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Consumer Driven Supply Chains
Case Studies from Vertical Industries



                                              Steve Keifer
                                             Vice President
                               Industry & Product Marketing
                                             14 March 2009
Sharing Information across Multiple Tiers
Key Capability for Success in Real-Time Consumer Driven Supply Chains

                                                                                        Consumers
             Key Data to Share

  Requests for Quote    Logistics
    Point of Sale    Work in Progress
                                                             Retailer
      Forecast            Price
      Inventory        Promotions


                                          Distributor



                          Brand Owner
                                                          Gaining Visibility to Consumer
                                                                Demand Patterns
                                                         Influence Consumer Demand with
Manufacturer
                                                             Marketing and Promotions

                                                          Rapidly Respond to Changing
                                                                Demand Patterns

                                               Slide 2
Real Time Consumer Driven Supply Chains                                 14 March 2009
Real Time Consumer Driven Supply Chains




                                          Visibility to Consumer Demand




                                                 Slide 3
Real Time Consumer Driven Supply Chains                     14 March 2009
Case Studies from Entertainment Sector
Movies (DVD), Music (CD) and Video Games


                                                             More SKUs
    Typical DVD Sales by Week
                                                             – Screen Formats - Widescreen
                                                             – HD Formats - HD-DVD & standard
                                                             – Box Sets & Gift Packs
                                                             – Unique Retailer Requirements for
                                                              customized packaging
                                                             Out of Stocks Impacts
                                                             – Potential $5 US profit/DVD
                                                             – 20% of OOS result in lost sale
  Week    Week     Week    Week     Week   Week   Week
                                                             – $2 US per expedited shipment
   -2      -1       0       +1       +2     +3     +4


                                                             Dynamic Market
      Majority of sales occur in                             – 80% of Sales in first 2 weeks after
                                                              new product introduction
       window with little to no
                                                             – Digital Downloads and Online
     historical demand patterns
                                                              Services are cannibalizing physical
                                                              product Sales
                                                         Slide 4
Real Time Consumer Driven Supply Chains                                        14 March 2009
Store Replenishment Process for DVDs
Vendor Managed Inventory Model based upon POS Analysis


            Retail                                             DVD                     Entertainment
                                      3rd Party
            Store                                            Duplicator                    Brand
                                      Logistics




                                            Physical Flow of Goods

                                            Information Flow of Data


              Capture of                    Data                    Inventory           Replenishment
              Store POS                   Cleansing                Calculation         Recommendation



             Improved Shelf Space                                  Fewer Out of Stock for New Titles
         Expanded Category Captain Role                                  Higher Margin Sales


                                                         Slide 5
Real Time Consumer Driven Supply Chains                                              14 March 2009
Looking Forward for Demand Planning


                    Historical View                                          Forward Looking

                                                                    Product
         Point of            Market       Demo/Psycho                                Sales             Search
                                                                  Configurators
          Sale               Basket         Graphics                              Interactions         Engines



         Loyalty            Retailer        Retailer                Promotion                            Gift
                                                                                    Online
          Card             Promotion        Pricing                Registration                        Registry
                                                                                   Wish List




                More data points than ever are being collected about
                consumer behavior and future purchase intentions.
                    How can we leverage this information to be more
                          responsive to consumer demand?


                                                        Slide 6
Real Time Consumer Driven Supply Chains                                                14 March 2009
Case Studies from the Auto Industry
Monitoring Pre-Sale Consumer Behavior for Demand Planning


                                                                         Auto OEM
 Retail Dealership

                          –   Walkups
                          –   Used sales contracts
                          –   New sales contracts
                          –   Phone calls
                                                                      Tier 1 Supplier




                          –   Visits
                          –   Page Views
                                                                     Tier 2 Supplier
                          –   Configurations
                          –   RFQs



 Web Interactions


                                                     Slide 7
Real Time Consumer Driven Supply Chains                        14 March 2009
Real Time Consumer Driven Supply Chains




                                          Influencing Shopper Behavior




                                                 Slide 8
Real Time Consumer Driven Supply Chains                    14 March 2009
Influencing Consumer Demand Patterns
Web 2.0 Enables New Levels of Direct Interaction with Consumer



           Traditional Mechanisms                                      Web 2.0 Techniques

                                                                    Consumer               Consumer
        Retailer Trade              Media Advertising
                                                                    Designed             Generated Video
         Promotions                  Print, TV, Radio
                                                                    Products                Contests

                                                                                           Blogs & Online
        New Product                        Financing               Free Online
                                                                                             Consumer
        Introductions                      Incentives              Only Content
                                                                                              Forums

