Kimberly-Clark

CHAPTER 6

Strategic Alliances

C A S E

How Kimberly-Clark

Keeps Client Costco

in Diapers

One morning, a Costco store in Los Angeles began

running a little low on size-one and size-two Huggies.

Crisis loomed.

So what did Costco managers do? Nothing. They

didn’t have to, thanks to a special arrangement with

Kimberly-Clark Corp., the company that makes the

diapers.

Under this deal, responsibility for replenishing

stock falls on the manufacturer, not Costco. In return,

the big retailer shares detailed information about

individual stores’ sales. So, long before babies in

Los Angeles would ever notice it, diaper dearth was

averted by a Kimberly-Clark data analyst working at

a computer hundreds of miles away in Neenah, Wis.

“When they were doing their own ordering, they

didn’t have as good a grasp” of inventory, says the

Kimberly-Clark data analyst, Michael Fafnis. Now,

a special computer link with Costco allows Mr. Fafnis to make snap decisions about where to ship more

Huggies and other Kimberly-Clark products.

Just a few years ago, the sharing of such data

between a major retailer and a key supplier would

have been unthinkable. But the arrangement between

Costco Wholesale Corp. and Kimberly-Clark underscores a sweeping change in American retailing.

Across the country, powerful retailers from Wal-Mart

Stores Inc. to Target Corp. to J.C. Penney Co. are

pressuring their suppliers to take a more active role

in shepherding products from the factory to store

shelves.

CHANGING SIZES

In some cases, that means requiring suppliers to shoulder the costs of warehousing excess merchandise. In

others, it means pushing suppliers to change product

or package sizes. In the case of Costco and KimberlyClark, whose coordinated plan is officially called

“vendor-managed inventory,” Kimberly-Clark oversees and pays for everything involved with managing

Costco’s inventory except the actual shelf-stockers in

store aisles.

Whatever the arrangement...