Cases e-fulfillment

Cases e-fulfillment • ATCOSTPLUS • CISCO • Track One - Startle • Amazon.com • Lensonline.com • Liquorconnet.com • IBM • Dell Buck Consultants International

ATCOSTPLUS • Winner of the “Nederlandse Logistiek Prijs 2000” • “ATCOSTPLUS reduced for her customers her own physical logistics activity without losing control over the Supply Chain. This unique combination is innovative and challenging.” says Prof. Dr. H.B. Roos, chairman of the Jury Logistiekprijs 2000 Buck Consultants International

ATCOSTPLUS originated from former Back Office of IT reseller (CSS) • Complete custom built ICT-solutions • 4 Business Units • > 2000 employees, 23 branches (Benelux) • Turnover > 300 mil. Eur. • Net income ca. 9% • Customer demands: • Supply Chain: fast, reliable & more efficient • More stock availability • More reliable information & reporting possibilities • The challenges were: • High stock, high risk • Reducing margins IT products • Decreasing lifecycle IT products (6 months > 6 weeks) • Databases in different formats • Low efficiency of traditional IT Supply Chain Buck Consultants International

The create the leading B2B e-Marketplace in the EU by offering both buyers and sellers comprehensive sets of functionality (value added services) that they can use to optimise their value chain • business at your finger tips*) *) = When, what and how you want it Buck Consultants International

Since 1-1-2000 • Carve-out from CSS, former Back-Office (technology / knowledge) • Owners: CSS (49%) & ING Bank (51%) • Based on ‘proven’ backoffice of CSS • Current turnover: 600 mio / years • Situated in Breda Buck Consultants International

Computer Services Solutions E-Market Buyer Seller telecom Buck Consultants International

Increase availability for our customers • Improve customer service • Faster and better delivery time’s • Higher fulfilment ratio • Decrease available stock in the Supply Chain • Increase order flow information • More efficiency in the Supply Chain • Get ready for an E-Commerce backbone Buck Consultants International

Scope ATCOSTPLUS Customer end-user contractor Manufacturer Factory Manufacturer DC Distributor Reseller Outsourcing Logistics Buck Consultants International

Supply Chain driven • Reduction of stock and risk • Reliable fulfilment / Increased availability • Order information available for customer • Customer driven • Increased service levels • Full digital order process, less handling • Offering value adding services • On-line Available-to-Promise, customers have access to many supplier-stock Detailed Costomer information available through the whole supply chain to deliver your customer what you promised! Buck Consultants International

Efficient Control ACP-back office Sales Sales order One-step business Purchase order Multi- vendor Distributor Customer Control Delivery ACP-back office SLA’s Buck Consultants International

Control ACP-back office Sales Sales order • Matching of databases in the Supply Chain • Stock of suppliers real time available • Fast, electronic communication Synchronised master data Virtual warehouse Electronic order flow Purchase order Distributor Customer Distributor Distributor Control Delivery ACP-back office SLA’s Buck Consultants International

System Landscape • SAP APO • Business Connector • Synchronised data • Order flow / one-step business Buck Consultants International

Business Connector XML XML APO CIF XML/ FTP EDI/ FTP Buck Consultants International

B Detailed Scheduling Production Planning Supply Network Planning ve Cach e APO Solvers Enabling ng, Connectivity Available To Promise OLTP Non/R\3 OLTP R/3 R/3 Non/R\3 OLTP Legacy OLTP Buck Consultants International

@ ATCOSTPLUS The internet channel R/3 System SAP Business Connector XML SAP BC Web browser R/3 System HTML Internet/HTTP XML Web Content Server XML Interface HTML/ XML XML Non SAP Systems Web Applic- ations Buck Consultants International

IM D1 F1 Number distribution Vendor part number ACP C2 D2 F1 F1 O1/2/3 C1 Number ACP Q4 D3 F1 Number ACP C1 APO • Master data • Daily update (21.000 / day) • Product information • Price information • Ca. 20.000 products per vendor • Mapping functionality • Stock updates Buck Consultants International

