GROCERY MANUFACTURERS OF AMERICA 2005

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GROCERY MANUFACTURERS OF AMERICA 2005 INFORMATION
SYSTEMS/LOGISTICS DISTRIBUTION
CONFERENCE APRIL 11 - 13, 2005
RAY SAREERAM SENIOR VICE PRESIDENT,
LOGISTICS BJS WHOLESALE CLUB, INC.
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BJS WHOLESALE CLUB, INC.WHERE VALUES COME TO
LIFE

• BJS CONCEPT OF OPERATIONS
• SUPPLY CHAIN CHALLENGES
• ELEMENTS OF AN IDEAL RETAILER/
• MANUFACTURER PARTNERSHIP

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BJS WHOLESALE CLUB, INC.

• 7.4 BILLION ANNUAL SALES
• 8 MILLION MEMBERS
• 156 SELLING CLUBS
• EXPANDING 10 PERCENT ANNUALLY
• HOME OFFICE NATICK, MA

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BJS CONSUMER CLUB OF CHOICE
CORE MEMBER ATTRIBUTES

• 3550 YEARS OLD
• 90 HOMEOWNERS
• HIGHER INCOME
• TWO CHILDREN AT HOME
• TWO CARS

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BJS DIFFERENTIATION
MERCHANDISING STRATEGY

• BROADER ASSORTMENT
• 50 MORE SKUS
• EXPANDED CATEGORIES
• SMALLER PACKAGE SIZES
• MANUFACTURERS COUPONS

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BJS DIFFERENTIATION
CLUB OPERATIONS

• CLUB LAYOUT
• AISLE MARKERS
• EXPRESS REGISTERS
• SELF CHECK-OUT LANES
• MOST PAYMENT OPTIONS

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MEMBER INSIGHT OVERVIEW
OBJECTIVE LEVERAGE DATA ACROSS ALL DIMENSIONS
TO ENHANCE MEMBER
SATISFACTION
INTERNAL
EXTERNAL
SPEND/BASKET
CLUB
MEMBER BEHAVIOR
MERCHANDISE DATA DEMOGRAPHICS
PRODUCT
TRANSACTIONS
DATA WAREHOUSE
REPORTING ANALYTICS
MEMBER SEGMENTATION
TARGETED PROMOTIONS
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GROWTH OPPORTUNITIES TAKE SHARE FROM LESS
EFFICIENT CHANNELS

• LOWER PRICES
• HIGHER QUALITY
• MORE GENERAL MERCHANDISE

• LOWER PRICES
• HIGHER
• QUALITY

SUPERCENTERS
SUPERMARKETS

• LOWER PRICES
• ONE STOP
• SHOPPING
• FOOD OFFERINGS
• TO DRIVE TRAFFIC

• LOWER PRICES
• LARGER VARIETY

CATEGORY KILLERS
DEPARTMENT/ SPECIALITY STORES
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WHERE VALUES COME TO LIFE . . .
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LOGISTICS BLUEPRINT
OPTIMIZE INVENTORY LEVELS
ACCELERATE PRODUCT FLOW
MAXIMIZE ASSET INTEGRITY
ENHANCE CUSTOMER SATISFACTION
DRIVE EFFICIENCY TO BOTTOM LINE
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LOGISTICS INTEGRATED PROCESSES
CLUBS

