Kimberly-Clark’s Secrets to RFID Success

Kimberly-Clark has been around for many years—135 to be exact. And while it may not be a household name, Kimberly-Clark’s roster of products and brands certainly are: Kleenex, Scott, Huggies and Pull-Ups, just to name a few. According to the company, 1.3 billion people use its products every day, contributing to $16.7 billion in sales last year.

Behind the nurturing and homey images of those powerhouse brands is a company with operations in 37 countries and a global supply chain that enables Kimberly-Clark to sell its wares in 150 countries.

As one of Wal-Mart’s top suppliers, Kimberly-Clark got onboard the RFID revolution early and has been one of the technology’s most ardent supporters. Mark Jamison, vice president of customer supply chain management, talked with CIO Senior Writer Thomas Wailgum about the company’s overall supply chain strategy, how RFID fits into the mix and how to make RFID work for the business.

CIO: What’s the overall supply chain management strategy at Kimberly-Clark?

Jamison: Our goal is to evolve the capabilities of our supply chain to a demand-driven supply network. One of the keys to achieving that vision is to have a highly integrated suite of supply chain systems that provide end-to-end visibility and as close to real-time information as possible.

About four years ago, we started redesigning our supply chain business processes and integrating our systems to that end. The first business process we redesigned was forecast-to-stock. We chose to go with SAP’s APO [Advanced Planner and Optimizer] product, and we finished putting that in the fourth quarter of last year. Following that was the redesign of our order-to-cash business processes, and we have chosen an SAP solution for this system as well.

When we implement our new order-to-cash system, we will have an integrated suite of systems, and all of our users will be working with the same information as close to real time as possible. In addition, we are developing strategies to better leverage downstream data in our business processes for supply chain, category management and consumer insights.

CIO: Supply chain integration with other enterprise systems is the holy grail of making SCM systems pay off. How big a part of your SCM strategy is focused purely on integration?

Jamison: It was a key driver, but it wasn’t the only driver. Historically, our business processes were managed with what I described as a “patch-quilt” of systems. There was a lot of handing off of information up and down the supply chain. Not everyone was working with the same information—and not even close to real-time information. And what that tends to drive in the supply chain is surprises, variability and waste. We believe that getting to the end state of high-level integration will allow us to have a more finite supply chain and also helps to manage that variability down and helps to take the waste out.

CIO: At Kimberly-Clark, how critical is the management of the supply chain function for those executives not on the inside? How much do they care to know about it?

Jamison: Obviously it’s critical in many ways, but it is so critical to working collaboratively with your customers on common objectives. Supply chains that have the capability to provide high levels of service for in-stock at retail and on-time delivery, in a cost-effective manner, can be a competitive advantage that can be leveraged to help grow the business.

CIO: You mentioned real-time data. There are some potential downsides to real-time data—for example, making too-quick decisions based on not fully flushed out supply chain information. In addition, the term “real-time data” can mean different things to different companies. What does real-time data entail at Kimberly-Clark?

Jamison: [Real-time data] improves your ability to see what’s going on in the marketplace and to understand, in a very timely manner, what’s happening with the promotions, what’s happening with a product in production. And it enables you to respond, from a supply chain perspective, in a more cost-effective manner, and in a manner that helps you increase your stock levels and keep things on the shelf.

Now that doesn’t mean to us that we that we need real-time data at an hour level. But we certainly want to look at it in eight- to 16-hour buckets so that we do get a very timely read as to what’s happening in the marketplace. (For more on the risks and rewards of real-time data in the supply chain, see Managing the Flow of Real-Time Data.)

CIO: Other supply chain executives that I have spoken with have told me about the “aha” moment when their supply chain users finally got the real-time or more up-to-date data they had always wanted. Did this happen at Kimberly-Clark?

Jamison: It did, when we implemented APO. Now, we won’t realize the full benefit of our integration until our order-to-cash is fully implemented, which I mentioned earlier. But when we implemented APO, our production planners saw an immediate improvement to their ability to service promotions because of improved visibility to real-time demand information.

CIO: Kimberly-Clark has been a major driver on RFID adoption. What can you tell me about RFID in 2007 and how you are currently using the technology?

Jamison: The first thing I would tell you is our strategy around RFID has been to focus on business processes and develop repeatable, scalable business processes that are enabled by the technology. The reason I start out with that is you read today a lot about whether companies are getting value from RFID. When we dug deep into those examples, it was because [those companies] really operated in a “slap and ship” mode.

