Best Buys Customer Centric Supply Chain Transformation

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Best Buys Customer Centric Supply Chain
Transformation

• Dan Currie
• SVP, Global Supply Chain

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About Best Buy

• Founded in 1966 based in Minneapolis, Minnesota
• An innovative, 36 billion, Fortune 100 growth
  company
• 1 Consumer Electronics retailer globally
• Consumer electronics
• Personal computers
• Entertainment software
• Appliances
• 1086 stores in US, Canada, and China
• Puerto Rico, Mexico, Turkey in the next 12 months
• 841 Geek Squad precincts worldwide

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Our Revenue Growth by Fiscal Year
35.9
36.0
30.8
27.4
30.0
24.5
25.0
20.9
17.7
20.0
15.2
12.5
15.0
Billions
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8.3
7.8
10.0
7.2
5
5.0
0.0
95 96 97 98 99 2000 01
02 03 04 05 06 07
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Our Transformation Agenda
WHAT are the strategic issues facing Best
Buy? WHAT is Best Buys strategic response?
WHAT capabilities are being deployed to enable
the strategy?
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What are the strategic issues facing Best Buy?

• The WHATs
• What is the next source of top-line growth ?
• What are we famous for in each brand?
• What do our brands stand for today and tomorrow?
• Which innovations are important for us to respond
  to?

• The HOWs
• How do I run a cost-effective operation and
  reduce complexity?
• How do I develop a results-driven organization?
• How can technology help me?
• How do I develop a confident organization,
  retaining and equipping people for change?
• How do I build relationships with customers
  across each brand?

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The macro trends facing us are changing fast

• Consumer pulls
• Balance of Power
• Demand for personalization
• Convenience
• Alternative calls on disposable income

• Retailer challenges
• Consolidation
• Commoditization
• Collaboration
• Compliance
• Convergence
• Obsolescence

• Technology shifts
• Disruptive Technologies
• Global Supply Chain
• Channel Integration
• Vanilla

So is Pace
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What are the Customer Behavior Trends issues are
we facing?

• The Customer
• Changing demographics
• Health and wellness
• The smart consumer converging technologies
• Differentiation of the buying experience

Source-Cap Gemini, 2016 The Future Supply Chain
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What are the Product Characteristic trends are we
facing?

• The Products
• Shift toward services
• Virtualized products
• Product complexity
• Customer-driven RD
• The commoditization of quality
• Brand ownership

Source-Cap Gemini, 2016 The Future Supply Chain
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What are the Product Chain trends are we facing?

• The Product Chain
• Global sourcing Global SCM
• Minimum inventory
• Lean provisioning
• Multi-channel shifts

Source-Cap Gemini, 2016 The Future Supply Chain
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What are the Information Flow trends are we
facing?

• The Information
• Demand capturing and aggregation
• Real-time visibility
• Intelligent decisions using agents
• Service orientation
• Standardization

Source-Cap Gemini, 2016 The Future Supply Chain
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The Transformation Agenda
WHAT are the strategic issues facing Best
Buy? WHAT is Best Buys strategic response?
WHAT supply chain capabilities are being
deployed to enable the strategy?
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The Co-Creation Experience

• Mass
• Targeted
• Personalized
• Co-Creation

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Experience Community Social Networks
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Order Management
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Two major pillars customer centricity and
efficient enterprise
Customer Profitability Distribution
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Customer EVA
- 100
Customer Deciles
CustomerCentricity
Efficient Enterprise
Supply ChainInformation Technology
Enablers
Enablers
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The Transformation Agenda
WHAT are the strategic issues facing Best
Buy? WHAT is Best Buys strategic response?
WHAT capabilities are being deployed to enable
the strategy? - Customer Centric Supply Chain
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Our Customer Centric Supply Chain Strategy -
Objectives
Customer experience driven Best Buy will own the
pipe through end-to-end integration from the
consumers home back to the raw materials
producers Work and cost will be pushed up the
supply chain and away from the store, with
floor-ready merchandise that enable stores to
focus on serving the consumer A one version of
the truth forecast will be developed that will
migrate the business from a push model, to a pull
model Speed and flexibility will be built into
the supply chain to enable more fashion and
freshness building attribute driven flows We
will transform our supply chain at speed by
collaborating and integrating with our partners,
develop collaborative partnerships within and
beyond our industry Leveraging our global
partnerships to extend global reach
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We needed to transform the supply chain for
speed, efficiencyand flexibility
From
To

• Standard assortments
• Push model
• Unnecessary work in the stores
• One size fits all
• Multiple forecasts
• Single channel
• Reactive variability management

• Voice of the store tailored market assortments
• Pull model Locality demand
• Push work back up the supply chain sales floor
  ready
• Tailored price and flowpath by store
• One version of the truth forecasting - CPFR
• Multi channel
• Proactive variability management

