Flawless Execution in the World of

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• Flawless Execution in the World of
• Real-Time Retailing
• February 12, 2007

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Agenda

• Todays Retail Challenge
• People, Process and Political Challenges
• The Barrier to Flawless Execution
• Supplier Collaboration
• History of Supplier Collaboration
• The Need for an Enhanced Supplier Collaboration
  Model
• The Issue of Hand
• Real Time Retail Trading Partner Portal
• Use Case Examples of Real Time Data in Action
• Promotions Execution In a Collaborative World
• Existing Promotions Planning Process
• The Use of Real-Time Data in the Promotions
  Process
• Real-Time Data in Promotions Planning
• Real-Time Data in Promotions Execution
• Real-Time Data in Promotions Analysis
• The Future Optimizing Execution Maximized

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Todays Retail Challenge

• Attract, Build and Retain a PROFITABLE Customer
  Base
• Drive Operational Efficiencies.
• Improve Marketing Effectiveness
• Differentiate with Customer Service Offerings.
• Meet or BEAT Wall Street Expectations
• Change the Paradigm on FINANCIAL Performance
  Metrics
• Drive Increased Performance through Store Level
  Execution.
• Increase the Level of Supplier Collaboration in
  order to DRIVE Execution Strategy
• Eliminate Practices and Processes that do not
  provide increased focus on CUSTOMER CENTRIC
  programs
• Define and Implement Replicatible BUINE
  PROCE Change

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People, Process, Political Challenges
Category Managers
Store Operations
Strategic Planning Data Accessibility not
Actionable Insight Continued Reliance on Trade
Promotion Compensation Plans Disconnect with
Store Ops
HQ- Store Communications Limited Data
Accessibility Pressure on Operations Costs
Inconsistent Vendor Relationships Reactive vs.
Proactive Strategies Labor Expense Scheduling
Integration of Business Process
Shared
Resistance to Change Training on BI Tools
Analytics Competitive Pressures
Vendor Community
Past Trade Promotion Practices Delay in Reaction
Times due to Data Accessibility Integration of
Field Merchandising Teams Limited Actionable
Information Private Label Emergence Industry
Consolidation Increased COGS Sarbanes Oxley
Regulations
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An Integrated Enterprise
Store Operations
Category Managers

• Applications
• Day of week performance
• Event Planning
• Order Guidance Report
• Item Management
• Assortment Management
• Promotion Effectiveness
• Logistics and Operations Planning
• Smoother Orders
• Value
• Increase Operational Efficiencies
• Reduce OOS
• Reduced Inventory Investment
• Increased Inventory Turns
• Reduce Item Voids
• Increase Sales
• Increase Profit

Maximizing Results will require adoption of a New
BUSINESS PARADIGM
Vendor Community
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The New Business Paradigm

• These mature organizations and their leaders
  have seized on collaboration and self
  organization as powerful new levers to cut costs,
  innovate faster, co-create with customers and
  partners, and generally do whatever it takes to
  usher their organizations into the twenty-first
  century business environment.
• Don Tapscott, Author - Wikinomics
• BMW, Boeing, PG

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Agenda

• Todays Retail Challenge
• People, Process and Political Challenges
• The Barrier to Flawless Execution
• Supplier Collaboration
• History of Supplier Collaboration
• The Need for an Enhanced Supplier Collaboration
  Model
• The Issue of Hand
• Real Time Retail Trading Partner Portal
• Use Case Examples of Real Time Data in Action
• Promotions Execution In a Collaborative World
• Existing Promotions Planning Process
• The Use of Real-Time Data in the Promotions
  Process
• Real-Time Data in Promotions Planning
• Real-Time Data in Promotions Execution
• Real-Time Data in Promotions Analysis
• The Future Optimizing Execution Maximized

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History of Supplier Collaboration

• Early Supplier Collaboration Models began in the
  1980s
• Significant Adoption of EDI/UPC Standards inlate
  1980s to mid 1990s
• Emergence of the Internet has led to the
  emergence of a number of proprietary retailer
  portal applications
• No comprehensive industry wide approach has
  emerged
• Plethora of disparate applications for supplier
  community
• Supply Chain agility and velocity is the key
  driver
• Application development focus vs. process
  improvements
• Increased complexity requires an industry based
  approach

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The Need for Enhanced Supplier Collaboration
Its No Longer Simple.
Inovis May 2006
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The Issue at Hand

