Optimizing Sales and Operations Forecasting Andrew C. McVeagh April 23rd, 2009

2 April 27, 09

Agenda

•  NBC Universal And Home Entertainment

•  Forecasting DVD’s And Blu-ray

•  Optimizing The Forecasting Process

•  Choosing The Right IT Tools To Help

•  Questions

3 April 27, 09

An Introduction to NBC Universal •  One of the World’s Leading Media & Entertainment Companies •  Formed In May 2004 Through Combining NBC & Vivendi Universal Entertainment •  NBC Universal Is 80% Owned By General Electric And 20% Owned By Vivendi

•  Markets & Distributes NBC Universal's Content Through DVD, Blu-ray, EST & VOD •  Includes Titles From Universal Pictures, Focus Features & Rogue Pictures •  Original Titles From USHE Family Productions and Mattel Properties •  Distribution for Summit Entertainment and other 3rd parties

Universal Studios Home Entertainment

4 April 27, 09

Forecasting DVD’s and Blu-ray

Initial Financial Ultimate

Operations Forecast

Production /Box Office

Release

Title Greenlight

Financial Forecast

Sales Forecast

Store Level Final

Forecast

Order DVD/BD Materials

DVD/BD Production /Marketing

Ship to Stores

VMI Replenish

Optimizing the Forecasting Process

6 April 27, 09

What is the Problem?

•  Inefficient Communication in Forecasting and Planning •  Returns Still Too High •  Limited Visibility To Promotional Effectiveness •  Multiple Forecasts In Multiple Systems – Which Is Correct?

Greenlights, Annual Plans, P&L, Cash, Overhead,

In Year Pacing & Ultimates

Finance

Replenishment, POS Forecasting, SKU Forecasting

Operations DVD Release Schedule

Marketing

Account, Customer, Store Level & Fixture Level Planning

Sales & Cat Mgmt

7 April 27, 09

What Is The Goal?

• Optimize and Streamline the S&OP Process • Drive Cross Team Visibility of Data for Better Decisions • Utilize Consensus & Leverage Statistical Demand Planning • Minimize Returns – Stop Revolving Door Syndrome • Revenue Lift – Better Promotion Management • Optimize Trade Spend $ - Utilize Highest Impact Tactics • One System to Unite and Communicate All Forecasts

Right Product Right Store Right Time Right Shelf Right Price

A Satisfied Customer Objectives: Sub-Goals:

8 April 27, 09

How to Accomplish Process Change

•  Finance •  IT •  Marketing

•  LEAN Value Stream Map Entire As-is Process •  Identify Value Add, Value Enabling and Non-Value Steps •  Identify Duplicates, Wait Time, Touch Time & Process Time •  Identify Pain Points and Integration Points to Other Processes •  Create New Process Maps Eliminating Non-Value Steps

•  9 Days Of Workouts With 40 Subject Matter Experts From: •  Operations •  Sales •  Strategic Planning

9 April 27, 09

A Closer Look at a LEAN Process Box

•  Reduced Number of Process Steps from 160 to 130

•  Eliminated 12 Rework Loops

•  65 Non-standardized Process Steps to be Automated in IT

•  Estimated Reduction of Average Process Time by ~70%

•  Estimated Reduction of Average Touch Time by ~75%

Accomplishments After Workouts

Choosing The Right IT Tools To Help

11 April 27, 09

What is the Systems Focus? •  Implement New LEAN Process In Enterprise Class System •  Simplify Systems Landscape & Retire Custom Applications

Enterprise Order Management,

Finance & Supply Chain System

Custom Decay

Application Custom

Reporting System

Custom Planogram

System Custom

Forecasting System

Custom Sales

Application Packaged

Replenishment System

Enterprise Order Management,

Finance & Supply Chain System

add Forecast, Demand,

Sales & Reporting

Packaged Replenishment

System

Custom Planogram

Leverage Enterprise Centers of Excellence

12 April 27, 09

Vendor 1

Replenish

Demand

Sales

Finance

Q2’08 Q3’08 Q4’08 Q1’09 Q2’09 Q3’09

Implement Go Live

Implement Go Live

Implement Go Live

Implement Go Live

Example: Implementation Timeline

Vendor 2

Replenish

Demand

Sales

Finance

Q2’08 Q3’08 Q4’08 Q1’09 Q2’09 Q3’09

Implement Go Live

Implement Go Live

Implement Go Live

Q4’09 Q1’10

Q4’09 Q1’10

Implement Go Live

$$$$$ $$$$$

$$$$$ $$$$$ $$$$$

Spend by Year

Spend by Year

$$$$$

13 April 27, 09

Example: Cost/Benefit Walk by Qtr

Replenishment Demand Sales Financial

Q2’08 Q3’08 Q4’08 Q1’09 Q2’09 Q3’09 Q4’09 Q1’10 Q2’10 Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 Q4’11

Q2’08 Q3’08 Q4’08 Q1’09 Q2’09 Q3’09 Q4’09 Q1’10 Q2’10 Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 Q4’11

Q2’08 Q3’08 Q4’08 Q1’09 Q2’09 Q3’09 Q4’09 Q1’10 Q2’10 Q3’10 Q4’10 Q1’11 Q2’11 Q3’11 Q4’11

Vend

or 2

Ve

ndor

1

Higher payback starts 9 months later

Costs conclude 6 months earlier

14 April 27, 09

Lessons Learned

•  Examine the Cost of Doing Nothing!

•  Executive Management Commitment and Buy in Necessary

•  Recognize Required Refresh Frequency of Data in Systems

•  Understand Data History Requirements to Forecast

•  Solid Requirements, Exhaustive UAT and Training = Success

Questions?