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The Holistic Customer Centric Supply Chain
Improve customer availability
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Customer Tailored Supply Chain
North America
ASIA
Reduce GA
BBY Stores
US Mfg DCs
Asian 3rd Party Consolidator (by Vendor)
BBY/Vendor DCs
Asian Factories
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Store Shelf Focused
Improve speed and transparency reduce cost
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N. American Factories
Streamlined Inbound Management
Improve CA reduce inventory
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Advanced Planning and Replenishment
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How are we going to achieve this SC
Transformation Program
Panorama Program
Forecasting Replenishment
Product Fulfillment
Merchandising

• Global Sourcing
• Physical Flows
• Direct Import
• Lean
• RFID Strategy
• Entertainment
• Network Optimization

• Forecast Accuracy
• Replenishment/ Allocation
• Inventory Optimization
• Key Item Planning
• Space Management (macro and micro)
• CPFR, VMI

• Assortment / Space Optimization (TMA)
• Price Optimization
• Integrated Promo Planning
• Financial Planning
• Partner Innovation
• Labor Scheduling

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The Best Buy RFID program has been shaped around
customer centricity.
Supply Chain Value
Predominant Industry Focus
Best Buy Focus
Customer Value
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RFID is already driving convenience for customers

• On our roads with E-ZPass, saving time at toll
  stations

By helping us keeping track of keys, mobile
phones, laptops, pets and even our children
When we are in a hurry
To enjoy attractions without having to carry
cash or credit cards
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Getting in the game with our case pallet pilot
Pilot runs in parallel with current processes for
shipping, routing, receiving, packaging,
labeling, and invoicing.

• EPC reads will be captured at RFID enabled dock
  doors.
• Reporting will compare EPC reads to ASN and
  actual PO receiving.
• EPC reads, read rate, tag, and ASN performance
  reporting will be shared with suppliers via portal

• Suppliers place RFID tags on cartons and pallets
• Suppliers send carton and pallet EPC information
  to BBY via Advanced Ship Notice (EDI ASN-856)

• Pilot suppliers represent 80 of total shipment
  volume
• All major product categories represented

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Our Customer Driven Vision for the Store
Experience
Smart Signs - Data from RFID-enabled smart
shelves correlate sales to store promotions and
product information.
Down-Stocking - RFID-enabled smart shelves
predict, identify, and report shelf stock levels
to store employees.
Receiving - RFID readers automatically confirm
receipts and update store inventory as product is
unloaded.
Shopping Assistance Loyalty cards with embedded
chips identify customers as they enter the store.
Check-Out - Serialized EPC codes increase the
speed and accuracy of customer checkout and
returns processing.
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Our RFID Customer Experience Test at Best Buy

• Retail Store Test Video Games
• Test Goals
• RFID technology readiness.
• Gain retail insight into the operational
  benefits.
• Results
• Revenue lift 18.7 increase
• Number of Units sold 14.1 increase
• Margin 10.8 increase
• Store averaged 98.7 CIS (games in store, and
  customer facing)
• Conclusions
• Item-level RFID improves retail processes
• Technology solution needs to be more flexible,
  easier to maintain, and less expensive.

Lower labor cost increase customer encountered
in stock
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The road ahead

• Expand our pilot to more categories
• Prove performance of Gen2 technology
• Continue to provide leadership in the industry
• Continue to explore innovative ways to use RFID
  driven data to improve the customer shopping
  experience

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RFID Could it be the greatest thing since.?
The 1928 design for the first bread slicing
machine
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So Why Transformation?
Closing Thoughts
The world around us will continue to change at
the speed of life, as will our customers needs,
wants and desires.

• Smart consumer as a partner
• Differentiation of buying and
• selling channels

• Economic
• Reshuffling of the top economies
• Growing gap between industrialized
• and developing countries

• Ecological
• Energy scarcity
• and efficiency
• Sustainability and
• waste management

• The open network rules
• Static, dynamic and rich
• content coverage
• Everything is a service

• Shift form product to service
• Commoditization of quality
• Lean throughout the supply chain

• Regulatory
• Legislation on health and wellness
• Privacy standards

• Demographic
• Shift in global population
• Urbanization

• New Technologies
• Virtual reality
• Information Networks

2016 The Future Value Change, Gap Gemini
We must transform our approach to driving the
future value chain TOGETHER!
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Closing Thoughts
True Transformation will happen when we
collaborate
In light of future trends, collaboration across
the end to end supply chain will be key to
meeting the needs of our customers, employees and
stakeholders.
The potential value to be delivered by these
trends will not occur on its own. Left to their
own devices, companies may potentially act in
isolation or in limited partnerships. The
industry needs to work in a more collaborative
fashion across the total value chain to deliver
the cultural and infrastructure changes necessary
to meet . . . consumers needs. 2006 Global
Commerce Initiative, Gap Gemini
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Closing Thoughts

• The supply chain transformation has to begin at
  the end which is with the customer
• Your Supply Chain journey must be holistic
• The transformation journey never ends as long
  as your customers continue to change
• Innovation is important but integration and
  collaboration are essential

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• Questions?
• Thank you
• dan.currie_at_bestbuy.com