I N S I G H T S I N T O I N D I G O ’ S J O U R N E Y & K E Y S A P F & R C A PA B I L I T I E S

J U LY 6 , 2 0 1 6

Indigo

Agenda

Why SAP F&R?

F&R Journey

Why SAP F&R?

F&R Journey

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Indigo

Agenda

Why SAP F&R?

F&R Journey

$850+ M Revenue Last Fiscal Year

PrintGeneral

Merchandise Toys

Home accessories

Fashion accessories

Stationary

Electronics

Gourmet

Baby

Toys

Games

American Girl

Trade Books

Bargain Books

Magazines

Calendars

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Agenda

Why SAP F&R?

F&R Journey

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9 Quarters of Revenue Growth

Agenda

Why SAP F&R?

F&R Journey

6

Supply Chain Overview

Retail DC

StoresVendors

200+ Stores across CanadaForecasting 5.5M Product Locations44% of all receipts is System Replen64% of all receipts sourced from DC50+% of GM receipts is seasonal

Online DC

30K Products

190K Products

1.5K Book Vendors2K GM & Toy Vendors130 Product Development Vendors(Supported by NY Design studio)

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Why F&R?

Agenda

Why SAP F&R?

F&R Journey

8

Prior to SAP F&R

System Landscape

• ERP implemented in 2004

• ERP used for forecasting and replenishment

• SAP Warehouse Management System implemented in 2012

• Many custom developments (2004-2013)

• Latest upgrade to ECC6 in 2013

• Stable system

• Reliable and mature Master Data

Challenges

• Manual preview of system replenishment order

• Manual analysis and re-orders into the DC

• Manual adjustment of forecasts

• Manual adjustment to account for out-of-stocks

• Manual adjustment of F&R parameters to align with demand changes

• Manual review of exceptions

Agenda

Why SAP F&R?

F&R Journey

9

Supply Chain Vision

Initial Buy less and allow more replenishment pull into the Retail DC from vendor to support store order forecasts

Allocate less rely more on pullMore accurate replen orders Influence forecast for events

Collaborate and share order forecasts with vendors to improve fill rate

STOP REACTING TO YESTERDAY

START PLANNING FOR THE FUTURE

Integrate Online Demand to drive vendor orders

Online DC

Vendors

Retail DC

Stores

Agenda

Why SAP F&R?

F&R Journey

10

F&R Capability

Advanced forecasting algorithms suitable for slow and fast sellers

Challenge

Inability to generate accurate forecasts for slow sellers

Store Forecasting

Agenda

Why SAP F&R?

F&R Journey

11

F&R Capability

Advanced forecast algorithms support Product Location Level Seasonality

Challenge

Category level seasonality not representative for all items within the category

Store Forecasting

Agenda

Why SAP F&R?

F&R Journey

12

F&R Capability

Advanced forecast algorithms support dynamic replenishment safety stock for volatile fast sellers

Challenge

Unable to maintain in-stocks for volatile fast sellers

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Sales

Average

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Sales

Average

High Volatility Low Volatility

Store Forecasting

Agenda

Why SAP F&R?

F&R Journey

13

Store Forecasting

F&R Capability

Automatic outlier peak and zero stock correction

Challenge

Manual effort to catch outliers and correct forecast out of stock items

Outlier Correction Zero Stock Correction

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10

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10

Agenda

Why SAP F&R?

F&R Journey

14

Store Forecasting

F&R Capability

Leveraging reference items to model forecast and order forecast for new items

Challenge

No systematic way to model the forecast for new item

1x saleshistory

Reference Item New Item

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Agenda

Why SAP F&R?

F&R Journey

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Store Forecasting

F&R Capability

Pre-allocation feature within F&R enables shifting forecast to build stock earlier at the stores

Challenge

No systematic solution to build-up stock earlier at the stores

Pre-allocation

Forecast shift for replenishment

Agenda

Why SAP F&R?