• JUST IN TIME INVENTORY
• ASSET INTEGRITY
• HIGH VELOCITY
• DEPENDABLE SUPPLY CHAIN

• SALES
• DEMOGRAPHY
• PLANOGRAM

MEMBER INSIGHT DATA
DISTRIBUTION
TRANSPORTATION
CLUBS
INVENTORY CONTROL

• FORECASTING
• REPLENISHMENT
• MODEL

• READY FOR SALE

• CLUB CONSOLIDATION

• TAILORED DELIVERY

MERCHANDISING
JDA/E3 SLIM
POSITIVE RECEIVING
SATELLITE TRACKING SYSTEM
CROSSDOCK MANAGEMENT SYSTEM

• SEASONAL
• EVENTS

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MERCHANDISE REPLENISHMENT LEAD-TIME
SUPPLIERS
DISTRIBUTION CENTERS
TRANSPORTATION
INVENTORY CONTROL
1 DAY
7 DAYS
4 HRS.
8 HRS.
8.5 DAYS
1 DAY
10 DAYS
4 HRS.
8 HRS.
11.5 DAYS
14 DAYS
1 DAY
8 HRS.
16.3 DAYS
1 DAY
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INVENTORY MANAGEMENT
OBJECTIVE. . .
THE RIGHT PRODUCTIN THE RIGHT QUANTITYAT THE
RIGHT PLACEAT THE RIGHT TIME
INVENTORY PROFILE . . .
MAXIMIZE EFFICIENCY BY. . .
MILLIONS

• CENTRALIZING REPLENISHMENT
• OPTIMIZING INVESTMENT
• MINIMIZING PAYROLL

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FORECASTING AND REPLENISHMENT SYSTEM ADVANCED
STORE REPLENISHMENT BY JDA/E3
PROMOTIONS
DAILY SALES
COLLABORATIVE REPLENISHMENT
SEASONAL PROFILES
OUTPUT

• ? CONTROL INVENTORY BY CLUB ? RAPID RESPONSE TO
  STYLE TRENDS
• MANAGE SEASONAL TRANSITION ? FLOW-THROUGH
  DISTRIBUTION
• ? ECONOMIC ORDERING ? ADMINISTER SUPPLY CHAIN

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DISTRIBUTION CENTERS
CLUB 840 JACKSONVILLE, FL
CLUB 820 BURLINGTON, NJ
CLUB 800 FRANKLIN, MA

• 630,000 SQ FT
• 232 DOORS
• 690 TRAILER SPACES
• 300 CAR SPACES

• 480,000 SQ FT
• 176 DOORS
• 516 TRAILER SPACES
• 216 CAR SPACES

• 143,000 SQ FT
• 80 DOORS
• 185 TRAILER SPACES
• 95 CAR SPACES

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DISTRIBUTION CENTER ATTRIBUTES
HIGH VELOCITY . . .
ASSET INTEGRITY
AGILITY
OPTIMUM COST . . .
PRODUCTIVITY
QUALITY OF WORKLIFE
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GLOBAL TRANSPORTATION
INTERNATIONAL
DEDICATED ASSETS
OPTIMUM LOADS
TAILORED DELIVERIES
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BJS PARTNERSHIPS WITH GMA MEMBERSBUSINESS VOLUME
65 BJS PARTNERS
35 NON BJS PARTNERS
TOTAL 117 GMA MEMBERS
35 GMA PARTNERS
65 NON GMA PARTNERS
TOTAL 7.4 BILLION SALES
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SALES GROWTH SELECTED GMA PARTNERS

• BJS RANKING BY U.S. SALES AND GROWTH

PARTNER SALES GROWTH
CLOROX 6 COCA COLA
10 PROCTER GAMBLE 9 UNILEVER
13 GEORGE WESTON 14
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SUPPLY CHAIN CHALLENGESGMA PARTNER PERFORMANCE
10 UNACCEPTABLE
90 ACCEPTABLE
120,000 PURCHASE ORDERS
86 TRANSPORTATION
4 OTHER
10 PACKAGING
TOTAL VIOLATIONS
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SUPPLY CHAIN CHALLENGESTRANSPORTATION VIOLATIONS

• PROBLEMS
• 72 ARE LATE FOR APPOINTMENT
• 4 HOURS AVERAGE
• 28 ARE BEYOND PURCHASE DUE DATES
• 7 DAYS AVERAGE
• CAUSES
• POOR COLLABORATION BETWEEN SUPPLIERS AND
  CARRIERS
• LOADS ARE TENDERED TOO LATE
• CARRIER INSENSITIVITY TO DELIVERY TIME
• NON-RESPONSIVE THIRD-PARTY LOGISTICS PROVIDERS

