Institute for Industrial Engineers Office Depot Business Process Improvement

1. Institute for Industrial EngineersOffice Depot Business Process Improvement Vince Pierce, Laura Wells, and Don Mears July, 2011

2. Office Depot Company Overview • Office Depot is a leading global provider of office products and services: • 2010 sales of $11.6 billion • North American Retail Division 43% • North American Business Solutions Division 28% • International Division 29% • One of the world’s largest e-commerce retailers – $4.1 billion in sales in 2010 North American Retail (43% of 2010 Sales) North American BSD (28% of 2010 Sales) International (29% of 2010 Sales) • 1,100+ stores in U.S. and Canada • Largest concentration of stores in California, Texas and Florida • Catalog, contract and e-commerce • Dedicated sales force works with medium sized to large customers • Orders serviced through 16 distribution centers • Catalog, contract, e-commerce and retail • Sell to customers directly and through affiliates in 51 countries outside of the U.S. and Canada • 40+ websites and 400+ stores

3. Business Process Improvement - Cause for Action Office Depot benchmarking efforts highlighted a significant opportunity to improve service levels (effectiveness) while reducing SG&A costs (efficiency). Senior Leaders also recognized the competitive advantages that would accumulate from building a cultural focus on Continuous Improvement. Office Depot created the Business Process Improvement Organization (BPI) to help us achieve world class execution by effective alignment of people, process and technology in the service of our business objectives and operational priorities.

4. BPI 2010 – Proof of Concept During our first year, we demonstrated our ability to partner with business leaders, engage process owners and associates, and deliver meaningful results

5. BPI Dual Strategies Our dual strategies are designed to deliver near-term results by addressing critical problems while deploying process improvement principles and practices across the organization to create a management culture of continuous improvement

6. BPI Integrated Centers of Excellence Our mission is to drive superior execution that accelerates associates, customers, and shareholder value Program/Project Management ERPIntegration ContinuousProcessImprovement Integration Change Management 6

7. PPM Deployment Strategies We operate a three-channel deployment strategy to drive superior program/project execution that delivers the required ROI on strategic initiatives Our PPM Strategies drive program/project execution excellence throughout the organization

8. ERP Integration Strategy We operate in partnership with the Business and IT to align ERP investments with strategic priorities and deploy integrated solutions that deliver significant business outcomes 8

9. CPI Deployment Strategies We operate a three-channel deployment strategy to realize significant process improvements while building the long-term capability for Continuous Improvement 9

10. Total Quality Management PDCA – SDCA Six Sigma Lean Ford 8D Toyota Production System Strategy Deployment A3 Problem Solving CPI – An Inclusive Approach Office Depot Continuous Process Improvement

11. Process Excellence CPI Goals • Meaningfully improve process performance • Deploy “CPI Fundamentals” to sustain results • Use the CPI Fundamentals to build team capability for continuous improvement Continuous Improvement Capability Process Maps and Standard Work A3 Problem Solving Management Operating System Leading and Lagging Metrics Process Ownership Leadership Alignment

12. BPI Approach to Culture Change A culture is the repertoire of mutually reinforcing beliefs & assumptions, behaviors & practices, and values shared by a community of people Changed Beliefs/Assumptions lead to readjustment of Values Beliefs & Assumptions CULTURE Behaviors & Practices Values Different Behaviors/Practices demonstrate and reinforce changed Beliefs/Assumptions Readjusted Values drive changes in Behavior/Practice The culture cycle can be entered and changed through any of its drivers

13. BPI Approach to Culture Change – 2 By focusing on Behaviors and Practices we deliver Value and reinforce Belief

14. BPI Partnership Model Our imperative is to enable and support the Business without removing their responsibility for delivering results Collaborative Partnership Business BPI Business Owner BPI Team Lead Business Ownership BPI Enablement ProcessOwner BPI Deployment Lead Joint Accountability for Results 14

15. Governance Plan Engage Deliver Sustain Right Projects and Metrics Right Leadership and Resources Right Actions and Results Right Management and Capabilities • Strategy Matrix • Business Expectations • Project Charters • Leadership Alignment • Delivery Objectives • Opportunity Assessment • People Solutions • Process Standardization • Delivery Strategies • Process Solutions • Process Metrics • Delivery Approach • Delivery Plans • Technology Solutions • Management System • Resource Requirements • Delivery Organization • Business Alignment • Business Results • Problem Solving Capability Enablement BPI Delivery Framework

16. Governance Plan Engage Deliver Sustain Enablement BPI Delivery Framework – Process View Delivery Methods Engagement Planning StrategicPlan BusinessRequests CPI Fundamentals Project andChange Methods DemandManagement ResourceAllocation

17. Project Management Standard Delivery Lifecycle Plan Validate Deploy Design and Build Analyze Change Management Process Improvement Technology Integration Value Stream Transformation BPI Delivery Methods Share a Common Foundation Our Standard Delivery Lifecycle establishes a fundamental delivery structure and discipline, but is adaptable enough that it can be tailored to fit a variety of engagements Custom Methods ProjectManagement ChangeManagement

18. Conduct Stakeholder Analysis Assess Readiness Assess Readiness Assess Readiness Change Management Integrated into Every Engagement Change Management and Project Management work in partnership to deliver desired business results Project Management: Solution is Designed, Developed and Delivered Effectively Change Management: People Embrace, Adopt and Use the Solution Effectively Execute and Monitor Communication Plan Plan Communications Define Change Agent Network Build and Manage Change Agent Network Create Training Plan Execute and Monitor Training Plan Define Change Strategy Execute Re-Organization Plan Create Re-Org Plan Create Change Sustainment Plan Execute Change Sustainment Plan 18

19. CPI Fundamentals Enable Sustained Process Excellence Process Excellence Management Operating System • Daily Performance Huddle • Weekly Process Owner Check • Monthly Executive Review Process Maps and Standard Work • End-to-End / Detailed Process Maps • Desktop Procedures • Standard Work A3 Problem Solving • Cross-functional Teams • Basic 5 Step Process (PDCA Cycle) • Why-Why Analysis Leading and Lagging Metrics • Voice of Customer • Customer Success Metrics • Key Input Metrics (Drivers) Continuous Improvement Capability Process Maps and Standard Work A3 Problem Solving Management Operating System Leading and Lagging Metrics Process Ownership Leadership Alignment

20. Business is Accountable to Adopt CPI Fundamentals

21. Key Success Factors