Kimberly-Clark's Supply Chain Network of the Future

The company ultimately plans to consolidate its distribution and co-packing operations into nine regional mega distribution centers.

Who would have thought supply chain management would become a hot business topic? When oil was priced more reasonably, line managers didn't think anything of shipping their products long distances using any available mode of transportation.Now that the price of oil has risen to historic levels, top C-suite executives are much more interested in supply chain logistics, with a mandate to reduce or ameliorate transportation costs.

The fact is, rapidly increasing fuel prices have caught many corporations with supply and distribution networks that were developed around plants or sources with little regard to shipping distance. Kimberly-Clark, however, is not among them.Thanks to a customer-oriented supply chain reorganization begun more than four years ago, K-C is improving distribution efficiencies, reducing transportation costs and shrinking its carbon footprint, while becoming an indispensable partner to retail customers.

When Kimberly-Clark began its supply chain reorganization in 2004, the original objective was to better serve retail customers by delivering K-C's innovative products to retail shelves faster, particularly during promotional campaigns, to help customers maximize sales.

In North America, Kimberly-Clark produces a range of health and hygiene products for the consumer market, including leading brands such as Kleenex facial tissue, Cottonelle and Scott bathroom tissue and Huggies diapers and toiletries.K-C's retail customers across the country range from mass retailers, to major warehouse clubs, to supermarkets and convenience and drug stores.

All of these retailers share a common goal -- maximize the efficiency of their supply chains so they have adequate products in stock to meet consumer needs, without tying up too much working capital in inventories. Therefore, timing of product shipments is critical for both K-C and its customers. Kimberly-Clark and its customers want to ensure that stores are promptly supplied with products during promotional periods and peak times of year, such as the winter cold and flu season.

What We Began With

Over much of K-C's history, the company has shipped product directly from manufacturing sites to customers. In many cases, K-C's distribution centers were attached to its? manufacturing plants. Over time, as these plants grew and outstripped their on-site distribution facilities, K-C added satellite shipping centers -- often located 20 or more miles away from the manufacturing site. Before the supply chain re-organization, K-C's network consisted of approximately 70 centers, with a number of overflow facilities for peak shipping periods. Many of these overflow facilities were not located near major markets, or in critical customer areas such as the Southwest and Northeast.

To meet the market need of customization, Kimberly-Clark frequently transferred product from company facilities to third party co-packing operations, which assembled products into promotional display units, then returned them to the distribution center for shipment -- adding more truck trips.

In addition to creating added transportation costs, K-C's widely dispersed legacy supply chain network made it more expensive for the company to flexibly serve individual customer needs. Smaller retailers, for example, quite often required different types of products placed into one shipment.

The solution was clear: K-C needed to consolidate its supply chain network into larger, regional facilities strategically located closer to key customer markets, where the company could bring together critical supply chain distribution functions under one roof -- including co-packing operations -- and enhance the transportation system as well.

Re-Designing the Supply Chain

Kimberly-Clark ultimately set plans to consolidate its distribution and co-packing operations into nine regional mega distribution centers. In the space of 18 months, the company purchased or leased eight new regional distribution centers in Chicago; Scranton, Penn.; Atlanta; Graniteville, SC; Dallas; Redlands, Calif.; Kansas City; and Toronto, and closed dozens of existing sites. (The ninth location will be in Seattle and is set to open by the end of 2009.) These new mega-distribution centers range in size from 500,000 square feet to 1.6 million square feet, with the average size being 800,000 square feet -- about the area of 14 football fields. K-C is currently re-locating external co-packing functions in the different distribution centers and should complete this by the end of 2009.

The company also has begun sending more product shipments via fuel efficient and environmentally friendly rail transportation. K-C is increasing its use of intermodal truck-rail transport with transportation module containers, which can be lifted from truck to train and back. Leveraging rail transport saves K-C approximately 130 gallons of fuel per 1,000 miles.

Results, Results, Results

Developing the supply chain network of the future has generated immediate benefits for K-C, its customers and the environment.

In 2007 alone, this streamlined supply chain helped decrease the number of customer miles (miles driven from Kimberly-Clark distribution centers to customer locations) by approximately 2.8 million miles, equivalent to over 500 round trips between New York City and Los Angeles. As a result, Kimberly-Clark has been able to reduce the use of fuel by more than 470,000 gallons.

Since the beginning of 2006 through the first quarter of 2008, the streamlining and efficiencies made to the consumer supply chain have reduced overall distances traveled by 24 million miles. This reduction in truck transport, coupled with a more than 20% increase in intermodal truck-rail transport has allowed K-C to save more than 22 million gallons of diesel fuel.

Reducing fuel consumption and reducing truck miles is also helping to shrink K-C's carbon footprint in North America by reducing emissions from truck trips -- to date, these changes equate to taking 24 thousand trucks off the road.

K-C's new supply chain network has also helped accelerate its speed-to-market. Today, K-C delivers products to 90% of its retail consumers in North America within one day's transit time. With the previous system, the company could only reach 65% of its retail consumers in one day. This created potential issues in replenishing products on shelves quickly without incurring added shipping costs.

K-C's supply chain improvements have been noticed. Since implementing the network of the future, many of Kimberly-Clark's top retail customers have selected K-C as their supplier of the year. Additionally, for the second consecutive year Kimberly-Clark was named among the top 10 North American consumer products companies in the influential Cannondale PoweRanking survey of retailers and suppliers in 2007. The company ranked No. 8 overall, improving its position from No. 10 in 2006, and moving up from No. 16 in 2005.

Kimberly-Clark's supply chain network of the future continues to be a win-win for the company and its customers creating added value for customers, while helping drive sustainable cost efficiencies and improving the company's competitive edge.

Mark Jamison is Vice President North America Customer Supply Chain at Kimberly-Clark, a 136-year old company with innovative health and hygiene brands such as Kleenex, Scott, Huggies, Pull-Ups, Kotex and Depend which are sold in 150 countries. www.kimberly-clark.com.


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