks. Kimberly-Clark then uses that forecast to guide internal deployment decisions and tactical planning.
The software contains algorithms that process data provided by the retailers, such as point-of-sale information, inventory in the distribution channel, shipments from warehouses, and the retailer's own forecast. It reconciles all of that data to create a daily operational forecast. The software also identifies patterns in the historical data to determine which inputs are the most predictive in forecasting shipments from Kimberly-Clark's facilities. The inputs are re-evaluated weekly, and how much influence each input has on the forecast can change. For example, POS might be the best predictor of a shipment forecast on a three-week horizon, but actual orders could be the best predictor for the current week.
By using actual demand—that is, the point-of-sale data—to recalculate its operational forecasts, Kimberly-Clark can better ensure that it has the products consumers want to buy in stores at the right time. Although only three companies at the moment are providing POS data, Kimberly-Clark is also using the Terra solution to create forecasts for its other retail customers. For that customer group, the manufacturer relies on historical shipment data to develop its forecast.
Lower forecast error rates
The incorporation of demand signals into Kimberly-Clark's shipment forecasting has resulted in substantial improvements in several respects. For one thing, the company has been able to develop a more granular metric for forecast errors. In the past, it measured forecasts by product categories; the metric it uses now tracks stock-keeping units (SKUs) and stocking locations. This metric is defined as the absolute difference between shipments and forecast, and it's reported as a percentage of shipments.
Using that particular metric to evaluate its daily forecast, Kimberly-Clark has seen a reduction in forecast errors of as much as 35 percent for a one-week planning horizon and 20 percent for a two-week horizon. "What we've noticed is that as you go farther out in the [planning] horizon, the inputs are less predictive and the amount of forecast-error reduction tends to erode," says Jared Hanson, a demand planning specialist.
Thanks to that reduction in forecast errors, there is less need for safety stock. In fact, Hanson says, more accurate forecasts have allowed Kimberly-Clark to take out one to three days of safety stock, depending on the SKU. "From a dollars or return on investment perspective, that's the most tangible benefit," he says.
More accurate forecasts and the commensurate reductions in safety stock have helped Kimberly-Clark reduce its overall inventory. The company says it has cut finished-goods inventory by 19 percent in the last 18 months.
Equally important, say Kimberly-Clark's supply chain executives, is that this stellar inventory performance has not compromised the quality of service it provides to its customers. "As we sit today," says Rick Sather, "our ability to serve customers with this level of inventory is the best it's been in many years."
Online merchants should consider seven key factors about American consumers in order to optimize their sales and operations this holiday season, according to a report from DHL eCommerce.
First, many of the most powerful sales platforms are marketplaces. With nearly universal appeal, 99% of U.S. shoppers buy from marketplaces, ranked in popularity from Amazon (92%) to Walmart (68%), eBay (47%), Temu (32%), Etsy (28%), and Shein (21%).
Second, they use them often, with 61% of American shoppers buying online at least once a week. Among the most popular items are online clothing and footwear (63%), followed by consumer electronics (33%) and health supplements (30%).
Third, delivery is a crucial aspect of making the sale. Fully 94% of U.S. shoppers say delivery options influence where they shop online, and 45% of consumers abandon their baskets if their preferred delivery option is not offered.
That finding meshes with another report released this week, as a white paper from FedEx Corp. and Morning Consult said that 75% of consumers prioritize free shipping over fast shipping. Over half of those surveyed (57%) prioritize free shipping when making an online purchase, even more than finding the best prices (54%). In fact, 81% of shoppers are willing to increase their spending to meet a retailer’s free shipping threshold, FedEx said.
In additional findings from DHL, the Weston, Florida-based company found:
43% of Americans have an online shopping subscription, with pet food subscriptions being particularly popular (44% compared to 25% globally). Social Media Influence:
61% of shoppers use social media for shopping inspiration, and 26% have made a purchase directly on a social platform.
37% of Americans buy from online retailers in other countries, with 70% doing so at least once a month. Of the 49% of Americans who buy from abroad, most shop from China (64%), followed by the U.K. (29%), France (23%), Canada (15%), and Germany (13%).
While 58% of shoppers say sustainability is important, they are not necessarily willing to pay more for sustainable delivery options.
Gulf Coast businesses in Louisiana and Texas are keeping a watchful eye on the latest storm to emerge from the Gulf Of Mexico this week, as Hurricane Rafael nears Cuba.
The category 2 storm’s edges could also brush Florida as it heads northwest, causing tropical storm force winds in the lower and middle Florida keys. However, the weather agency said it is too soon to forecast Rafael’s impact on the U.S. western Gulf Coast.
In the face of campaign pledges by Donald Trump to boost tariffs on imports, many U.S. business interests are pushing back on that policy plan following Trump’s election yesterday as president-elect.
U.S. firms are already rushing to import goods before the promised tariff increases take effect, to avoid potential cost increases. That’s because tariffs are paid by the domestic companies that order the goods, not by the foreign nation that makes them.
