Dixons Commercial Programme

1. Dixons Commercial Programme The IT Story Version 7.0

2. Key Conclusions • We are proposing to refine the existing mainframe processes to support execution capabilities • We are proposing new applications for merchandise planning, supply chain planning and supplier integration • We are proposing to integrate business processes and applications with a middleware application • Our chosen architecture does not restrict hosting options that exploit a risk-reward arrangement

3. Architecture strategyOur approach has been to define a business-led systems strategy that shows the system changes required to support the business objectives, benefit opportunities and required capabilities How we have derived the strategy : Benefit opportunities Business objectives Solution options Capabilities and barriers Migration and costs The key questions : • What are the key benefit areas? • How do these drive our business objectives? • What are the key business objectives of the programme? • What is the scope of phase 1? • What capabilities are required to realise the benefits? • What are the barriers with our current processes and systems? • What are the dependencies on the execution systems? • What are our architecture principles? • Can we modify our existing systems to deliver the new capabilities? • What are the best application options? • How would it be different with the new systems? • What components of the solution should we trial? • What are the costs and hosting options? • How do we migrate progressively to the final architecture?

4. Section 1 – Benefit opportunities What we have done • We have broken down the Commercial Programme benefits (defined during the previous stage of work) in more detail to show the relative benefit provided by each major function to identify and prioritise the required system changes Our conclusions • The areas of merchandise planning, supply chain planning and supplier integration have the most significant benefit opportunities, and the execution components have little direct benefit • For example, of the total benefit of ~£67M : • Over £30M of this is dependant on new merchandise planning capabilities • £15M is dependant on supply chain planning capabilities • £9M is connected with supplier integration processes • However only £1.6M is directly dependant on changes to the core execution processes • By breaking down the benefits in this way, we were able to make a judgement on where the most improvement needed to be made to either processes or their supporting systems • However it is not feasible or the right approach to “cherry pick” the areas of highest benefit and fix these whilst ignoring the others • There are important dependencies between processes and systems across functions so changes have to be made in several areas to deliver each direct benefit

5. Commercial programme scopeThe scope of the commercial programme includes the four areas of merchandise planning, intake planning, supplier integration and supply chain execution Integrate with suppliers’ commercial processes ..and with warehouse processes Plan & Review Distribution Capacity Planning Budget/ STF Store Planning NPD/ Sourcing Auctions Macro Space Planning Macro Stock/ OTB Planning Commercial Planning Set up & launch products Agree prices Range Planning Share & align plans and forecasts Manage & track orders/ commitments Assortment Planning Micro Space Planning Agree & reconcile deals Warehouse Booking Intake / Fulfilment Planning ..and with Finance Processes Resolve payment discrepancies Future Stock availability Promotion Planning Price Optimising Integrate with store processes Sales & Margin Planning Execute Merchandising instructions • Set up and • administer:- • Product info • Assortments • Suppliers • Supply routes • Allocation rules • Orders/Commitment • Deals • Trading costs • Trading revenues • Trading Account • Set up and • administer:- • Prices • Promotions Pricing, POS Promotion, Performance reviews & exception management Attachment Opportunities Sales priorities & margin info KEY: Out of Scope Phase 2 Sponsored Initiatives Two way flow of information Highly Iterative Process

6. Functional blueprintWe have defined a set of key business processes within the Commercial area and we have used this as a foundation for our system strategy SUPPLIER INTEGRATION MERCHANDISE PLANNING SUPPLY CHAIN PLANNING EXECUTION Supplier management Commercial plan Range plan agreement Net Sales Forecasting Price management Sales & margin plan Intake plan Intake plan agreement Promotions management Store clustering OTB / macro stock plan Deal agreement Product management Macro space plan Allocation plan Product launch Location management Range plan Purchase order tracking Deal management Assortment plan Payment discrepancies Trading account Price plan Supplier performance mgt Stock ledger Promotions plan Purchase order mgt Micro space plan Booking in Price & promo optimisation … this function is in the scope of the Commercial programme phase 1 … this function is out of the scope of the Commercial programme phase 1

7. Functional blueprintOur system architecture has also assessed options for performance management, business process integration and links to other functions SUPPLIER INTEGRATION PERFORMANCE MANAGEMENT MERCHANDISE PLANNING SUPPLY CHAIN PLANNING EXECUTION Supplier management Commercial plan Ad-hoc reporting Range plan agreement Net Sales Forecasting Price management Sales & margin plan Performance scorecard Intake plan Intake plan agreement Promotions management Store clustering Data analysis / mining OTB / macro stock plan Deal agreement Product management Macro space plan Allocation plan Product launch Location management Range plan Purchase order tracking Deal management Assortment plan Payment discrepancies Trading account Price plan Supplier performance mgt Stock ledger Promotions plan Purchase order mgt Micro space plan Booking in Price & promo optimisation INTEGRATION Process manager Shared data manager Inter-company data transfer OTHER FUNCTIONS Branch Warehouse Finance Budgeting … this function is in the scope of the Commercial programme phase 1 … this function is out of the scope of the Commercial programme phase 1

8. Direct benefit opportunitiesOur system strategy will be driven by the relative benefits apportioned to each business process £30.6M £14.8M £1.6M £8.8M SUPPLIER INTEGRATION PERFORMANCE MANAGEMENT MERCHANDISE PLANNING SUPPLY CHAIN PLANNING EXECUTION Supplier management Commercial plan Ad-hoc reporting Range plan agreement Net Sales Forecasting Price management Sales & margin plan Performance scorecard Intake plan Intake plan agreement Promotions management Store clustering Data analysis / mining OTB / macro stock plan Deal agreement Product management Macro space plan Allocation plan Product launch Location management Range plan Purchase order tracking Deal management Assortment plan Payment discrepancies Stock ledger Price plan Supplier performance mgt Trading account Promotions plan Purchase order mgt Micro space plan Booking in Price & promo optimisation INTEGRATION Process manager Shared data manager Inter-company data transfer OTHER FUNCTIONS Branch Warehouse Finance Budgeting … this function is out of scope of the Commercial programme phase 1 … there is little benefit opportunity attached to this function … there is a moderate benefit opportunity attached to this function … there is a significant benefit opportunity attached to this function