• 20 of all orders across all industries are in
  error
• 26 for electronics manufacturers
• 62 for CPG/retail suppliers
• 43 result in deductions or overpayments
• Suppliers attribute 6 of selling, general, and
  administrative expenses to resolving invoicing
  issues
• Deductions account for nearly 10 of invoiced
  sales
• Lost sales represent 3.5 of annual revenues due
  to stock outs
• Out of stocks still range from 5-15 by UPC/store
• Cost to resolve item data and invoice errors
  ranges from 40-80

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The Issue at Hand
Retailer Pressures
Out of Stocks and Long Supply Cycles Drive the
Need for Speed
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Retail Trading Partner Portal Real Time
Retailing
Firewall
Data Repository
Daily Sales Data

Inventory and Order
Retail Checkout Systems
Vendor A
Location Information
Audited POS Sales OH, OO SKU/Store


T h e I n t e r n e t
Item File
Vendor B
Real Time Feed To Operational Data
Store

Vendor C
Data Sync Platform
Firewall
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Retailing in Real Time
Alert Messaging

Web Services
Operational Data Repository
Point of Service
Sales Reporting
Exception Workbench
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Real Time Sales Reporting
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Real Time Sales Monitoring-Alerts

• Event Based Alerts
• Automatically triggers when a specified threshold
  is obtained
• Upfront promotions planning process includes
  defining alert triggers
• Rules Based alert triggers
• Defined Recipients
• Open Question Who does what to whom to resolve
  the issue?
• Example

• -----Original Message-----
• From CustomerSupport_at_retailerxxx.com
  mailtoCustomerSupport_at_XXXXXXXXXXX.com
• Sent Monday, July 10, 2006 335 PM
• Subject Alert Qty 100 Store 447 20 LB ICE
• ReceiptsPLUS Item Sale Quantity Alert
• Trans Date 2006-07-10 1155
• Store Number 447
• Item Number 00000009079625
• SFI Number 090796
• Item Desc 20 LB ICE
• Quantity 100
• ReceiptID 193336635

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Retail Trading Partner Portal Objectives

• Leverage and Extend the Value of Existing
  Merchandise Management Initiatives
• Define Roles and Partner Responsibilities
• Operations Logistics Improvements
• Inventory Management
• Promotion Analysis
• Administrative Financial Accounting
  Improvements
• Real Time Delivery of Sales Data to Provide
  Accurate Timely Business Intelligence
• Enhances Support Capabilities of vendor partners
  by providing real time access to movement
• Sales by Units s / Store / SKU / Avg.
  Retail Selling Price
• Direct Link to PO as Key Compliance Measurement

Trading Data Data Analysis for Increased
Accountability
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Agenda

• Todays Retail Challenge
• People, Process and Political Challenges
• The Barrier to Flawless Execution
• Supplier Collaboration
• History of Supplier Collaboration
• The Need for an Enhanced Supplier Collaboration
  Model
• The Issue of Hand
• Real Time Retail Trading Partner Portal
• Use Case Examples of Real Time Data in Action
• Promotions Execution In a Collaborative World
• Existing Promotions Planning Process
• The Use of Real-Time Data in the Promotions
  Process
• Real-Time Data in Promotions Planning
• Real-Time Data in Promotions Execution
• Real-Time Data in Promotions Analysis
• The Future Optimizing Execution Maximized

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Use Case Example ROI Measurement
Warehouse Vendors Direct
Store Delivery Vendors

• Detail Operations and Logistics Changes
• Routing / Frequency / Timing of Deliveries
• Monitor and Document Distribution Voids
• Reduce or Eliminate OOS
• Document Execute an Improved Emergency Load
  Process
• Analyze Shrink

• Monitor and Document Distribution Voids
• Analyze Data and Prepare Reports for Category
  Manager Review Meetings
• Category Reviews
• Event Planning
• Monitor Report on Item Performance
• New Item Introduction
• Identify Fast / Slow Movers
• Promotion Effectiveness

Improved Communication between Stores, Vendor
Corporate Office
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Vendor Steering Committee - ROI Measurement
Supplier Type Report Use
Comments Sales Increase

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Use Case Example Real Time Sales Monitoring

• District Performance of Void and Zero Movers
• Shows a snapshot of performance summarized by
  district
• Shows the contribution of each district to the
  total
• Calculates a opportunity for improving
  execution
• Example

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Use Case Example Real Time Sales Monitoring