                                                                    Television &
         Contest &                        Manufacturer                                         Reality
                                                                   Movie Product
        Sweepstakes                         Rebate                                            Television
                                                                     Placement




               Price Incentives will always be a leading technique for
                          influencing consumer behavior

                                                         Slide 9
Real Time Consumer Driven Supply Chains                                            14 March 2009
Case Studies in the Beverage Sector
 Three Tier Distribution Model for Fast Moving Consumer Goods


                               Multiple Retail Chains                  Distribution
                                                                       Complexities
                                                                       – Three tier distribution
                                                                         model using regional
                                                                         wholesalers
                                                                       – Retail chains serviced
                                                                         by different distributors
                                                                         in each region

                                     Regional                          Promotions Challenges
                                    Distributors
                                                                       – Less than 50% uptake
                                                                         on price incentives
                                                                         offered less than 30
                                                                         days out
                                                                       – 30-60% of account
                                                                         team’s time is spent
                                                                         reporting and
                                                                         communicating price
        Other Brand                  Brand Owner         Other Brand


                                                        Slide 10
Real Time Consumer Driven Supply Chains                                  14 March 2009
Price and Promotion Communication
Case Studies in the Beverage Sector



                                     1                                 6
                                              Brand Owner
                                              Headquarters



                                              5
                   Brand Owner
                  Field Marketing
                                                                      Brand Owner
              3                           2        4                   Field Sales

                                                                  7
                    Wholesaler/                                                             8
                    Distributor
                                              10
                       9                                                   Retailer

                  Optional Process


                                                       Slide 11
Real Time Consumer Driven Supply Chains                                     14 March 2009
Price Synchronization Process
Case Studies in the Beverage Sector

                                                                                    Process & Technology
                                  Multiple Retail Chains
                                                                                    Changes
                                                                                    – Centralized pricing
                                                                                      function
                                                                                    – Standardization of
                                                                                      processes across
                                                                                      regions
                                                                                    – Automated process for
                                Centralized Price &
 Regional                                                             Regional
                            Promotions Synchronization                                synchronizing pricing
 Distributor                                                          Distributor
                                                                                      and promotions
                                                                                      calendar
                                                                                    Benefits
                                                                                    – Sales uplift from higher
                                                                                      execution of promotions
                                                                                    – Expanded shelf space –
                                                                                      retailers find easier to do
                                                                                      business with
                                                                                    – Sales team focus on
           Other Brand                    Brand Owner          Other Brand            selling

                                                           Slide 12
Real Time Consumer Driven Supply Chains                                               14 March 2009
Real Time Consumer Driven Supply Chains




                                          Rapid Response to Change




                                               Slide 13
Real Time Consumer Driven Supply Chains                   14 March 2009
Challenges of Long Distance Sourcing

                               Finished            Ocean                   Warehouse              Retail
                               Product            Transport             Finished Product          Store
Manufacturing




                                          Finished Product Inventory – Inflexible to Demand Changes




   Consumers are                                Variations in                      Long Distance
   seeking greater                            features (color,                     supply chains
   customization &                          size), but also due                      challenge
   personalization                             to languages,                      forecasting and
     of products                           regulations, channel                  demand response



                                                         Slide 14
Real Time Consumer Driven Supply Chains                                           14 March 2009
Late Stage Configuration & Postponement

                                                                          Kits
        Thousands of permutations of
            mobile phones can be                                                      Late stage product
                                                                                       configuration on
        configured from a few hundred                                                   various SKUs
              standardized parts.                                                        based upon
                                                                                      consumer demand


 Manufacturer                              Inventory                                     Retailer




  Generic version of                      Generic version of
  product assemble                         product stored
 centrally in low-cost                    closer to point of
 manufacturing center                       consumption                             Local country
                                                                                 documentation and
                                                                                   retailer specific
                                                 Documentation &                      packaging
                                                    Packaging

                                                               Slide 15
Real Time Consumer Driven Supply Chains                                      14 March 2009
Enables Faster Response to Demand

                                Finished Goods assembled at Source
                               Finished                Ocean                       Warehouse                Retail
                               Product                Transport                 Finished Product            Store
Manufacturing




                                            Finished Product Inventory – Inflexible to Demand Changes


                                            Postponement Model
                              Generic                   Ocean                      Late Stage               Retail
                            Product + Kit              Transport                  Configuration             Store
 Manufacturing