9. Sections 2 & 3 – Objectives, capabilities and barriers What we have done • We have taken each top-level business objective and broken it down into a series of business functions and then defined the required capabilities for each. We then analysed the current processes and systems used to support each capability to identify the barriers with the current ways of working Our conclusions • There is no standard system support for merchandise planning, supply chain planning or supplier integration and these are the areas with the most significant barriers • Merchandise planning is done in ad-hoc spreadsheets in different ways in each area of the business and the plans do not reconcile with the execution systems • The sales planning process involves inconsistent manual overrides to order quantities before orders are placed with suppliers and they are unable to fulfil these orders because they are changed at such short notice • The existing intake planning system (Prism) does not support planning by location or constraint based planning so cannot provide precise intake quantities by location • There is no system support for reviewing intake plans with suppliers. Forecasts are shared with suppliers today (in some areas) but they do not trust the numbers and tend to ignore them until a firm order is received • There are also a number of general limitations with existing execution systems which are constraining the business across all functions (e.g. usability, scaleability, availability), for example : • The current grading structure enforces a “pyramid” assortment so large stores have to include all products in their range • There are many basic usability issues with the mainframe screens (e.g. no pick-lists so users have to remember codes) • Location reference data restricts the mapping of LDCs and MCDs to stores and stores cannot replenish from other DCs • Warehouse and central systems use different codes for stock statuses so its difficult to get an accurate view of stock • Purchase orders are difficult to find and so tend to be deleted instead of being carried over to the following week

10. BUSINESS OBJECTIVES FUNCTION LEVEL 1 FUNCTION LEVEL 2 SAMPLE CAPABILITIES AS-IS SYSTEM SAMPLE BARRIERS PROCESS/PEOPLE SYSTEM • Optimise Store Range, Breadth, Depth and Availability • Merchandise Planning • Store Clustering • Cluster stores based upon a number of defining factors including size, location, sales, demographics, mkt trends & competitor benchmarking • Define corresponding product profiles • Ensure clustering process & outcome is transparent • No tools to support definition of clusters • MKT Suite holds the current grades • Current process for store grading contains an unclear mix of size and other factors e.g. format for Dixons • No system support for definition of clusters • Demographic data is not available in a suitable format to include • Current system is constrained to a pyramid structure where smaller stores have a sub-set of product in larger stores • Commercial Planning • Model sales, margin and unit volumes by chain, by planning group by week • Commercial plan used to drive range, assortment & space planning activities • Spreadsheets • The process of commercial planning is standalone from the day-to-day operations e.g. no integration with the line-level assortment and intake plans • No system support to enable top down, bottom up planning • Sales & Margin Planning • Ability to undertake bottom-up sales & margin planning by product group/store/day • Integrate with commercial & assortment plans • Spreadsheets • No standard process for reviewing plans against the sales & margin plan • No integration with Commercial & Assortment Plans • Macro Space Planning • Ability to review space allocated to each category by chain/cluster • Measure conformance to Macro Space Plans • No system support (macro space database holds space data) • Ad-hoc process for macro space planning/modelling or optimisation • No conformance measurement • No system to support macro space planning/modelling or optimisation • No record of promotional space • Range Planning • Standard Process & Outputs for RP • Exception reports to highlight variance between planned and actual, highlighting under-performing products • Spreadsheets • No standard processes or outputs for range planning • Current range plans are maintained at differing levels and frequencies so comparative performance is difficult • No systems to support range planning • No systems integration with Commercial Planning • Assortment Planning • Integrated process to manage the range into assortments for stores in different clusters (including switch on & off) • Exception reports to show variance between planned and actual • Incorporate Product Lifecycles • Spreadsheets • No standard process for Assortment Planning • Lack of business skills for Assortment Planning • No systems to support Assortment Planning • Poor access to product lifecycle data • Cannot assort effectively due to incorrect clusters • No systems integration with Commercial Planning • Micro Space Planning • Allocate space to each product in each store • Ability to create a POG suitable to each store • Measure conformance • Undertake sales & profit analysis from POG • Apollo • No standard fixtures within and beyond chains • No governance of POG conformance by stores • No record of promotional space in Apollo

11. BUSINESS OBJECTIVES FUNCTION LEVEL 1 FUNCTION LEVEL 2 SAMPLE CAPABILITIES AS-IS SYSTEM SAMPLE BARRIERS PROCESS/PEOPLE SYSTEM • Integrate Processes with Suppliers • Supply Chain Planning • Net Sales Forecast • System-generated forecast based on past sales and criteria defined • Include promotional activity and seasonality to drive intake plans • Ensure clean sales history is used to drive rolling net forecast • Integrate with Commercial Plan and set tolerance for allowed deviation • Ability to forecast new product profiles from the range plan • Produce Exception reports for actual vs forecast to drive product investigation • Mainframe • Prism Planner • Promotional activity is manually added to the forecast in an ‘ad-hoc’ fashion. There is no standard process and prism planner is used to adjust the figures at various points • Buyers use stock availability from suppliers to drive the forecast – ie. They forecast what is available • Time wasted reviewing products against the forecast that are not actually exceptions • Lack of resource with an understanding of sales forecasting process • Basic forecast does not include promotions • The seasonality added to the forecast is not true seasonality – it includes other trends • The forecast does not include products not being actively sourced (e.g. clearance). Therefore, accuracy is difficult measure • When analysing past sales to generate forecast, there is no view of the distribution/space allocated to a product • Open nature of Prism allows planners to make changes at various stages • Intake Plan • Ability to plan stock levels and optimise intake phasing across all locations • Integrate with Sales Forecasting • Incorporate Suppliers' critical path/lead times • Drive creation of draft P/Orders • Exception reporting against OTB plan • Prism Planner • Mainframe Intake Calculation • Different processes within the business for Intake Planning – 80% use Prism, but many have created their own process/tool e.g. Commercial Download Sheet • Poor understanding of how the ideal stock calculation algorithm should be used to optimise stock levels • None or little reconciliation between order quantity and initial intake forecast given to suppliers – results in 30-40% of failed deliveries • Lack of exception reporting results in no prioritisation of effort in reviewing intake reports • Prism does not include a view of stock by location • No access to a true stock position • Limited integration between Prism Planner and the Mainframe Intake Calculation • No direct automation from Intake Planning to P’Ordering • Cannot view a breakdown of supplier lead times • No automated capacity constraints • No exception reporting highlighting products for review • System enables users to hide availability issues by de-listing products • Macro Stock/OTB Planning • Manage stock level limits for planning group purchasing • Integrate with commercial plan to monitor achievement of Business Plan • Record OTB Plan • Produce Exceptions to drive review • spreadsheets • No standard process for agreeing display quantities as a proportion of the OTB • OTB is not integrated with the Commercial Plan or the Intake Plan • No automation of ‘scaling down’ when over the OTB level set • No exception reporting to highlight exceeding OTB