• Store Performance of Void and Zero Movers
• Breaks down the by district information to show
  the performance of each store in the district
• Shows the contribution of each store to the
  district total
• Calculates a opportunity for improving
  execution so that resources and efforts can be
  allocated to where it will have the greatest
  impact
• Example

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Use Case Example Real Time Sales Monitoring

• SKU Performance of Void and Zero Movers
• Shows a snapshot of performance summarized by SKU
• Shows the contribution of each SKU to the total
  business
• Calculates a opportunity for improving
  execution so that issues can be uncovered by
  product attributes
• Example

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Use Case Example Real Time Sales Monitoring

• Comparative Sales Analysis
• Shows sales performance TY to LY updated to the
  day
• Shows where selling efforts need to be directed
  for the greatest impact
• Example

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Use Case Promotions Analysis

• OOS Monitoring Before, During, and After
  Promotion to Understand Impact
• Findings
• Out of Stocks during the promotion ranged from 5
  to over 50 on promoted items resulting in a
  negative sales impact during the promotion
• 10 of the sales increase during the promotion
  was due to improved in-stock positioning
  resulting in a renewed focus on pre-promotions
  setup and execution!

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Use Case Promotions Analysis

• Promotion Costs Prevented Success for the
  Supplier
• Findings
• The promotion cost the supplier 4 for every
  additional unit sold. This was almost evenly
  split between the discount on shipments and the
  paid to the retailer for display
• The supplier lost to participate in this
  promotion while the retailer made over 3 for
  every unit sold

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Use Case Promotions Analysis

• Post-Promo Analysis Revealed that Unnecessary
  Deductions Were Taken
• A 10 savings in promo costs could have been
  achieved if the supplier had given deductions
  based on units sold resulting in
• A move towards scan-based discounts
• Improved analysis of promo setups
• Backstocking inventory to allocate in-promotion

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Agenda

• Todays Retail Challenge
• People, Process and Political Challenges
• The Barrier to Flawless Execution
• Supplier Collaboration
• The History of Supplier Collaboration
• The Need for an Enhanced Supplier Collaboration
  Model
• The Issue of Hand
• Real Time Retail Trading Partner Portal
• Use Case Examples of Real Time Data in Action
• Promotions Execution In a Collaborative World
• Existing Promotions Planning Process
• The Use of Real-Time Data in the Promotions
  Process
• Real-Time Data in Promotions Planning
• Real-Time Data in Promotions Execution
• Real-Time Data in Promotions Analysis
• The Future Optimizing Execution Maximized

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Existing Promotions Planning Process
Weekly Sales Data Daily Sales Data
Summary Data Syndicated Data Provided Post Promo
Customer
Disconnect
Disconnected Promotions Planning Process
Supplier
Retailer
Promo Inventory
Trade Promotion
Promotional sales data is not synchronized with
suppliers and customers resulting in flawed
execution and post promotions analysis
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The Use of Real Time Data in the Promotion Process
PRE-Promotion
IN-Promotion
POST-Promotion
How much did we sell LY so we know how much to
order?
Delay in analysis results in poor documentation
Limited Visibility
Current Model
How can we maximize sales based on what the
customer buys?
Alert and monitor thresholds defined to track
sales
Promotions analysis documented to use for
subsequent planning
With Timely Accurate Data
Planning
All promo goods shipped and allocated
Limited due to delay in sales results
communication
Current Model
Limited Visibility
Execution
Goods are replenished as they are sold Store
setups are verified and corrected as needed
Immediate post-promo wrap-up includes allocating
field resources for store recovery
Enough goods for initial setups are sent to
stores
W/ Real Time Data
Limited Visibility
What did we promote LY?
Did we beat LY sales?
Current Model
Is pricing compelling? What else is the customer
buying? Do we have the right product in the right
place?
Did we optimize margins? Did we maximize
cross-selling opportunities? Did we react to what
the customer bought?
Analysis
What can we promote profitably? What do we
anticipate we will sell at each point in the
promotion?
W/ Real Time Data
Real-Time Data Affects the Total Promotions
Process Life Cycle
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Real Time Data in Promotion Planning
PRE-Promotion
IN-Promotion
POST-Promotion
How much did we sell LY so we know how much to
order?
Delay in analysis results in poor documentation
Limited Visibility
Current Model
How can we maximize sales based on what the
customer buys?
Alert and monitor thresholds defined to track
sales
Promotions analysis documented to use for
subsequent planning
Planning
W/ Timely Accurate Data