        Generic, Configurable Inventory – Flexible to Demand Changes


                                                              Slide 16
Real Time Consumer Driven Supply Chains                                                     14 March 2009
Case Studies from Consumer Software
Postponement enables Flexible, Rapid Response to Consumer Demand


                                                                           Supply Chain Challenges
                                               Operating
                                            System Software                • Multiple SKUs – Home/Business;
                                                                             Mac/Windows; Upgrade/Full
                                                                           • Packaging, warranty and
                                                                             documentation vary by country
                                                                           • Frequent changes to product
                                                                             (source code) for new releases
       -3    -2    -1     0    +1    +2    +3    +4   +5   +6
                                                                           • Demand spikes for new titles;
                                                                             holiday season; tax due dates
                                                                           • Immediate product obsolescence
                                                Tax Preparation              with new title release
                                                   Software
                                                                           Benefits from Postponement
                                                                           • Fewer out of stocks - rapid
                                                                             response to consumer demand
                                                                           • Reduced product obsolescence
                                                                             and excess waste
       -6    -5    -4     -3    -2    -1   0     +1   +2   +3
                                                                           • Ability to scale up and down


                                                                Slide 17
Real Time Consumer Driven Supply Chains                                               14 March 2009
Thank You




                                          Steve Keifer
                                          E-Mail: steve.keifer@gxs.com
                                          EDInomics Blog: http://blogs.gxs.com/keifers



                                           Slide 18
Real Time Consumer Driven Supply Chains                           14 March 2009

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Case Studies in Consumer Driven Suppy Chains