12. BUSINESS OBJECTIVES FUNCTION LEVEL 1 FUNCTION LEVEL 2 SAMPLE CAPABILITIES AS-IS SYSTEM SAMPLE BARRIERS PROCESS/PEOPLE SYSTEM • Integrate Processes with Suppliers • Supplier Integration • Agree Intake Plans (including Supplier Available to Promise) • Online sharing of Intake Plans from SF level down • Balance supplier open to promise and production plans and intake • Track performance from data • No system support • No visibility of the commitments within supplier deals, but it is thought that relatively few are made • No system recording of commitments made to supplier for tracking • Agree Range Plans • Create visibility of supplier area of range plan for agreement • No system support • Initial range quantities shared with the supplier are not consistently trusted • No system to facilitate the communication and agreement of range plans • Deal Agreement (incl Price & Promos) • Price differences are compared automatically and resolved prior to delivery • Request and trigger deals online with suppliers • No system support • All price changes are manual at present • Any collaboration with suppliers on cost-reduction initiatives is not tracked • No online environment for price change notification, deal arrangement or cost-reduction exercises • Product Launch • Communicate and track progress against product launch plan • Ability to set up critical path for product launch at multiple levels – chain/group • Exception alerts for critical path • No system support • No standard process in place for ensuring timely launch of new & time-critical products • Communication with suppliers dependent upon individual buyer relationship • No system support for recognising new, time-critical products • No ability to raise orders for pre-release items • No knowledge in Whse systems of forthcoming critical products • Supplier Performance Management • Development of KPIs • Clear accountability for the supplier base • Definition of standard terms and conditions • Development of the supplier scorecard and support for fact based negotiations • No system support • Responsibility for the supplier base is spread across functions • Supplier contracts are not standard • Difficult to track suppliers against orders as buyers can cancel and re-raise instead of carrying over • There is no process or system support for supplier performance management • No system storage of KPIs • Purchase Order Tracking • Online agreement and tracking of key stages of the production process and order fulfilment • Exception alerts of actual against planned • Integration with booking in for knock-on effect of changes • PCM (limited) • No standard process – manual between buyer and supplier which can be time-consuming • No system support • Lack of constraints or prioritisation in booking-in means time-critical products are often not booked in • Cannot view orders by SKU in PCM – must know PO reference to track • Resolve Payment Discrepancies • Online trigger and resolution of payment discrepancies • No system support • No standard process for raising and resolving discrepancies • No system for resolving discrepancies – manual process

13. BUSINESS OBJECTIVES FUNCTION LEVEL 1 FUNCTION LEVEL 2 SAMPLE CAPABILITIES AS-IS SYSTEM SAMPLE BARRIERS PROCESS/PEOPLE SYSTEM • Optimise Store Range, Breadth, Depth and Availability • Integrate Processes with Suppliers • Execution • Supplier Management • Simple set-up and maintenance of supplier details • Development of standard Ts&Cs • PCM & Lawson • No formal processes for implementing supplier strategy concepts e.g. build/reduce/hold • Current systems make it difficult to look up the supplier due to the language and development environment. • No support for supplier strategy • Product Management • Add ‘category’ to hierarchy • Enable cross-referencing of SKUs across Europe • Integrate with product portal • Manage supplier/prod. relationship • CBD & Smart • No validation of product data – many product attributes are entered incorrectly • UI is limited by its environment – no look-up ability for product IDs • Limited linkage ability • No record of product lifecycle • Location Management • Manage organisational hierarchy reference data • Allow store replenishment from DCs outside of their group • CDB • No clear process for agreeing distribution locations prior to product launch • Cannot associate an LDC and an NCD to a store • Cannot replenish a product to a store from a DC that it is not grouped to • Deal Management • Account for complex deals • Visibility of DSG exposure • Automate claims • Accommodate multi-currency • Deal File • Users do not always record deals properly and there is a perception that they enter the wrong deal type to manage their targets • No automation of claims • Complex screens for entering deals • Stock Ledger • Single view of stock and status (DSG liable) • Do not allow minus stock • Stock System • No clear stock status definitions results in confusion over stock location • Different stock status definitions for Whse & MF • Batch processes result in mainframe and LDCs becoming out of sync • Order Management (post P/O placement) • Automatic creation of draft P’Order • Simple process for amendments and deletion post creation • Multi-currency capability • PCM • Buyers delete P/Orders instead of amending so we cannot track against the original • Correct cost prices are not always captured • No standard process for mgt • Automated orders can only be confirmed in small batches • P’Orders are difficult to find on the system, so orders tend to be deleted not carried over • Single currency constraint • Booking In • Accessible to suppliers & DSG for all locations • Constraints & prioritisation built in • Fixed slots programmable • PCM • No centralised booking-in process for Newark & Stevenage • ‘Catch all’ for poor Intake Planning processes • Uneven weekly booking in load • Batch nature results in longer lead times & inflexibility • Poor visibility of booking slots available • No ability to prioritise intake

14. General system barriersIn addition to specific capability barriers, the characteristics of the current system are also constraining our support of the commercial objectives • Usability • Knowledge of systems limited to a small number of power users so capabilities not exploited to the full • Text-based screens without lookup-lists etc increase data entry errors and reduce efficiency • Complex screen navigation with several ways to complete a process (e.g. deals) • Capability • Many systems are batch rather than event-driven (e.g. allocation and intake planning) • Difficult to manage end-to-end business processes across systems • Limited exception reporting so lots of time wasted getting to relevant information • Does not support multi-language, country or currency • Tactical development has led to silo-based systems and data ownership • Scalability issues e.g. product and order codes • Availability • Most mainframe systems are not available between 7pm and early morning each day (batch process) • Mainframe systems are not available on Sundays (batch process) • Central view of stock is not updated until data received from warehouse systems at the end of the day • The stock system is not updated on Sundays • NDC allocation does not run Friday or Sunday and LDC allocation does not run Sunday

15. System barriersThe realisation of the benefits is dependent upon resolving some key system barriers in the areas of merchandise planning, supplier integration and business process integration SUPPLIER INTEGRATION PERFORMANCE MANAGEMENT MERCHANDISE PLANNING SUPPLY CHAIN PLANNING EXECUTION Supplier management Commercial plan Ad-hoc reporting Range plan agreement Net Sales Forecasting Price management Sales & margin plan Performance scorecard Intake plan Intake plan agreement Promotions management Store clustering Data analysis / mining OTB / macro stock plan Deal agreement Product management Macro space plan Allocation plan Product launch Location management Range plan Purchase order tracking Deal management Assortment plan Payment discrepancies Trading account Price plan Supplier performance mgt Stock ledger Promotions plan Purchase order mgt Micro space plan Booking in Price & promo optimisation INTEGRATION Process manager Shared data manager Inter-company data transfer OTHER FUNCTIONS Branch Warehouse Finance Budgeting … this function is out of scope of the Commercial programme phase 1 … there are no significant problems with the existing system and there are no significant new business requirements … there are moderate problems with the existing system and it could be modified to fulfil the new requirements … there are significant problems with the existing system, or there is no system support