End-user 5a. Shipment 1. 6b. Billing 5a. Billing Supplier 3 Supplier 2 5b. Shipping notification & Serial numbers Sales order Supplier 1 4. Order Confirmation Credit limit Credit insurance 3. Purchase order DC Confirm. 2b. 2a. APO ATP request Availability Supplier 1 Update ATP Availability Supplier 2 Update ATP Availability Supplier 3 Business connector APO: Advanced Planning & Optimiser ATP: Available to Promise Buck Consultants International

Fully digital integrated Supply Chain (efficiency) • Virtual warehousing (real time) • 200 mio stock available • Multi vendor, multi channel, multi brand • Following existing or creating new standards Buck Consultants International

Product leadership Customer Focus Ecosystem Partners Cisco’s business strategy “Cisco’s number one priority is our customers. Our customer support organization offers comprehensive solutions designed to help oour customer to be successful in today’s internet economy. Our goal is to create the most innovative, Internet-based, customer support organization in the world.” John Chambers President and CEO Cisco Systems Inc. Buck Consultants International

Cisco.com (September 2001) • 800 K registered users • 4 Million monthly visits • 123 million page views • Features Cisco e-commerce model: • On line ordering • Product configuration • Validity checks • Order status • Updates • Technical documentation Buck Consultants International

Cisco’s ‘virtual demand chain’ model Internet Based architecture Demand & supply planning Sourcing & supplier management Manufacturing & Operations Transportation & Distribution Customer Service & Order management suppliers customers Plan Buy Make Move Sell To ship any product from any location to any customer transparently supported by using the internet “50% of customer orders are shipped without a Cisco touch” Buck Consultants International

Influencers to Ecosystem Strategy Share information Network is strategic Growth & scalability Cisco Ecosystem model Customer driven Focus on strengths Extend processes Buck Consultants International

Cisco internet commerce usage history 93% 100% 90% 80% 70% 60% % of orders 50% 40% 30% 20% 10% 0% 1996 1997 1998 1999 2000 2001 2002 Buck Consultants International

Ecosystems architecture Fabric of relationships Seamless connectivity Operations TPM Locations TPI locations Re-sellers Common integration layer Suppliers Customers Technology Infrastructure Buck Consultants International

Supply chain applications -> visibility Order monitor Inventory monitor World wide web Customer order Legacy WMS PC ERP MRP II TMS 3PL End- user Contract manufacturer Raw mat Comp onents Trans- port Trans- port Ass’y Trans- port Buck Consultants International

Logistics solution Cisco Business layer Logistics Orchestrator UPS Logistics Group Resources Danzas DFDS TNT Expeditors Buck Consultants International

Summary and review - Cisco’s success factors • It’s about culture • There is no single answer • Must be open to collaborate • Using the internet as enabler • Strategic decision for the long term Buck Consultants International

Telstar Records Recording Wholesale Web Design Digital Label Business Company Jukeboxes Startle plc IPO Tibbett & Britten Group Track One Logistics Track One Background • Startle plc was spun out of Telstar Records in 1999 with plan to IPO. • Traditional wholesale business with $100 million revenue, serving retailers for 20+ years. • Formed Track One (50/50 jv) with Tibbett & Britten Group in Fall 1999 to provide fulfilment • Startle raised $40m of venture capital December 1999 to fund e-fulfilment and digital download. • Startle folded May 1, 2001. • TBG purchased 100% of Track One in summer 2001 Buck Consultants International

UK Music Distribution Model Background :UK Music Market • 200m albums • 90m singles • 5 record companies >80% of sales • top 100 SKUs account for > 30% of sales • 24% of albums sold in December • Startle raised $40m of venture capital December 1999 to fund e-fulfilment and digital download. • Startle folded May 1, 2001. • TBG purchased 100% of Track One in summer 2001 Buck Consultants International

Startle’s e-com Strategy • Establish JV with leading 3PL to create a large scale and credible e-fulfilment operation • Invest in a web based database of artists and titles, generating orders for product to be serviced by the wholesale company • Create a searchable database of music for use by media companies • Develop infrastructure to support a network of digital jukeboxes Buck Consultants International