The technology in and of itself is not going to bring value to the supply chain. The value to the supply chain comes from reengineering your business processes and enabling that new business processes to work with the technology.

CIO: Can you give an example of where it’s working now?

Jamison: Our focus is on redesigning business process and finding a way for the technology to support that process. A perfect example of that is in what we’ve done in the area of promotional execution. We found that only 55 percent of the time our promotional displays were moving to the floor in time to meet our promotion, or advertising, dates. And that was missing a real opportunity to get that product out to our customers along with our retail partners.

So we redesigned the business process that tracks execution of our retail displays on sales floors. We developed daily reports, based on real-time data, and we included our retail operations people in the process so that on a daily basis we can identify those stores which have not executed the promotions. The retail operations people can then be dispatched to go into the stores of our retail partners, and we can get that display and product immediately on the floor.

Shortly after we implemented the new process that was enabled by the technology, we saw our execution of promotional displays improve from 55 percent to over 75 percent. We also saw a corresponding increase in point of sale. So while we saw the execution improve, we also saw sales increase at a corresponding rate. And I just think that’s an excellent example of how RFID, in combination with redesigning a business process, can have big effect on the supply chain.

CIO: Is this working for specific products, and what are those?

Jamison: This specific process we have focused on is with the Depend [adult incontinence] healthcare product. The reason why this is very critical for us is that we have a first-of-the-month promotion for that product because that’s when many of our consumers receive their Social Security checks, and we want that product available when they go shopping.

CIO: Do you think these kinds of examples—that show real RFID-enabled results—is just what the industry needs to keep the RFID momentum going? Jamison: I think it is, and that’s one of the reasons why Kimberly-Clark is willing to show examples [of RFID successes]. Because we really believe that for RFID to work there has to be wide adoption.

CIO: Over the years there has been dissatisfaction with the RFID tags and read rates of the RFID readers—some products, such as those that contained liquids or had metal, didn’t work so well. Do you feel now, in 2007, you’re getting good returns on Kimberly-Clark’s investment, and are satisfied with the technology results?

Jamison: Our products are pretty RFID–friendly—lots of bulk paper products. Our read rates are well over 95 percent, so we are very comfortable with the accuracy of [our technology]. There are some products in the marketplace that still are challenging and are not RFID-friendly—metals and glass and products with liquids. But I’m not a good expert in that area.

CIO: Another challenge been integrating the new RFID data into enterprises’ back-end systems. Are you finding that there are enough software products available to make this work?

Jamison: Yes. In the example of the promotional execution, we were working with a software provider called Oat Systems. What they have given us is that supply of information that is actionable. We don’t have to do a lot of data mining ourselves. We’re also working with another company called TrueDemand on replenishment, so we don’t have out–of-stock on the shelves.

CIO: The last of the RFID challenges that I have been hearing about is ensuring that one person—or one group—takes ownership of the overall RFID implementation, especially because an RFID program can span so many different functions—from supply chain, to IT, to marketing, to accounting. How have you dealt with that?

Jamison: We have created two teams at Kimberly-Clark to develop RFID capabilities. The first is focused on technological capability such as tag performance and readers. This team is part of our Process and Technology Development organization. The second team is focused on utilizing RFID to develop insights and enhance business processes. This team is part of the Customer Supply Chain organization and works directly with our customers to develop these capabilities.

CIO: Has there been any pushback on RFID funding over the years?

Jamison: Obviously we have to bring a solid business case forward, but so far we’ve been successful. And that’s because we are focused on solving business problems and finding real-world business results—and that enables us to get money for the program.

CIO: Are there any other applications of RFID that Kimberly-Clark is looking at for the future?

Jamison: Another area where we’re starting to pilot is trailer management. In our large distribution center, we have some 500 to 700 trailers parked in the yard. We’re looking at a process where we can track the location and the identity of those trailers. When a trailer comes in the yard, we’ll apply an RFID tag. We believe we’ll be able to improve the accuracy of information and cut down on the amount of time it takes to track trailers in our yard.

In the supply chain, potentially, we could bring RFIDs back into the manufacturing environments, and trace raw materials. We’ve found that the bigger payback in the short term for us has been reducing out-of-stocks on the shelf. But we believe there are a lot more opportunities with RFID.