• Benefits
• Promotions decisions no longer based on repeating
  last years model
• Customer votes on what items to promote based on
  buying preferences
• Purchases bought based on anticipated sales and
  shipments are staggered throughout the promotion
  by analyzing the peaks and valleys of product
  demand
• Data synchronized across retailers and suppliers
  improving collaboration resulting in mutually
  beneficial promotions
• Immediate post-promotion wrap-up results in well
  documented results and benchmarking

Data Sharing in the Pre-Planning Process Leads to
Collaboration
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Real Time Data in Executing Promotions
PRE-Promotion
IN-Promotion
POST-Promotion
All promo goods shipped and allocated
Limited due to delay in sales results
communication
Current Model
Limited Visibility
Execution
Goods are replenished as they are sold Store
setups are verified and corrected if needed
Immediate post-promo wrap-up includes allocating
field resources for store recovery
Enough goods for initial setups are sent to
stores
W/ Real Time Data

• Improved Capabilities
• Real-time sales and inventory models allows for
  corrections and adjustments during the promotion
  improving turn and profitability
• Replenish inventory of trending stores
• Transfer inventory where weeks of supply is
  increasing
• Reduce initial inventory investment by back
  stocking inventory to pull
• Corrective action taken for stores that are not
  properly setup
• Sharing data across the organization improves
  communication and promotes more active involvement

Real-Time Data Provides Insight Into Promotions
Execution Performance
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Real Time Data in Promotion Analysis
PRE-Promotion
IN-Promotion
POST-Promotion
Limited Visibility
What did we promote LY?
Did we beat LY sales?
Current Model
Is pricing compelling? What else is the customer
buying? Do we have the right product in the right
place?
Did we optimize margins? Did we maximize
cross-selling opportunities? Did we react to what
the customer bought?
Analysis
What can we promote profitably? What do we
anticipate we will sell at each point in the
promotion?
W/ Real Time Data

• Greater Insight
• Allows for analysis that expands beyond how did
  we compare to LY
• Analysis becomes a crucial step throughout the
  promotions process
• Uncovers pricing, assortment, and logistics
  opportunities that can be corrected in the
  promotion and used to improve future promotions
• Understanding the timing of sales can impact
  staffing and resource allocation
• Transaction based data reveals cross-promotional
  opportunities based on customer buying patterns
• Future promotions based on findings from past
  promotions as well as current trends

Analysis is no longer limited to only pre post
analysis
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Agenda

• Todays Retail Challenge
• People, Process and Political Challenges
• The Barrier to Flawless Execution
• Supplier Collaboration
• History of Supplier Collaboration
• The Need for an Enhanced Supplier Collaboration
  Model
• The Issue of Hand
• Real Time Retail Trading Partner Portal
• Use Case Examples of Real Time Data in Action
• Promotions Execution In a Collaborative World
• Existing Promotions Planning Process
• The Use of Real-Time Data in the Promotions
  Process
• Real-Time Data in Promotions Planning
• Real-Time Data in Promotions Execution
• Real-Time Data in Promotions Analysis
• The Future Optimizing Execution Maximized

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The New Business Paradigm

Revolutionize the way Customers interact with
Retailers, their Supplier Community and the
supporting Industry infrastructure.
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The Future Flawless Execution Maximized

• Improved Performance Visibility
• Operational Efficiency
• New Targeted Promotion Opportunities
• Enhanced Retailer Collaboration

Improved Service
Increased Loyalty
Customer
Collaborative Promotion Planning
Supplier
Retailer
Improved Marketing Support
Web Enabled Data Access
Expanded Retail Enterprise
Real Time Sell Through
Increased Customer LOYALTY Through Flawless
Execution

• Gross Margin Optimization
• Enhanced Store Operations Reporting
• Increased Supplier Collaboration
• New Customer Marketing Tool

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Summary

• Real Time Retailing is an important step in the
  efforts to integrate Merchandising, Store
  Operations and the Vendor Community in order
  enhance the customers shopping experience
• A Trading Partner Portal Program is designed to
  drive improved operational efficiency, increase
  in stock positions and provide vendors
  information that will support a retailers
  business objectives.
• Operational Excellence will successfully drive
  top and bottom line growth.

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Thanks from

• Jim Nadler VP Business Development
• [phone]
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