Payment Retailers Accounts Department Startle Wholesale Company Invoice for product supplied to consumer 3. Order for product Payment remitted Retailers Bank Facility Startle Product Database Customers Payment Music Store Front 2. Browse, select, pay Retailers Web site Paper flow Product flow 1 Access 4 Order fulfilled, product shipped with retailers branded paperwork Funds flow Consumer Startle’s Virtual Music Model Buck Consultants International

Key Business Issues • Consumer continues to shop stores for current titles • Some customers have own inventory of faster movers (Virgin, Amazon) • Track One therefore increasingly used for infrequent titles from database • Pricing • Startle adds no premium for e-fulfillment to wholesale discount model • Single picks of SKUs, whether in stock or not, delivered direct to consumer, charged at same discount as full pallets of best sellers • Track One is on cost plus pricing Buck Consultants International

Old marketing saying “Hey, the margin on this deal is terrible, so we’d better make it up on the volume” Buck Consultants International

What went wrong? • Some elements of general malaise of e-commerce in 99/00 • Many companies focused on IPO • Many companies focused on front end • More haste, less focus, less speed • Neither partner in Track One asked all the necessary questions • Fundamental flaw in commercial model • “Build it and they will come” • Track One serviced primarily “exceptions” • No price premium for service, handling, delivery • Operational issues • Handling product from 550 vendors: inbound ordering/ receipt/ payment process not integrated and highly variable • Poor integration of order/ payment system with WMS. No priority given to create batch order system. Buck Consultants International

Amazon.com • Sales up to 1,7 billion Euro (losses of 720 million Euro) • Surpassing 20 million customers in 150 countries • Bookseller with a flourishing sideline in CDs, DVDs and videos • Specializing in deep discounting - the top 40 best selling books at half-price, with hundreds of thousands of others available at discounts up to 40 per cent • 6 DCs in the US • 2 in Europe (UK: Milton Keynes; Germany: Regensburg) • Margin low: volume necessary to amortize the fixed costs of DCs and headquarters: E-commerce is a scale business, with costs tat are largely fixed. The solution: create mass and volume “4 years ago, we were US only and books only. We were not selling music, videos or the other product categories we now sell. Nowadays half of our revenue comes from these categories and business. And with every additional dollar, the fixed costs of the distribution centers and headquarters systems are amortized that little bit further. “ John Bezos - founder and CEO of Amazon Buck Consultants International

Research showed that Amazon.co.uk and Amazon.de are the most visited e-commerce site in their respective countries. “In our first year, we did not do a dollar of paid advertising, and we still grew incredibly rapidly”, Bezos says Amazon patented the ‘one click’ approach to online shopping E-Christmas disaster avoided - 99% of orders were dispatched by 24th December Buck Consultants International

European DC’s in Milton Keynes and Regensburg (for own account) Warehouse management system Inventory Management Financial /MIS Forecasting Order management systems National postal systems customers webfront amazon.com amazon.co.uk amazon.de Buck Consultants International

Imperative behind Amazon’s selling proposition: • end-to-end, order-to-delivery customer experience • in other words: the quality of the buying experience from fist logging on the placing an order to finally receiving the order in your hands • The end-to-end customer experience is even more important on-line than it is in the physical world: • “Every internet customer has a big megaphone, and if we make a customer unhappy, they don’t tell five friends, they tell 5,000. And the reverse is true: you create evangelists. If you do a great job for your customers, then they tell 5,000 friends in newsgroups, listservers, chat areas, etcetera - so that on-line, your marketing dollars are best spent building great customer experiences.” Place a call to Amazon, or send an e-mail and your query is dealt with 24 hours a day, 7 days a week (Bill Price, head of customer service). Buck Consultants International

Availability is key: • 1.2 million books in the UK • 900,000 books in Germany • One of the things that differentiates us from other retailers is the way we hold inventory as a network • inventory deployment is key • splitting shipments in case of non availability/non compliance • customer doesn’t pay in case this happens • Our vision is that if we have 20 million customers then we should have 20 million stores” - Jef Bezos, Founder of Amazon: • if a customer likes literary fiction, then Amazon should tilt a store towards literary fiction • collaborative filtering - data mining in order to merge customers into something of an electronic soul mate • “and then we look at the things that electronic soul mate has purchased, but that this particular individual customer has not. And then we recommend those things.” Buck Consultants International