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THE MODEL PARTNERSHIP
COMPETITIVE ADVANTAGE
LEVERAGE UNIQUE CAPABILITIES
INNOVATION
BUILD CUSTOMER LOYALITY
ESTABLISH DIFFERENTIATION VALUE
RESPONSIVENESS
CUSTOMER SATISFACTION
RELIABILITY
MAXIMIZE PRODUCT AVAILABILITY
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ELEMENTS OF AN IDEAL PARTNERSHIP
RETAILER/MANUFACTURER

• BALANCED COMMITMENT TO GROW
• JOINT OBJECTIVES AND GOALS
• COMMON MEASUREMENT TOOLS
• JOINT PROCESS IMPROVEMENT PLANS
• MULTI-FUNCTIONAL TEAMS

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MIRROR TEAM FRAMEWORK

• SPONSORS BJS PRESIDENT/PG TEAM LEADER
• FUNCTIONAL REPRESENTATION
• MERCHANDISING
• MARKETING
• INFORMATION SYSTEMS
• OPERATIONS
• LOGISTICS
• CONTINUOUS COLLABORATIVE ACTION
• QUARTERLY ACTION PLAN REVIEWS

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TRANSPORTATION INITIATIVES

• OBJECTIVES
• ENHANCE ON-TIME DELIVERY
• MEET SHIFTING BUSINESS NEEDS
• ELIMINATE NON-VALUE ADDED COSTS
• RESULTS
• EXPANDED DROP HOOK PROGRAM
• OFFERED DIRECT TO CLUB SHIPMENTS FOR EVENTS
• CUSTOMIZED MULTI-PRODUCT FULL TRUCK-LOADS

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COLLABORATIVE REPLENISHMENT

• OBJECTIVE
• PG PERFORM REPLENISHMENT PROCESS
• HBA RESULTS
• COMP SALES INCREASED 21
• INVENTORY DECREASED 5
• SEAMLESS EVENT PLANNING FORECASTING
• EXPANDED TO PAPER COMMODITY IN MARCH

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AVAILABLE FOR SALE INITIATIVES

• OBJECTIVE
• ENSURE SUFFICIENT PRODUCT IS AVAILABLE, VISIBLE
  
• AND SHOPPABLE
• PG TEAM IDENTIFIED AFS PROBLEM
• 50 OF MEMBERS COULD NOT FIND AN ITEM
• MILLIONS IN LOST SALES
• BJS ESTABLISHED INITIATIVE AS TOP PRIORITY
• SOLUTIONS UNDERWAY
• EFFECTIVE PLAN-O-GRAMS
• CLUB REPLENISHMENT ENHANCEMENTS

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MUTUAL UNDERSTANDING AND COMMITMENT

• PG MASTERED BJS
• DELIVERY PROCESSES
• REPLENISHMENT PROCESSES
• PACKAGING/PALLET REQUIREMENTS
• BJS OBTAINED INSIGHT ABOUT
• INSTOCK AVAILABLE FOR SALE PARAMETERS
• MEMBER INSIGHT AND FOCUS GROUPS
• SUPPLY CHAIN EFFICIENCY PRACTICES
• THE BOTTOM-LINE
• A WIN-WIN PARTNERSHIP

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BJS CLUB GROWTH VS PG SALES GROWTH
PG SALES GROWTH
BJS CLUB GROWTH
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LOGISTICS RESPONDING TO TRIGGER POINTS
ADVANTAGE
REDEFINING AND REPOSITIONING
PROSPER
PARITY
ADOPTING BEST PRACTICES
SURVIVE
DECAY
BUSINESS AS USUAL
R I P
FAIL