Best Buys Customer Centric Transformation

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Best Buys Customer Centric Transformation

• Dan Currie
• SVP Supply Chain, Best Buy

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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
- Multi-channel - Personal Networking -
Services - IT transformation
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About Best Buy

• Founded in 1966 based in Minneapolis, Minnesota
• An innovative, 30.8 billion, Fortune 100 growth
  company
• North Americas 1 retailer
• Consumer electronics
• Personal computers
• Entertainment software
• Appliances
• 1076 stores in US, Canada, and China

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Our Revenue Growth by Fiscal Year
30.0
25.0
20.0
15.0
Billions
10.0
5.0
0.0
95 96 97 98 99 2000 01
02 03 04 05 06
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The trends facing us are changing fast

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

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

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

So is Pace
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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 avoid
  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 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
- Multi-channel - Personal Networking -
Services - IT transformation
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Two major pillars customer centricity and
efficient enterprise
Customer Profitability Distribution
100
Customer EVA
- 100
Customer Deciles
CustomerCentricity
Efficient Enterprise
Supply ChainInformation Technology
Enablers
Enablers
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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 We will transform our supply chain at
speed by collaborating and integrating with our
partners Leveraging our global partnerships to
extend global reach
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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
- Multi-channel - Personal Networking -
Services - IT transformation
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We needed to transform the supply chain for
speed, efficiency and flexibility
From
To

• 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

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

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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 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)

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

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Our Entertainment Software Supply Chain Strategy
Objective and Scope Identify changes needed to
improve the current state of the physical supply
chain and identify options to leverage the core
competencies of our suppliers in the areas of
systems, logistics, and in-store.

• Guiding Principles
• Reduce Fixed Assets
• Leverage Variable Expenses
• Optimize Speed to Store Shelf

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Our Entertainment SC Transformation was based on
collaboration
Partner Expertise

• VMI
• Merchandising
• Category Management

Systems
Store Assortment
NR Forecasting
Category Forecasting
Replenishment
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Collaboration across three key dimensions helped
us better meet the needs of our customers.

• Improved Forecasting
• Improved forecasting
• Incorporating local lift (concerts, events)
• Reverse replenishment planning

• Reduced Logistics Costs
• Consolidated demand through single facility
• Reduced put-away labor costs
• More efficient store shipments

• Better Assortments
• TMA vs. Chain Level Assortment

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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 in the Media and Entertainment space offers
significant opportunity for value

• Retail Store Test Video Games
• Test Goals
• RFID technology readiness.
• Gain retail insight into the operational
  benefits.
• Show RFID Store Pilot Video
• 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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In conclusion

• 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 is
  essential

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Q A