PALM DESERT, Calif. -- Replenishment and category management programs have decreased costs and increased sales for Johnson & Johnson and its retail partners. "The benefits are real. Replenishment programs have yielded significant reductions in inventory, paperwork and waste. Category management programs have significantly increased sales and profits," said James Litts, president of the Johnson & Johnson Customer Support Center, New Brunswick, N.J. He spoke here at a health and beauty care conference sponsored by the General Merchandise Distributors Council. "Our experience has been that one of the easiest places to begin these relationships [with retailers] is with logistics," Litts said. "It is an area that is critically important to both parties and immediate improvements can be made that benefit both parties."
He used an example of a replenishment partnership with a medium-sized regional customer whom he did not name. The agreement called for cooperation in all components of replenishment: order cycle, handling, storage, inventory and transportation. After nine months, he said, the results were a 57% reduction in inventory, a 54% increase in in-stocks and 100% on-time shipments. "We were impressed and became believers," said Litts. "The results are typical of what can happen when the managements of two companies decide to attack the inefficiencies of the supply chain. We have since improved and expanded this effort and will have replenishment partnerships with 32 accounts by the close of 1994."
According to Litts, successful relationships in replenishment have led Johnson & Johnson to move naturally into category management partnerships "where we have seen the biggest returns for both parties." Category management is "where consumer marketers with dominant brands can bring substantial value to retailers and wholesalers," he said. Litts gave these specific results of Johnson & Johnson's category management partnerships:
6% to 15% category growth.
9% to 19% increase in sales per linear foot.
12% to 37% profit increase.
As a result of replenishment and category management programs, Litts said, "a strong side benefit of cooperation and teamwork begins to evolve between companies."
The Johnson & Johnson Customer Support Center was formed by the parent company in 1991 to facilitate J&J business processes with trade customers. The center is responsible for cross-functional sales teams, retail selling, revenue cycle transactions, trade relations and supply chain management for the consumer sector. "We thought this restructuring would improve our competitive position within the trade, now and into the future, by enabling collaborative working relationships with our trade customers," said Litts.
