Partnering with Customers and Leveraging Data to Boost Health

Partnering with Customers and Leveraging Data to Boost Health

In May 2023, Kenvue, the company behind iconic brands such as Tylenol and Listerine, spun off from Johnson & Johnson, becoming the world’s largest pure-play consumer health company by revenue. The spinoff also meant Kenvue’s leadership team had to establish strong supply chain operations as a consumer goods company, rather than as part of a pharmaceutical firm.


THE COMPANY

Kenvue Inc. is an American consumer health company. Formerly the Consumer Healthcare division of Johnson & Johnson, Kenvue is the proprietor of well-known brands such as Aveeno, Band-Aid, Benadryl, Combantrin, Zyrtec, Johnson’s, Listerine, Mylanta, Neutrogena, Trosyd, Tylenol, and Visine.


This required benchmarking, among other measures, its service levels, technology, and the ways in which its logistics processes could impact how Kenvue was going to market.

The good news? The company didn’t need to completely overhaul its operations. “But we did have to ask ourselves, ‘If we want to be best in class, what needed to change?’” says Rodney Leonard, vice president, U.S. deliver operations. The consensus that emerged identified leveraging data and partnering more strategically with retail customers as the approach that would provide the most substantial opportunities. “That’s what we are focusing on,” Leonard says.

In doing so, Kenvue has reduced unloading times, overages, damages, and shortages, while boosting on-time shipment arrivals at its customers’ warehouses.

Across the globe, Kenvue’s 2023 sales hit $15.4 billion, with 10 brands bringing in sales of $400 million or more. About half of net sales were generated outside North America. Each day, more than 100 trucks leave Kenvue’s four distribution centers strategically located across the United States; the company also has one in Canada. Then, the trucks head to customer distribution centers.

Digital First

To ensure an efficient operation, Kenvue has leaned into technology, becoming a digital-first company. This has meant shifting from a more transactional approach to focusing on data analysis. The company also uses technology to boost service to its retail customers and to help drive the decision-making process.

Kenvue centered on the on-time, in-full (OTIF) metric, knowing that optimizing this would maximize its revenue, as well as customer revenues.

One example is using technology to improve the order-to-cash process. When a customer places an order, Kenvue has to ensure it has the right inventory in the right distribution center and can efficiently move it to the customers’ distribution centers.

For example, an order from a Chicago location would probably be filled through the distribution center located in the Midwest.

Another step has been using technology to automate and receive orders more efficiently. Previously, Kenvue might receive a customer order, and manually hold it for an employee to review, checking that it contained the right price and quantity.

Also, purchase orders could come from different buyers within the same company. Placing multiple purchase orders, typically for smaller quantities, in different areas within a truck often led to inefficiencies in receiving and increased claims for overages, shortages, and damages.

Now, Kenvue has automated the intake and collation of these orders using EDI software and other Bot technology to optimize the customer logistics analytic review. (Bot technology refers to automated software applications that perform repetitive tasks over a network. It follows specific instructions to imitate human behavior but is faster and more accurate.)

Improved Picking, Packing, Shipping

When working with five orders with the same SKU, for instance, Kenvue can combine them, putting the orders together because they’re going to the same region. This enables employees to pick the items logically.

“We were able to use technology to help organize the orders and create a much smoother customer receiving experience,” Leonard says.

Before this change, a customer might receive multiple different Tylenol bottles on different pallets throughout the truck. As a result, it took them longer to find, count, and properly receive the products.

In a pilot with the new system, two of Kenvue’s largest customers saw up to a 40% reduction in unloading costs, as well as an improvement in reported errors.

By creating a cleaner, more organized order, the picking, packing, and shipping processes are also more efficient. These changes reduced Kenvue’s loading time by about 20%.

The new system has also cut overages, shortages and damages (OS&D) about in half. Previously, customers might think they hadn’t received some of the products they’d ordered. By more effectively organizing each load so the same SKU codes are together on the truck, Kenvue’s customers accelerate unloading time and can better assess the goods they’ve received.