16. Execution system dependencies In addition, the realisation of benefit is also dependent upon a limited number of changes to the core execution systems Supplier Mgt Product Mgt Location Mgt Deal Mgt Stock Ledger Order Mgt Booking In H/M/L = Level of system upgrade required Merchandise Planning Store Clustering Commercial Planning Sales & Margin Planning Macro Space Planning Range Planning Assortment Planning Micro Space Planning M L L L L M L M L L Supply Chain Planning Net Sales Forecasting Intake Planning OTB/Macro Stock Planning M L L M M M M H H L M Supplier Integration Agree Range Plans Agree Intake Plans Deal Agreement Product Launch Supplier Performance Mgt Purchase Order Tracking Agree Price Discrepancies M M M L L M H H L H H

17. Section 4 – Solution options What we have done • We have used the conclusions on benefit opportunities and system barriers to derive a recommendation for system changes to support the Commercial Programme • We have researched each of the leading vendor solutions for the functions where a new system is required to assemble a short-list of solution options Our conclusions • We believe the right approach is to get the right balance between targeting the big benefit opportunities and making sure each IT initiative takes us a step towards the right long term architecture • It is also important to ensure that projects are business driven and include an element of process design and change management in addition to systems, so the business buys into them and adopts the change • Where changes to the existing systems are needed, we believe the right approach is to re-use what we have if it is cost-effective to do so. If a new system is required we should use proven package-based solutions • MarketMax and JDA are the strongest options for merchandise planning and Manugistics and JDA are the strongest options for supply chain planning • A combination of Manugistics plus JDA Arthur or MarketMax provides the best end-to-end solution and provide the right balance of functionality and ease of integration • We will need to configure the integration layer to provide workflow management across applications. This will connect individual applications together to support end-to-end business processes

18. Architecture guiding principlesSystem changes to support the Commercial programme need to be governed by a set of principles that balance realising business benefits with establishing the right long-term architecture Trial and transition steps Focus the trial on the biggest benefit areas Proves theoretical benefits and builds business buy-in Business led and no systems-only projects Ensures buy-in and optimises the take up of new systems Each project moves us towards the right final architecture Reduces support and enhancement costs System solution choices Refine the current systems where feasible and cost effective Exploits what we have and avoid massive up-front costs Use package solutions and minimise the number of vendors Faster and lower risk, cheaper to support and upgrade Use systems that have been implemented before elsewhere Reduces the risk associated with large scale IT investment Minimise the customisation of package systems Exploits best practice, faster, cheaper and lower risk Use relevant and proven technology standards Faster and lower risk, cheaper to support and upgrade Exploit risk-reward financial arrangements with vendors Reduces up-front investment and capital costs

19. Proposed system changesWe propose implementing new systems for merchandise planning, intake planning and supplier integration and modifying the existing systems for execution SUPPLIER INTEGRATION PERFORMANCE MANAGEMENT MERCHANDISE PLANNING SUPPLY CHAIN PLANNING EXECUTION Commercial plan Ad-hoc reporting Supplier management Range plan agreement Net Sales Forecasting Sales & margin plan Performance scorecard Intake plan Price management Intake plan agreement Store clustering Data analysis / mining Promotions management OTB / macro stock plan Deal agreement Macro space plan Product management Allocation plan Product launch Range plan Location management Purchase order tracking Assortment plan Deal management Payment discrepancies Price plan Trading account Supplier performance mgt Promotions plan Stock ledger Micro space plan Purchase order mgt Price & promo optimisation Booking in INTEGRATION Process manager Shared data manager Inter-company data transfer OTHER FUNCTIONS Branch Warehouse Finance Budgeting … the existing system is out of scope of the Commercial programme phase 1 … we propose no change to the existing systems … we propose modifying the existing systems … we propose adding new / replacement systems

20. Execution system rationaleWe propose modifying the existing mainframe execution systems because the cost-benefit and level of change required do not justify replacement • The dependencies show there are only a limited number of changes required to execution systems • These include purchase order management, stock ledger and booking-in • The business benefits realised from these changes would be small • The total direct benefit for execution system changes is estimated at £1.6M • It will be more cost effective to modify the existing systems rather than replace them • Replacing the execution systems could cost in the order of £20M+ • Modifying the systems is expected to cost in the order of £1.7M • Total cost of ownership is likely to be cheaper if the mainframe is retained • The new systems available today still have some key limitations (e.g. batch not event driven) EXECUTION Supplier management Price management Promotions management Product management Location management Deal management Trading account Stock ledger Purchase order mgt Booking in Supplier Management 400 md Booking in 500 md Order Management 1500 md Stock Ledger 1200 md Product management 500 md Price management 600 md Location management 300 md Deal Management 1000 md TOTAL 6000 md (mainframe development cost estimates are based on a high-level study conducted by IS systems analysts)

21. Application optionsThe application options investigated include a short-list of best-of-breed options in each area. Our conclusions will be compared with the recommendations made by the selected system integrator • Some vendors offer solutions in several functional areas but typically these are separate products with varying levels of integration, so each module has been investigated separately • In addition to researching business applications for planning and execution we have also considered technical components for application and data integration • DSG are looking for applications (and combinations of applications) that have been implemented before because this will reduce the overall risks of the programme SUPPLIER INTEGRATION PERFORMANCE MANAGEMENT EXECUTION MERCHANDISE PLANNING SUPPLY CHAIN PLANNING (Mainframe) (APOLLO) (PRISM) INTEGRATION

22. Application selection processWe have meet each vendor and assessed their products against a list of selection criteria to create a short list of two options for each function • Selection criteria • Functional fit to requirements • Alignment with technical standards • Relevant reference clients • Affordable and cost effective • Single source of data • Works with our volumes • Vendor is financially strong • Vendor can provide support • Available in our timescales Where possible at least two options are being included at this stage so that negotiations are not compromised Do we understand the requirements and benefits? Do we need to select a standard now? Can we define two options to help the negotiations? How good are the options? Research application options Map options against the selection criteria Define requirements & benefits Negotiate with relevant vendor(s) Meet each of the vendors Pilot to test benefits Evaluate modifying existing systems Define fit with overall Commercial architecture Application Selected Vendor Shortlist Preferred Solution Is it cost effective to modify the as-is systems? How will the preferred option(s) interface with other Commercial applications?

