Martha Uhlhorn

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Scan Based Trading

• Martha Uhlhorn
• Executive Vice President
• eCommerce Category Management
• Magazine Publishers of America
• March 18, 2002

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What is Scan Based Trading?

• Reengineering of our current DSD process
• How?
• Consigned sale
• Eliminate paper invoices
• Retailers scan data becomes the invoice
• No more waiting in store back rooms
• Better ability to serve retailers and consumers
• Wider back door receiving time windows
• Wednesday/Sunday store access

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Traditional DSD
Terms begin
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Scan Based Trading
Terms begin
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SBT balances integrates one-sided DSD
efficiencies
Retailer Advantage
Supplier Advantage
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Scan Based Trading

• EGR began SBT with Luckys in Northern California
  in April 1996
• Today we have 2,657 stores live with 11
  customers
• HEB - 273 Schnucks - 70
• Kroger - 682 Winn Dixie - 54
• Luckys - 156 Meijer - 71
• Wal-Mart/Sams - 1335 Dillons - 4
• Ralphs - 2 Raleys - 1
• Andronicos - 9

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of SBT Live Stores Through Time
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Why Are We Investing In SBT At EGR?

• Time Savings
• Price Synchronization

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Time Savings

• Time saved at the back door can be deployed in 3
  different ways
• Employee Quality of Work Life
• Revenue growth
• Route re-engineering/asset utilization

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Employee Quality of Work Life

• Route sales jobs are hard work
• long hours
• exposed to the weather
• very physical
• 99 of EGRs route people are men 18-40
  (shrinking labor pool)
• SBT allows us to separate the delivery and
  merchandising functions
• Merchandisers arrive at the store after the
  product is deliveredno check in
• No waiting in the back room

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Revenue Growth

• Route personnel more focused on sales
• Time saved is re-invested in merchandising
• Bread is a very high touch category
• Better merchandising Higher sales
• Higher sales Higher commissions
• Afternoon call backs allow EGR personnel to
  interact with store management
• less competition from other DSD vendors
• we get credit for our product pull up

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Route Re-engineering/Asset Utilization

• 70-75 of all retail stops in a market equal
  critical mass for a supplier
• When we reach those levels, route restructure is
  possible
• All SBT routes
• Fewer routes/more stops per route
• Route trucks used more that once a day
• Alternative distribution options

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Texas City Test

• In order to validate the SBT potential, we have
  tried several experiments
• Transport drop/Merchandiser is one example of
  these alternative distribution methods
• Texas City, Texas

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Texas City Test

• Goals of the test
• Change the structure of the RSR job
• Lower costs
• Increase sales
• Increase customer service
• Prove out a new concept that is repeatable across
  the Region/System

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Texas City Test

• Sales Results
• Sales in the CSR routes are up
• Stale is down
• Cost Results
• Cost reductions are occurring
• Costs for the Texas City depot are down
• We were able to eliminate several routes
• We continue to collect information

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Scan Based TradingCustomer / Employee Feedback

• Customer
• Customers very pleased with program
• Improved Merchandising
• Higher quality Pull-up service
• Employee
• High Enthusiasm Interest in CSR Position
• Benefits
• Start day later
• Reduced physical work
• Van vs.. Route Truck

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Price/Item Synchronization

• Get it right the first time
• Fewer/no deductions
• Eliminate non value added administrative
  activities

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Price SynchronizationThree SBT Models Emerging

• 2 party - Retailer Manufacturer
• 3 party - Retailer Manufacturer enabled by
  information service provider (like viaLink)
• 3 party - Retailer Manufacturer enabled by
  their Exchanges (TBD)

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GMA DSD-viaLink Pilot
DSD Companies
Retailers

• Anheuser-Busch
• Coca-Cola
• Coors Brewing
• Miller Brewing
• Dreyer's
• Sara Lee Bakery Group
• Frito-Lay
• Pepsi-Cola
• Tonys Pizza

• Andronicos - Bay Area
• Schnucks - St. Louis

Scorekeeper

• Prime Consulting
• Group, inc.

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Pilot Objective
Demonstrate the benefits and requirements for
price/item synchronization and Scan Based Trading
processes supported by a third-party
information/network provider.
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Pilot Objective

• Translated that means

- Price/item synchronization - Use daily scan
data (customer pull) to




influence sales

• Forecasts
• Orders
• Planograms
• Out of stocks

- Lower the technology hurdles

• Kinder/Gentler SBT

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viaLink Item Catalog Common Database
Supplier
Retailer
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Integrated E-Commerce and Replenishment for DSD
Companies
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Price Synchronization

• The pilot was very successful
• 3rd party operating processes identified/documente
  d
• Sales growth of 3 vs. Control stores
• Shrink was .5
• Issues identified
• Price synchronization is hard to do
• Inventory reporting is difficult for some DSD
  categories

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Price Synchronization

• Item/cost mismatches
• Item mismatches eventually eliminated
• Cost mismatches declined 59 after the initial 90
  days
• the remaining mismatches were resolved in half
  the time vs. the beginning of the test
• Down from 5 days to 2-3 for resolution

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SLBG Benefits

• Our most quantifiable SBT benefits are in the
  cost avoidance area
• 52 fewer routes because of SBT
• 500m/yr. of avoided overtime system wide
• The SBT process is an enabler for our 7 day
  distribution initiatives

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SLBG Benefits

• Softer yet tangible benefits from SBT involve
  customer attitudes/actions
• We were given preferential consideration in the
  sale/purchase of the Luckys bakery in CA and the
  Kroger bakery in Houston
• A customer recently advised that they were not
  going to bid out their P/L bread contract
• SLBG would be awarded the contract, subject to
  negotiations, because of our use of SBT and 7 day
  distribution initiatives

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SLBG Benefits

• Employee issues
• Employee moral is higher when they are able to
  utilize SBT
• Sales Benefits
• Our Sales organization has been unable to isolate
  specific sales increases due to SBT
• We intuitively believe that the increased
  merchandising, afternoon callbacks and better
  down day service all contribute to increased
  customer/consumer satisfaction and few out of
  stock conditions

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SLBG Benefits

• 96 of our sales impacted by price and item
  synchronization are with Wal-Mart
• The following statistics apply to our efforts
  since we began the synchronization process
• Total units impacted down 90
• Short pays down 86
• Over pays down 81
• Errors are resolved in 2 days vs. 10-30 before
• The number of unauthorized products has been
  reduced

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SBT is more than EDIand Consignment Sales

• Scan Based Trading is a fundamental change in the
  way manufacturers and retailers conduct business.

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Martha Uhlhorn

• Martha.Uhlhorn_at_slbg.com
• 314-259-7285