That dynamic would likely increase prices for U.S. consumers as importers pass along the extra cost in the form of price hikes, according to an analysis by the National Retail Federation (NRF). Specifically, Trump’s tariff plan would boost prices in six consumer product categories: apparel, toys, furniture, household appliances, footwear, and travel goods. “Retailers rely heavily on imported products and manufacturing components so that they can offer their customers a variety of products at affordable prices,” NRF Vice President of Supply Chain and Customs Policy Jonathan Gold said in a release. “A tariff is a tax paid by the U.S. importer, not a foreign country or the exporter. This tax ultimately comes out of consumers’ pockets through higher prices.”
The rush to avoid those swollen costs can already be measured in the form of rising rates for transporting ocean freight, as companies start buffering their inventories before the new administration officially announces tariff hikes. Transpacific rates are still $1,000/FEU or more above their April lows, showing increased ocean volumes and climbing rates generated by shippers’ concerns about supply chain disruptions including port strikes and the Trump tariff increases, supply chain visibility provider Freightos said in an analysis. "The Trump win may start shaking up supply chains even before he takes office. Just the anticipation of higher tariffs may lead importers to pull forward shipments, creating a preemptive freight frenzy," Judah Levine, Head of Research at Freightos, said in a release. “Frontloading will cause freight rates to feel the heat as importers race to dodge the extra costs, similar to what took place with Trump’s tariffs on Chinese goods in 2018 and 2019."
Another group sounding a note of caution about international trade developments was the Global Cold Chain Alliance (GCCA), a trade group which represents some 1,500 member companies in more than 90 countries that provide temperature-controlled warehousing, logistics, and transportation. “We congratulate President Trump on his election. We also congratulate all those who have been elected to the U.S. Senate and House of Representatives,” GCCA President and CEO Sara Stickler said in a statement. “We are also committed to promoting the growth of exports from U.S.-based food production and broader manufacturing sectors. We will engage constructively in the policy discussion about future trade policy and continue to make the case for the importance of maintaining balanced and resilient trade routes for food and other temperature-controlled products across the world.”
Businesses in the European Union (EU) were likewise wary of tariff plans, judging by a statement from the VDMA, a trade group representing 3,600 German and European machinery and equipment manufacturing companies. "Donald Trump's second term will be a greater challenge for German and European industry than his first presidency. We must take his tariff announcements seriously, in particular. This will once again put a noticeable strain on transatlantic trade and investment relations," VDMA Executive Director Thilo Brodtmann said in a statement. “The USA is and will remain the most important export market outside the EU for mechanical and plant engineering from Germany. Our companies offer the products required to implement the re-industrialization of the USA that Donald Trump is striving for. The VDMA's overall outlook for the American market therefore remains positive."
In addition to its flagship Clorox bleach product, Oakland, California-based Clorox manages a diverse catalog of brands including Hidden Valley Ranch, Glad, Pine-Sol, Burt’s Bees, Kingsford, Scoop Away, Fresh Step, 409, Brita, Liquid Plumr, and Tilex.
British carbon emissions reduction platform provider M2030 is designed to help suppliers measure, manage and reduce carbon emissions. The new partnership aims to advance decarbonization throughout Clorox's value chain through the collection of emissions data, jointly identified and defined actions for reduction and continuous upskilling.
The program, which will record key figures on energy, will be gradually rolled out to several suppliers of the company's strategic raw materials and packaging, which collectively represents more than half of Clorox's scope 3 emissions.
M2030 enables suppliers to regularly track and share their progress with other customers using the M2030 platform. Suppliers will also be able to export relevant compatible data for submission to the Carbon Disclosure Project (CDP), a global disclosure system to manage environmental data.
"As part of Clorox's efforts to foster a cleaner world, we have a responsibility to ensure our suppliers are equipped with the capabilities necessary for forging their own sustainability journeys," said Niki King, Chief Sustainability Officer at The Clorox Company. "Climate action is a complex endeavor that requires companies to engage all parts of their supply chain in order to meaningfully reduce their environmental impact."
Supply chain risk analytics company Everstream Analytics has launched a product that can quantify the impact of leading climate indicators and project how identified risk will impact customer supply chains.
Expanding upon the weather and climate intelligence Everstream already provides, the new “Climate Risk Scores” tool enables clients to apply eight climate indicator risk projection scores to their facilities and supplier locations to forecast future climate risk and support business continuity.
The tool leverages data from the United Nations’ Intergovernmental Panel on Climate Change (IPCC) to project scores to varying locations using those eight category indicators: tropical cyclone, river flood, sea level rise, heat, fire weather, cold, drought and precipitation.
The Climate Risk Scores capability provides indicator risk projections for key natural disaster and weather risks into 2040, 2050 and 2100, offering several forecast scenarios at each juncture. The proactive planning tool can apply these insights to an organization’s systems via APIs, to directly incorporate climate projections and risk severity levels into your action systems for smarter decisions. Climate Risk scores offer insights into how these new operations may be affected, allowing organizations to make informed decisions and mitigate risks proactively.
“As temperatures and extreme weather events around the world continue to rise, businesses can no longer ignore the impact of climate change on their operations and suppliers,” Jon Davis, Chief Meteorologist at Everstream Analytics, said in a release. “We’ve consulted with the world’s largest brands on the top risk indicators impacting their operations, and we’re thrilled to bring this industry-first capability into Explore to automate access for all our clients. With pathways ranging from low to high impact, this capability further enables organizations to grasp the full spectrum of potential outcomes in real-time, make informed decisions and proactively mitigate risks.”