23. Merchandise planning applicationsWe have mapped each of the applications against a list of selection criteria as shown below = strong capability TopPlan, KeyPlan, Assort Arthur MP = weak capability Grown out from SC planning Functional fit to requirements Alignment with tech standards Relevant reference clients Affordable and cost effective Single source of data Works with our volumes Vendor is financially strong Vendor can provide support Available in our timescales No live clients, Sainsburys in final test No relevant retailers No UK clients Better if Retek MM selected Limited integration Gartner concerns = Recommended

24. Supply chain planning applicationsWe have mapped each of the applications against a list of selection criteria as shown below = strong capability E3 Slim/ Trim WRP, SRP DP, RP = weak capability Replenishment planner still in development Replenishment planner still in development Functional fit to requirements Alignment with tech standards Relevant reference clients Affordable and cost effective Single source of data Works with our volumes Vendor is financially strong Vendor can provide support Available in our timescales AS400 platform None for retail intake planning No UK clients Better if Retek MM selected Complex to implement AS400 complicates integration Better if Retek MM selected CPG heritage so check for retail volumes CPG heritage so check for retail volumes Gartner concerns Replenishment planner still in development Replenishment planner still in development = Recommended

25. Supplier integration applicationsWe have mapped each of the applications against a list of selection criteria as shown below. The final recommendation is dependant on the outcome of the supplier study = strong capability = weak capability Developmt toolset with basic starter modules Intake integration only Functional fit to requirements Alignment with tech standards Relevant reference clients Affordable and cost effective Single source of data Works with our volumes Vendor is financially strong Vendor can provide support Available in our timescales Microsoft platform New product and few credentials NOT EVALUATED Microsoft platform = Recommended

26. Solution set optionsWe have been able to narrow-down the shortlist of application options further by trading off integration, availability and functionality = strong capability = weak capability Ease of integration to existing Single source of data Functional coverage Consistent platform Proven integration Single company Solution set Conclusion û Inconsistent platforms and weak integration All JDA û Weak intake planning and integration All i2 û Intake planning not available All Retek ~ Good integration but weak merch. planning All Manugistics ~ Integrated planning not available Manugistics + Retek ü Good balance, some functional gaps Manugistics + JDA Arthur ü Good balance Manugistics + MarketMax = Recommended

27. Application conclusionsWe have reached some broad conclusions about the preferred applications but the final selection will be influenced by the selected system integrator and commercial discussions with the vendors • MarketMax and JDA are the strongest options for merchandise planning • MarketMax has strong functionality and technology but it has few live credentials • JDA Arthur has strong functionality and is proven but DSG has tried implementing it before • Manugistics and JDA are the strongest options for supply chain planning • Manugistics has strong functionality and the right technology platform • JDA has strong functionality but uses a platform DSG are in the process of removing (AS400) • A combination of Manugistics (supply chain planning and integration) plus JDA Arthur or MarketMax (merchandise planning) provides the best end-to-end solution • These products provide the right balance of functionality and ease of integration • The forthcoming supplier study will influence whether we need additional applications

28. Application conclusionsWe have reached some broad conclusions about the preferred applications but the final selection will be influenced by the selected system integrator and commercial discussions with the vendors • The proposed planning tools have good capabilities to support supplier integration for merchandise and supply chain planning • The forthcoming supplier study will influence whether we need additional applications • Bespoke systems such as EQOS provide broader integration capabilities such as event tracking • Yantra and Manugistics are the strongest options for order tracking, but commercial discussions between DSG and Yantra have stalled and so this option may not be feasible • 4PL service providers such as IEC Logistics provide outsourced services • A combination of the new planning tools and Business Objects should be used for performance management reports • Operational reports can be used from the new planning applications where pre-built reports are available • Business objects and Teradata can be used to collate information for company-wide reporting • The Business Objects environment needs to be managed to control localised ad-hoc reporting

29. Cannot perform automated reconciliation of planning data in spreadsheets and execution data on the mainframe Inconsistent planning processes and tools used by different categories and chains Inconsistent data sent to stores which constrains in-store processes to check range conformance Cannot perform end-to-end modelling to see the expected impact of range changes on the distribution network Store grading structure limits us to “pyramid” assortment plans and we can only groups stores by size Manual process to integrate space plan data into mainframe, leading to data inconsistencies Automated interfaces between new planning application and execution system removes data inconsistencies One standard process and application improves planning consistency, accuracy and efficiency Range and assortment plans published in a standard format via a web portal to stores Improved long-term planning reduces the need for short-term amendments and corrections Stores clustered using a combination of metrics (e.g. demographics) and tailored assortments for each Full integration between commercial, range, assortment and space plans to provide integrated planning Merchandise planning scenarioThe new application will resolve a number of hotspots within the current processes and systems to tailor product assortments to stores and improve product profitability 1 Produce promotion plans in Exel Manual comparison of R/A plan and MF data 2 Produce category brief Tender for products with suppliers Update range / assortment plan on Exel Enter planning data on mainframe Distribute R/A plans to store comms Publish R/A plans on COOL for stores 4 2 5 3 Produce space plan for display qty (Apollo) Hotspots Solutions 6

30. Lack of planning leads to high administration effort in correcting order quantities Poorly integrated process steps leads to inaccurate order quantities and stock availability issues No automation of constraints leads to imbalance of stock in DCs Limited sharing of accurate forecasts with suppliers leads to poor order fulfilment Orders cannot be fulfilled due to physical or financial constraints: Insufficient capacity in DCs due to stock apportionment being set at planning group level Too much stock in the wrong locations due to static apportionment across DCs Improved long-term planning reduces the need for short-term amendments and corrections One standard process improves intake accuracy and efficiency One integrated application for forecasting, planning, constraint modelling and supplier integration. Supplier integration and supplier/DSG performance management improves stock availability in DCs Setting DC stock ideal at product/location level optimises mix of stock in DCs and reduces capacity issues Dynamic DC to store ‘routes to market’ improves accuracy of DC stock ideals and optimises stock holding Intake planning scenarioThe new application will resolve a number of hotspots within the current processes and systems to improve supplier performance levels and stock availability within DCs Update DC apportionment % Review forecast in Prism Planner Upload forecast to MF and apportion by DC Generate Intake Plan Review & amend quantities Extract to Intake Spreadsheet and amend Review availability with suppliers Generate Sales Forecast Raise Purchase Orders 4 5 3 1 2 Hotspots Solutions

