Kimberly-Clark Makes Sense of Demand
There are certain products that consumers ask for by name, and Kimberly-Clark happens to make at least three of them: Kleenex tissues, Huggies diapers and Kotex feminine napkins.
So when store supplies for the company’s retail partners are out of synch with production forecasts it can have a very real impact on the $20.8 billion personal care products giant’s sales. Empty shelves send impatient buyers to competitors’ products, while too much inventory can result in unwanted carrying costs.
For years, Kimberly-Clark relied on historical data to guide forecasts, but that changed in 2007 when the company began a complete end-to-end overhaul of its supply chain and invested. The company implemented Multi-Enterprise Demand Sensing to gain more visibility into real-time demand trends and improve forecast accuracy. Why is forecast accuracy such a big deal for Kimberly-Clark? A one-day reduction in safety stock for one business unit can equate to $10 million in savings.
“The supply chain transformation started by moving away from functional silos to an end-to-end value chain,” says Rick Sather, vice president Customer Supply Chain, North America, Kimberly-Clark. The focus was on information flow to link the demand creation capability with supply capability while removing complexity and redundancies.”
Although that transformation is ongoing, the company has already made remarkable progress using Demand Sensing. It has reduced the number of customer-facing shipping locations to approximately 20 from 80 – all while growing annual sales an average of 5 percent during that timeframe. Kimberly-Clark also has decreased forecast errors by anywhere from 15 percent to 35 percent, depending on the weekly horizon window.
The return on investment comes from a safety stock reduction built on lower forecast error. The forecast error reductions can translate into one to three days reduction in safety stock.