The DCs are highly automated, using barcodes and scanners to track and sort inventory that moves through the facilities. A typical Amazon DC has 10 miles of conveyor belts and ships most in stock items within 24 hours of the order click • The ultimate model of Amazon would be a sort of a one-stop shopping mall, delivering your products directly to your door in a single consignment - ideally from a single shipping point in order to save costs. Imagine, goes the theory being able t buy not just a video about barbecuing and some recipe books, but the barbecue itself - and in a single transaction. Buck Consultants International

Lens-Online.com Background • Virtual company: entrepreneurs with 20+ years experience in ophthalmic industry • Had developed web-pages with other partners and seeking fulfillment partner • TBG e-commerce group project managed • fulfillment center • integration with front end • integration with vendors and payments Buck Consultants International

Buck Consultants International

Lens-Online Model Order Capture Back Office Logistics Telephone Contact Centre Stock Orders released Fax Data Input Verification Process Pick, pack and ship Web Orders Financial BUSINESS INTELLIGENCE - EVENT MANAGEMENT AND DATA MINING Online stock range availability Order acknowledgement Order track and trace Interface to finance house Despatch confirmation and carrier interface Stock replenishment Trend information CRM data Buck Consultants International

Lens-Online.com Background • Target market is optometrists: • 6,500 in UK • 65,000 in Continental Europe (price break) • Product line: spectacle lenses: not contacts • 5,000 SKUs, fast movers only • Very limited special orders • Currently 400 orders/ week Buck Consultants International

Lens-Online.com Lessons • One-stop concept works • Limited scale, but commercial success for both partners • >95% commonality of process with previous B2C experience Buck Consultants International

Liquorconnect.com Background • Liquor in Canada controlled by Provincial Governments • Liquor retailing in Alberta liberalized in 1994 • Distribution privatized in 1995. TBG wins competitive bid to take over Government assets, founds Connect Logistics • Number of liquor retailers quadrupled overnight as government stores closed • No common systems or visibility • No set pricing constraints - tax changes • Cash constraints on inventory and selection • Volume spikes for seasonality Buck Consultants International

Effects of Privatization / Commercial issues for Connect • Vendors now have more to do • import what they like, subject to labeling, fitness for human consumption • vendors now own inventory until sold • inventory management issues • SKUs more than tripled over first two years • Need for variable services • vendors need to communicate with retailers • Only active distributor license in Alberta • Competition has tried and failed • Need to satisfy Government, retailers, vendors to survive • Need to delight all of the above to prosper Buck Consultants International

Operational issues for Connect • Seamless systems interface required with Government • Inventory accountability: tax • Management of payments • Previous mechanized sortation redundant • Explosion of SKUs, services • Demand is now for small specialized orders Buck Consultants International

Connect Logistics - Alberta • St. Albert warehouse: 430,000 square feet • Typically 1.1 Million cases of inventory • 17,200 registered products • 9,000 active products in stock daily • Products from 1430 suppliers, 60 countries, and 185 agents • Warehouse operational 24 hours a day, 6 days a week • All liquor sold in Alberta except domestic beer • Agent services available: on-packing, bar-coding,strip labeling, assembly of gift packs, allocations and restriction of products, inventory management • Key indicators - Alberta: • Received – 6,255,467 cases (average 120,297 cases per week) • Shipped - 52,461 orders (average - 1009 orders per week) • Shipped - 6,145,635 cases (average – 118,185 cases per week) • Radio Frequency Scanning ensured a 99.996% accuracy rate on orders shipped • Customer Service processed 28,134 calls (in-coming and out-going) Buck Consultants International

Liquorconnect.com Rationale • Obvious in 1999 that complexity was labor-intensive and fragile • Mixture of order types: EDI, fax, phone, mail etc which was complex in a real-time environment • Need to create sustainable competitive advantage • Phase 1 • Database of SKUs and inventory, accessible to retailers and vendors and allowing real-time order placement and tracking • Phase 2 • Fully illustrated web-site with product information, pricing and availability usable by consumers, vendors and retailers Buck Consultants International

Cases e-fulfillment