31. Lack of planning leads to high administration effort in correcting order quantities Poorly integrated process steps leads to inaccurate order quantities and stock availability issues No automation of constraints leads to imbalance of stock in DCs Limited sharing of accurate forecasts with suppliers leads to poor order fulfilment Orders cannot be fulfilled due to physical or financial constraints: Insufficient capacity in DCs due to stock apportionment being set at planning group level Too much stock in the wrong locations due to static apportionment across DCs Improved long-term planning reduces the need for short-term amendments and corrections One standard process improves intake accuracy and efficiency One integrated application for forecasting, planning, constraint modelling and supplier integration. Supplier integration and supplier/DSG performance management improves stock availability in DCs Setting DC stock ideal at product/location level optimises mix of stock in DCs and reduces capacity issues Dynamic DC to store ‘routes to market’ improves accuracy of DC stock ideals and optimises stock holding Intake planning scenarioThe new application will resolve a number of hotspots within the current processes and systems to improve supplier performance levels and stock availability within DCs Update DC apportionment % Review forecast in Prism Planner Upload forecast to MF and apportion by DC Generate Intake Plan Review & amend quantities Extract to Intake Spreadsheet and amend Review availability with suppliers Generate Sales Forecast Raise Purchase Orders 4 5 3 1 2 Hotspots Solutions Distribution Capacity Planning • Our intake planning solution will help to alleviate the current problem of “bed blocking” within LDC’s through: • Refining the DC apportionment % • Re-defining the mix of stock in DCs • Including forecasted customer orders as a capacity constraint

32. Process management and workflowWe will need to configure the integration layer to provide workflow management across applications. This will connect individual applications together to support end-to-end business processes Example intake planning process Generate sales forecasts Review sales plan Produce intake plan Agree intake plan Create purchase orders Track purchase orders External Events Regular trigger Regular trigger Regular trigger Supplier response Supplier response Prompt for outstanding response Business process workflow management Workflow business logic Integration Intake plan agreed Forecast created Forecast reviewed Intake plan created Purchase orders sent Create forecast Prompt to review forecast Prompt to create intake plan Create purchase orders Publish plan Triggers Resolve PO exception Forecast engine Sales planning Intake planning Integration tool Purchase order creation Purchase order mgt Systems

33. Section 5 – Migration and costs What we did • We have analysed system options and defined a high level architecture design for the trial and shown the major transition steps to realise the long term Phase 1 architecture • We have created man-day estimates for implementing each component of the Commercial Programme’s system architecture and apportioned these across trial, pilot and rollout stages Our conclusions • The key system objective of the trial is to test the final application solutions where feasible. The key areas to be tested are merchandise planning (range and assortment) and supply chain planning • The trial applications will interface with the mainframe using semi-automated point-to-point interfaces, and some interfaces are expected to be manual (e.g. creating purchase orders in the execution system) • After the trial the architecture will be re-engineered to provide a production strength system that can be rolled out, including middleware to provide interfaces between applications and business process control • Our total estimate for the Phase 1 system changes is 35,000 man-days. This is based on previous implementation experience and is dependant on a more detailed understanding of the requirements • There are a number of financial options for “hosting” the solution to spread initial implementation costs over the period of the support agreement but the smoothed cost includes an amount to cover the finance charge

34. Trial applicationsThe objective for the trial is to implement best-practice processes supported by applications that are proven and as near to the ‘end-game’ solution as possible = recommended Basic Option Hybrid Option Fully-featured System Option Commercial Planning • Market Max • JDA • Current Spreadsheets with minor changes Sales & Margin Planning • Market Max • JDA • Prism Planner Store Clustering • Process trial – Spreadsheets, possibly with input from SAS or similar package • Market Max • JDA • Business Objects • SAS • External consultancy NB. May be possible to trial Market Max if being used elsewhere already Range Planning • Process trial, run on spreadsheets • Upgrade of PRISM Planner, plus some simple interfaces • Market Max • JDA Assortment Planning • Process trial, run on spreadsheets • Upgrade of PRISM Planner (only suitable for limited volumes) • Market Max • JDA Macro Space Planning • Use existing Space Database plus spreadsheets • Use existing Space database and spreadsheets, plus include interfacing promotional space • Market Max Micro Space Planning • Not applicable (as now) • Not applicable (as now) • Apollo plus trialling process / working practices changes

35. Trial applicationsThe objective for the trial is to implement best-practice processes supported by applications that are as near to the ‘end-game’ solution as possible = recommended Basic Option Hybrid Option Fully-featured System Option • PRISM planner (establish and fix the problems with the forecasting process and inputs e.g. sales curves, seasonality, etc within the mainframe & prism planner) • Manugistics • JDA Sales Forecasting Intake Planning • Process trial plus spreadsheets • Amend PRISM Planner (only suitable for limited volumes) • Manugistics • JDA • i2 OTB Planning • Process trial only • Current Spreadsheets and Prism Planner with minor changes • Manugistics • JDA

36. Trial applicationsThe objective for the trial is to implement best-practice processes supported by applications that are as near to the ‘end-game’ solution as possible = recommended Basic Option Hybrid Option Fully-featured System Option Supplier Integration • Process trials • Eqos plus manual interfaces • Manugistics • JDA Agree Intake Plan • Market Max • JDA Agree Range Plan • Process trials • Eqos plus manual interfaces Deal Agreement • Process trials • Eqos plus manual interfaces • Eqos • Websphere Product Launch • Process trials • Eqos plus manual interfaces • Eqos • Websphere Purchase Order Tracking • Process trials • Eqos plus manual interfaces • Yantra • Manugistics • Websphere Supplier Performance Management • Process trials • Eqos plus manual interfaces • Eqos • Yantra • Manugistics Resolve Payment Discrepancies • Process trials • Eqos plus manual interfaces • Eqos • Yantra • Websphere

37. Existing system (Mainframe) Trial architecture phase 1 step 1The application architecture of the first phase of the trial will require point-to-point interfaces to the existing mainframe (only for supplier integration and intake planning applications) Existing system (non-Mainframe) New system Merchandise planning As current Intake planning Supplier integration Hosting options Manugustics / JDA / I2 TBC DC level intake plan Location Box Support Edited net forecasts DC stock at hand Store stock ideals Store net demand DC level Intake plan Existing DSG box DSG Stevenage data centre Combined DSG plus remote ACN/vendor recommended Purchase orders ACN sourced ACN Warwick data centre Remote ACN/vendor Mainframe Prism planner Calculated forecasts Edited net forecasts Characteristics Supply chain planning • Forecasts will be produced by the M/F, edited in Prism and updated on the M/F • Forecasts and stock data will be loaded on to the new intake planning tool to create DC intake plans • These will be loaded into the mainframe to drive the purchase order creation process Perf. mgt & integration • One-off data analysis used to derive store clusters • Interfaces will be point-to-point file transfer but reusable where possible • Limited process management using package capabilities and manual tracking / change mgt Execution • Upgrades as required to interface with new planning tools Supplier integration • Intake plans will be shared with suppliers • Other changes to be confirmed by study Feb/Mar