  • 1. Consumer Driven Supply Chains Case Studies from Vertical Industries Steve Keifer Vice President Industry & Product Marketing 14 March 2009
  • 2. Sharing Information across Multiple Tiers Key Capability for Success in Real-Time Consumer Driven Supply Chains Consumers Key Data to Share Requests for Quote Logistics Point of Sale Work in Progress Retailer Forecast Price Inventory Promotions Distributor Brand Owner Gaining Visibility to Consumer Demand Patterns Influence Consumer Demand with Manufacturer Marketing and Promotions Rapidly Respond to Changing Demand Patterns Slide 2 Real Time Consumer Driven Supply Chains 14 March 2009
  • 3. Real Time Consumer Driven Supply Chains Visibility to Consumer Demand Slide 3 Real Time Consumer Driven Supply Chains 14 March 2009
  • 4. Case Studies from Entertainment Sector Movies (DVD), Music (CD) and Video Games More SKUs Typical DVD Sales by Week – Screen Formats - Widescreen – HD Formats - HD-DVD & standard – Box Sets & Gift Packs – Unique Retailer Requirements for customized packaging Out of Stocks Impacts – Potential $5 US profit/DVD – 20% of OOS result in lost sale Week Week Week Week Week Week Week – $2 US per expedited shipment -2 -1 0 +1 +2 +3 +4 Dynamic Market Majority of sales occur in – 80% of Sales in first 2 weeks after new product introduction window with little to no – Digital Downloads and Online historical demand patterns Services are cannibalizing physical product Sales Slide 4 Real Time Consumer Driven Supply Chains 14 March 2009
  • 5. Store Replenishment Process for DVDs Vendor Managed Inventory Model based upon POS Analysis Retail DVD Entertainment 3rd Party Store Duplicator Brand Logistics Physical Flow of Goods Information Flow of Data Capture of Data Inventory Replenishment Store POS Cleansing Calculation Recommendation Improved Shelf Space Fewer Out of Stock for New Titles Expanded Category Captain Role Higher Margin Sales Slide 5 Real Time Consumer Driven Supply Chains 14 March 2009
  • 6. Looking Forward for Demand Planning Historical View Forward Looking Product Point of Market Demo/Psycho Sales Search Configurators Sale Basket Graphics Interactions Engines Loyalty Retailer Retailer Promotion Gift Online Card Promotion Pricing Registration Registry Wish List More data points than ever are being collected about consumer behavior and future purchase intentions. How can we leverage this information to be more responsive to consumer demand? Slide 6 Real Time Consumer Driven Supply Chains 14 March 2009
  • 7. Case Studies from the Auto Industry Monitoring Pre-Sale Consumer Behavior for Demand Planning Auto OEM Retail Dealership – Walkups – Used sales contracts – New sales contracts – Phone calls Tier 1 Supplier – Visits – Page Views Tier 2 Supplier – Configurations – RFQs Web Interactions Slide 7 Real Time Consumer Driven Supply Chains 14 March 2009
  • 8. Real Time Consumer Driven Supply Chains Influencing Shopper Behavior Slide 8 Real Time Consumer Driven Supply Chains 14 March 2009
  • 9. Influencing Consumer Demand Patterns Web 2.0 Enables New Levels of Direct Interaction with Consumer Traditional Mechanisms Web 2.0 Techniques Consumer Consumer Retailer Trade Media Advertising Designed Generated Video Promotions Print, TV, Radio Products Contests Blogs & Online New Product Financing Free Online Consumer Introductions Incentives Only Content Forums Television & Contest & Manufacturer Reality Movie Product Sweepstakes Rebate Television Placement Price Incentives will always be a leading technique for influencing consumer behavior Slide 9 Real Time Consumer Driven Supply Chains 14 March 2009
  • 10. Case Studies in the Beverage Sector Three Tier Distribution Model for Fast Moving Consumer Goods Multiple Retail Chains Distribution Complexities – Three tier distribution model using regional wholesalers – Retail chains serviced by different distributors in each region Regional Promotions Challenges Distributors – Less than 50% uptake on price incentives offered less than 30 days out – 30-60% of account team’s time is spent reporting and communicating price Other Brand Brand Owner Other Brand Slide 10 Real Time Consumer Driven Supply Chains 14 March 2009
  • 11. Price and Promotion Communication Case Studies in the Beverage Sector 1 6 Brand Owner Headquarters 5 Brand Owner Field Marketing Brand Owner 3 2 4 Field Sales 7 Wholesaler/ 8 Distributor 10 9 Retailer Optional Process Slide 11 Real Time Consumer Driven Supply Chains 14 March 2009
  • 12. Price Synchronization Process Case Studies in the Beverage Sector Process & Technology Multiple Retail Chains Changes – Centralized pricing function – Standardization of processes across regions – Automated process for Centralized Price & Regional Regional Promotions Synchronization synchronizing pricing Distributor Distributor and promotions calendar Benefits – Sales uplift from higher execution of promotions – Expanded shelf space – retailers find easier to do business with – Sales team focus on Other Brand Brand Owner Other Brand selling Slide 12 Real Time Consumer Driven Supply Chains 14 March 2009
  • 13. Real Time Consumer Driven Supply Chains Rapid Response to Change Slide 13 Real Time Consumer Driven Supply Chains 14 March 2009
  • 14. Challenges of Long Distance Sourcing Finished Ocean Warehouse Retail Product Transport Finished Product Store Manufacturing Finished Product Inventory – Inflexible to Demand Changes Consumers are Variations in Long Distance seeking greater features (color, supply chains customization & size), but also due challenge personalization to languages, forecasting and of products regulations, channel demand response Slide 14 Real Time Consumer Driven Supply Chains 14 March 2009
  • 15. Late Stage Configuration & Postponement Kits Thousands of permutations of mobile phones can be Late stage product configuration on configured from a few hundred various SKUs standardized parts. based upon consumer demand Manufacturer Inventory Retailer Generic version of Generic version of product assemble product stored centrally in low-cost closer to point of manufacturing center consumption Local country documentation and retailer specific Documentation & packaging Packaging Slide 15 Real Time Consumer Driven Supply Chains 14 March 2009
  • 16. Enables Faster Response to Demand Finished Goods assembled at Source Finished Ocean Warehouse Retail Product Transport Finished Product Store Manufacturing Finished Product Inventory – Inflexible to Demand Changes Postponement Model Generic Ocean Late Stage Retail Product + Kit Transport Configuration Store Manufacturing Generic, Configurable Inventory – Flexible to Demand Changes Slide 16 Real Time Consumer Driven Supply Chains 14 March 2009
  • 17. Case Studies from Consumer Software Postponement enables Flexible, Rapid Response to Consumer Demand Supply Chain Challenges Operating System Software • Multiple SKUs – Home/Business; Mac/Windows; Upgrade/Full • Packaging, warranty and documentation vary by country • Frequent changes to product (source code) for new releases -3 -2 -1 0 +1 +2 +3 +4 +5 +6 • Demand spikes for new titles; holiday season; tax due dates • Immediate product obsolescence Tax Preparation with new title release Software Benefits from Postponement • Fewer out of stocks - rapid response to consumer demand • Reduced product obsolescence and excess waste -6 -5 -4 -3 -2 -1 0 +1 +2 +3 • Ability to scale up and down Slide 17 Real Time Consumer Driven Supply Chains 14 March 2009
  • 18. Thank You Steve Keifer E-Mail: steve.keifer@gxs.com EDInomics Blog: http://blogs.gxs.com/keifers Slide 18 Real Time Consumer Driven Supply Chains 14 March 2009