F&R Journey

16

Store Forecasting

F&R Capability

Demand shaping ahead of the feature and capability to ignore feature sales post promotion

Challenge

Over-forecasting post feature and unable to influence the forecast for the upcoming feature

Future Promo

TodaySales Forecast

Agenda

Why SAP F&R?

F&R Journey

17

ForecastToday

Store Forecasting

F&R Capability

Demand shaping ahead of the feature, ability to replicate last promotional lift and capability to ignore feature sales post promotion

Challenge

Over-forecasting post feature and unable to influence the forecast for the upcoming feature

Re-occuring Promo

Sales

Agenda

Why SAP F&R?

F&R Journey

18

Store Forecasting

F&R Capability

Ability to ignore unrepresentative sales history in order to drive better forecast

Challenge

Inability to influence the forecast due to non-representative sales history causing over or under forecast

Store Renovation

TodaySales Forecast

Agenda

Why SAP F&R?

F&R Journey

19

Store Replenishment

F&R Capability

Ability to use time phased display quantities

Challenge

Unable to use different display quantities for different periods

Double Exposure during Easter

Agenda

Why SAP F&R?

F&R Journey

20

DC Shipment Forecast

F&R Capability

Multi echelon feature enables accurate shipment forecast for the DC based on store and online sales forecast

Challenge

Unable to generate an accurate shipment forecast for the DC

Store Sales Forecast Store Sales Forecast Online Sales Forecast

Store Order Forecast Store Order Forecast Online Order Forecast

Aggregated Store and Online Order Forecast

Agenda

Why SAP F&R?

F&R Journey

21

Vendor Order Forecast

F&R Capability

Multi echelon feature enables accurate vendor order forecast for DC sourced items

Challenge

Unable to generate an accurate vendor order forecast for DC sourced items

Store Sales Forecast Store Sales Forecast Online Sales Forecast

Store Order Forecast Store Order Forecast Online Order Forecast

Vendor Order Forecast

Aggregated Store and Online Order Forecast

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F&R Journey

Agenda

Why SAP F&R?

F&R Journey

23

Process

Business Led & Focus on standard capabilities

Project Timeline & Approach

People

Phased Rollout & Training

System

Pilot & Performance Tuning

Planning Phase

Aug Sep Oct Nov Dec Jan Feb Mar April May Jun July

3 Month

Realization Phase

Rollout

Pilot Phase

4 Month

2 Month

3 Month

Continuous communication across the organization

Agenda

Why SAP F&R?

F&R Journey

24

Project Phases in Detail

Planning

• Sandbox Environment Prep with UCS

• Training with UCS prior to Blueprinting

• Business focused Blueprinting

Realization

• F&R Config and technical design by UCS

• ECC6 Config and developments

• Integration

• Testing

• Data Clean-up

• Performance Tuning

• DIF Assessment and technical support by SAP

Pilot

• Production Environment Prep

• Pilot Team training

• Parallel Testing (soft go-live)

• Performance Tuning

• Pilot Hard Go-live

• Monitor Integration & daily orders

• Parameter fine tuning

• Job scheduling

Rollout

• Phased Training Approach

• Phased Conversion

• Continuous Performance Tuning

• Fine tuning of job schedules

• Standing meetings within and post rollout week

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2000000

4000000

6000000

8000000

April May June July

Product Locations in F&R

Agenda

Why SAP F&R?

F&R Journey

25

Key Lessons Learned

Experienced integrator

Training led by UCS Solutions before blueprinting

Business led blueprinting

Early engagement of Basis

Minimize Customization

Broad & Experienced Pilot Team

Large scale parallel run

Phased conversion & rollout

Extensive training & support

Performance tuning

Agenda

Why SAP F&R?

F&R Journey

26

Impact on Day in Life

Inventory Analyst

BOOK ONLY

Roles using F&R

Assistant Planning Manager

GM & TOYS

Less time spent on order review

Allocation Analyst

BOOK ONLY

Less time spent on manual adjustments

Less time spent on pushes

Vendor order forecasts now supplied by F&R vs. manual effort

Focus shifted towards value added work

More time spent on planning & influencing forecast for future events

Why SAP F&R?

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