38. Existing system (Mainframe) Trial architecture phase 1 step 2The application architecture of the second phase of the trial will require point-to-point interfaces to the existing mainframe (for all trial applications) Existing system (non-Mainframe) New system Merchandise planning • New store clusters will enable targeted product assortments to be produced • The new planning system will generate macro space plans and product / store assortment plans • The assortment will be loaded into the mainframe eligability file where the store stock ideal is calculated Commercial planning spreadsheet Category targets R/A/S planning Intake planning Supplier integration MarketMax / JDA / I2 Manugustics / JDA / I2 TBC DC level intake plan Assortment Edited net forecast Macro space Product assortment (eligability) Edited net forecasts DC stock at hand Store stock ideals Store net demand Micro space planning DC level Intake plan Rich product data Sales history Base product data Edited net forecast Purchase orders Data warehouse Smart Mainframe Prism planner Calculated forecasts Edited net forecasts Characteristics Supply chain planning • Forecasts will be produced by the M/F, edited in Prism and updated on the M/F • Forecasts and stock data will be loaded on to the new intake planning tool to create DC intake plans • These will be loaded into the mainframe to drive the purchase order creation process Perf. mgt & integration • One-off data analysis used to derive store clusters • Interfaces will be point-to-point file transfer but reusable where possible • Limited process management using package capabilities and manual tracking / change mgt Execution • Upgrades as required to interface with new planning tools Supplier integration • Intake plans will be shared with suppliers • Other changes to be confirmed by study Feb/Mar

39. Existing system (Mainframe) Phase 1 architecture step 1The application architecture of the first step of the phase 1 pilot will require robust integration of the new intake planning applications with point-to-point interfaces to the existing mainframe for the merchandise planning trial Existing system (non-Mainframe) New system Merchandise planning • New store clusters will enable targeted product assortments to be produced • The new planning system will generate macro space plans and product / store assortment plans • The assortment will be loaded into the mainframe eligibility file where the store stock ideal is calculated Product assortment (eligibility) Intake planning Supplier integration Commercial planning spreadsheet Category targets R/A/S planning Sales history Forecasts inc seasonality Promotion/seasonality Supplier reviews Process events Store/DC intake plan Edited net forecasts MarketMax / JDA / I2 Supplier reviews Store/DC intake plan Purchase orders Process events Assortment Edited net forecast Macro space Micro space planning New integration layer for process, data and applications Rich product data Sales history Base product data Forecasts inc seasonality Purchase orders Store/DC intake plan Base product data Edited net forecast Sales history Data warehouse Smart Data warehouse Mainframe Performance reports Purchase orders Characteristics Supply chain planning • Forecasts inc seasonality produced by MF and edited in the new intake planning system and fed back to MF • The new intake planning tool will create store and DC level intake plans • These will be loaded into the mainframe to drive the purchase order creation process Perf. mgt & integration • Reports to measure trial benefits realisation and supplier performance • Message bus interfaces using publish/subscribe architecture • Basic workflow and exception management alerting Execution • Upgrades as required to interface with new planning tools Supplier integration • Other changes to be confirmed by study Feb/Mar

40. Existing system (Mainframe) Phase 1 architecture step 2The application architecture of the second step of the phase 1 pilot will require robust integration of of all the new applications Existing system (non-Mainframe) New system Merchandise planning • As per previous release Merchandise planning Intake planning Supplier integration Sales history Forecasts inc seasonality Promotion/seasonality Supplier reviews Process events Store/DC intake plan Edited net forecasts Product assortment Supplier reviews Category targets Product data Edited net forecast Process events Store/DC intake plan Purchase orders Process events New integration layer for process, data and applications Base product data Forecasts inc seasonality Purchase orders Store/DC intake plan Category targets Rich product data Sales history Commercial planning spreadsheet Data warehouse Smart Mainframe Performance reports Purchase orders Characteristics Supply chain planning • Forecasts inc seasonality produced by MF and edited in the new intake planning system and fed back to MF • The new intake planning tool will create store and DC level intake plans • These will be loaded into the mainframe to drive the purchase order creation process Perf. mgt & integration • Reports to measure trial benefits realisation and supplier performance • Message bus interfaces using publish/subscribe architecture • Basic workflow and exception management alerting Execution • Upgrades as required to interface with new planning tools Supplier integration • Other changes to be confirmed by study Feb/Mar

41. Existing system (Mainframe) Possible future architectureThe phase 1 architecture will be progressively extended to include additional capabilities (e.g. international, promotions planning) Existing system (non-Mainframe) New system Merchandise planning • New planning tool extended to include promotion planning • Extended to include European scope Order management Merchandise planning New price & promotions optimisation Intake planning Supplier integration Store /DC intake plan Edited net forecasts Store/stock allocation Category targets Product assortment Space plans Product data Price data Sales history Promotion/seasonality Supplier response Process events Reviewed intake plan Order status Purchase orders Order status Process events Promotion plans Price plans Product data Process events Purchase orders Process events New integration layer for process, data and applications Reviewed store /DC intake plan Store stock allocation Base product data Purchase orders Rich product data Sales history • Mainframe: • Supplier Mgt • Booking In • Stock Ledger • Product Mgt • Price Mgt • Location Mgt • Deal Mgt Data warehouse European Systems Smart Performance reports Purchase orders Characteristics Supply chain planning • Extended to include European scope Perf. mgt & integration • Extended reports (requirements TBC) Execution • Upgrades as required to interface with new planning tools Supplier integration • Example extensions may include shared promotion planning

42. Trial system developmentWe will set-up a basic configuration of the new application(s) and then implement a number of iterative releases based around business scenarios defined with users Mobilisation Conference Room Pilot Configure Release 1 Further Releases People & Process • User group set-up • Identify key sponsors • Resource plan • Communications prog. • User workshops • Key process scenarios • Capture requirements • Define KPIs • Communications prog. • Functional specification • User training • Implement RACI • Support team set-up • Communications prog. • User feedback • Change requests • Provide support • Communications prog. Systems • Dev team set-up • Hosting set-up • Environments set-up • Release plan • Contingency plan • Kick-off technical design • Basic data extract • Install application • Server build • Back-up/recovery • Technical design • Data extract & load • Application mods • Legacy system mods • Interface development • Unit and system tests • User acceptance test • Support team set-up • Provide support • Bug fixes • Application mods • Data extracts • Testing • QA Accenture Accenture will set up and support the new applications for the duration of the trial. We will take responsibility for overall management of the project including sub-contracting of vendors Team We would expect to work together on the detailed technical design and application integration DSG We would expect Dixons to undertake work required on legacy systems including data extracts, interfaces and modifications