The enhanced Pick Logic system was built in collaboration with Kenvue’s third-party logistics partner, who runs warehouse operations. The 3PL changed its picking sequence, or the logic within its system, from a “most efficient path” to an “end-to-end customer experience path” to streamline the customers’ receiving operation.

Timely Information Sharing Is the Key

For these tools to work effectively, Kenvue and its customers need to share information. With a timely exchange of information, Kenvue can understand its customers’ inventory levels and where they want to receive products, among other information. “It all starts with that data,” Leonard notes.

For instance, Kenvue might alert its customers to data on products that are running low. Then, the company can make more tailored suggestions regarding inventory replenishment.

In the past, if a customer indicated it wanted, say, 50 cases of a product, Kenvue typically would just ship the cases. Now, it can let the retailer know that it could actually use 60 cases at its store in Southern California, which had a spike in sales over the past week.

“We’re able to help retail customers prevent out-of-stocks on the shelf by having access to that data,” Leonard says.

The Perfect Store

Kenvue’s Perfect Store solution taps into AI to help retail customers drive better store execution. Analyzing and sharing a store’s daily sales data can identify irregularities and prevent out of stocks.

While moving products to a customer’s distribution center in the right quantity and time frame is a critical starting point, the products also need to get onto the store shelves.

Many retailers are also focused on acing store execution, Leonard says. The goal is to avoid inadvertently having products in the distribution center or back room, while the shelves are empty.

To help address this, Kenvue is initiating what it calls “The Perfect Store.” The goal is to help customers ensure on-shelf availability.

Store shelves are the customer’s space, and not Kenvue’s. But partnering can help both. For example, Kenvue recently launched Perfect Store pilots with several customers, using AI to help them drive better store execution. As Kenvue receives the store’s daily sales data, it can analyze the information to identify any irregularities at the store level.

Say a location that normally sells 10 items daily hasn’t sold any in three days. AI can alert the retailer, who can check whether the product is actually on the shelf.

“With AI, we can be targeted in looking at point-of-sale trends,” Leonard says. “We’re seeing some great results to drive the consumer experience.

“This is the next frontier,” he adds. “We’re driving all the way to the customer’s shelf.”

Kenvue continues to add customers to the program. “Every customer we have approached expresses high interest in the program,” Leonard says.

Leveraging AI and Partnerships

The AI tool can help in adjusting not only for historical trends, but also can consider factors such as weather patterns or social media and events.

So, if a summer music festival will be taking place in one city, the system can incorporate that data into its analysis. It might recommend boosting the inventory of sunscreen in the area. “We’re able to be much more forward-looking and predictive,” Leonard says.

While Kenvue and its retailer would typically sign a non-disclosure agreement, so the retailer can be confident the data will be used appropriately, sharing information also requires a trusted partnership. Kenvue has worked diligently to foster such partnerships.

The labor shortage has also helped accelerate this practice. In the current environment, many stores may have one or two employees in a store, and they’re trying to manage hundreds of products, Leonard notes. AI can help them.

Kenvue is testing this in different regions, highlighting best practices, while adjusting to each region. A bodega in Asia will require a different approach than a big-box store in North America.

“There’s a certain level of freedom that we have to use, but the concept and the spirit of using technology to drive consumer experiences is consistent,” Leonard says.

Since becoming an independent company, Kenvue has not only streamlined transactions, but it has also established a new culture and way of interacting with customers.

“It has been a whirlwind, but it has been exciting,” Leonard says.


Casebook Study: A View Into Kenvue

Challenges

After spinning off from Johnson & Johnson, Kenvue needed to establish a successful and effective supply chain as an independent company that’s also the world’s largest pure-play consumer health company by revenue.

Solutions

Leveraging data and artificial intelligence, while also partnering more strategically with its retail customers to drive efficiency.

Results

Reducing unloading times, overages, damages, and shortages, while boosting on-time arrivals at customers’ warehouses.

Next Steps

Continuing to test and implement The Perfect Store approach with customers around the world.