43. Inter-programme dependenciesWe have met with other key initiatives and identified a number of cross-programme issues that need to be resolved Initiative Interface point details Dependencies What we need to do Branch - Till system replacement (Eclipse) • Sending R/A/S plans to store • Measuring planogram conformance • Receiving sales and movements from store • Impact of intake planning on PC World store • Customer orders from store • BIs/TNs for stock transfers • Store to HO messaging (BDC/ISC) • Rich product information from SMART • Back to back orders (BPU SHD) • Branch stock status changes • BDC/ISC interfaces and PLU. Their replacement is currently out of scope for both programmes and Branch plan to connect the new systems to the existing BDC/ISC systems • The Branch programme are using MQ/MQSI middleware whereas we are considering BPM (e.g. WebMethods) • Branch is assessing options for new customer order management for release 3 (2004) • Assess opportunity and benefit of replacing BDC/ISC with middleware messaging • Inter-programme discussion on middleware/interfacing strategy, involving core architecture team • Assess opportunity for consolidated order management capability for all orders and stock movements • Assess requirements for rich product information • Assess BPU / SHD requirements Routes to market - Enhanced Order Mgt • WSM/BSM/STM provide the interface between central stock database and warehouse management systems • Order management / customer order fulfilment currently managed by LDO / Focus / Classic • RTM were planning to implement Yantra order management but stopped due to problems with the vendor negotiation. Now planning to compromise on requirements and use the LDO system with limited modification • Check feasibility of re-opening commercial discussions with Yantra • Understand possible cross programme requirements for Order management Finance - n/a • APICS does invoice matching • Currency conversion maintained in PCM • Lawson maintains supplier data • Commercial Programme will need to connect new systems into APICS • Define interface requirements • Understand APICS / Lawson constraints Commercial - Smart • Shelf edge label marketing details for each products • Promotion / price timing • Smart provides product feature extensions and originally planned to replace the core product database but this is no longer the case • Commercial Programme data architecture needs to include Smart as a data source for product features • Clarify end-game objectives of the Smart programme (expected to be limited to marketing product features) - ODS • N/a • We are proposing an alternative data architecture strategy • Decide on whether to stop or change the ODS project

44. Implementation costsThe estimates below show the man-days, software and hardware for the implementation the proposed new applications, including any supporting infrastructure / middleware These estimates are for illustrative purposes only and have been based on experience from previous (and similar) Accenture implementation projects. More work will be required to refine these during the detailed design phase. The trial costs are expected to be superseded by bids from the integrators

45. Hosting options – Smoothing costs By hosting the solution, you have the ability to spread any initial implementation costs over the period of the support agreement. cost Smoothed X+Fin Traditional X years 3 1 6 2 4 5 implementation support Note : time scales are for illustrative purposes only

46. Hosting options – Buy vs Rent Suitability/Availability Availability Suitability Highly Customised (Low) Highly Customised (Low) Generic (High) Generic (High) Merchandise Planning Merchandise Planning X  ) Supply chain Planning  ) Execution  ) Supplier integration  ) Perf. mgt & integration  Deals Pricing Supply chain integration Master data Mgt Order Mgt Booking In Planning integration

47. Hosting options – Approaches to Delivery I. II. III. IV. V. Keep Internal Leverage External Advisor Co-sourcing; Targeted Capabilities Targeted Business/IT Transformation Transformational Outsourcing Incremental Change Rapid Step Change Leverage External Advisor Co-sourcing; Targeted Capabilities Targeted Business/ IT Transformation Transformational Outsourcing Keep Internal • Develop all processes and frameworks internally. • Implement with internal resources. • Engage external partner to validate and evaluate practices. • Solicit leading practices, approaches, and points of view. • Rely on internal resources to implement. • Third party infuses resources for projects or to manage discrete systems (e.g., legacy applications). • Scope limited to roles within larger projects run by IT. • Fills skills gaps. • Efficiency gains through process improvements, tools,and methodologies. • External partner manages and runs targeted IT capabilities. • Partner may manage strategic programs. • The company and external partner jointly define key roles and targeted benefits. • External partner manages and runs all IT capabilities. • Works with executives to determine IT strategy and align with and deliver on key business imperatives. Aspirational Position DSG Current positioning

48. Appendices- Benefit breakdown by process- Application architecture details- Application option details- Integration layer details- Who we have consulted

49. Commercial programme benefitsThe benefits shown below are based on internal judgement, previous analyses and external benchmarks. The trial will be used to prove the benefits prior to requesting funds for implementation Direct Benefit by Process (£m) Payment Discrepancies Sales & Margin Planning Range Plan Agreement Intake Plan Agreement Macro Space Planning Net Sales Forecasting Micro Space Planning Commercial Planning Assortment Planning Supplier Perf. Mgt Store Clustering Product Launch Deal Agreement Range Planning Intake Planning OTB Planning Stock Ledger Location Mgt Supplier Mgt Product Mgt P’Order Mgt PO Tracking Booking In Price Mgt Deal Mgt Sales Volume Intake Costs Level of Unfunded Discounting Trading Account Cost of Supply Chain Branch Costs (0.2) (0.2) (0.2) (0.2) (0.2) Central Costs Supplier Integration Merchandise Planning Supply Chain Planning Execution 30.6 14.8 1.6 8.8

50. Application selection processWe have compared modifying the existing systems with best-of-breed application options. We have meet each vendor and assessed their products against a list of selection criteria • Selection criteria • Functional fit to requirements • Alignment with technical standards • Relevant reference clients • Affordable and cost effective • Fits with other applications • Works with our volumes • Vendor is financially strong • Vendor can provide support • Available in our timescales Where possible at least two options are being included at this stage so that negotiations are not compromised Do we understand the requirements and benefits? Do we need to select a standard now? Can we define two options to help the negotiations? How good are the options? Research application options Map options against the selection criteria Define requirements & benefits Negotiate with relevant vendor(s) Meet each of the vendors Pilot to test benefits Evaluate modifying existing systems Define fit with overall Commercial architecture Application Selected Vendor Shortlist Preferred Solution Is it cost effective to modify the as-is systems? How will the preferred option(s) interface with other Commercial applications? However, the final selection of applications will be influenced by the chosen system integrator …