1. Learning from Leaders: Gartner’s Top 25 Global Supply Chains Kevin Sterneckert Janet Suleski January 15, 2013 0

2. Gartner delivers the technology-related insight necessary for our clients to make the right decisions, every day.

3. How Today's Shoppers Shape Demand-Driven Requirements Economic Uncertainty Evolving Supply Chains Empowered Consumers Volatility

4. Key Issues for Becoming a Demand-Driven Retailer 1.How do you create a demand-driven foundation? 2.What types of initiatives enable demand-driven retailing? 3.What's the business value of creating a demand- driven retail supply chain?

5. Demand-Driven Value Network (DDVN) and Demand-Driven Retailing Strategies DemandSupply Product Understand and Respond to Demand Signals Build Value Networks Use the Supply Chain to Support Products and Services Innovation Fulfill Cross- Channel Demand Fulfill Cross- Channel Demand Deliver Consumer-Centric Retailing Deliver Consumer-Centric Retailing

6. Tomorrow's Profitability and Innovation Are Built On the Right Foundation End-to-End SC Process Outside-In View Aligned X-Functional Objectives Technology Cost Optimized Risk Management Global Network Management Demand Management SegmentationCost to ServeResiliency Predictive Analysis End-to-End Visibility Talent Management Integrated PLM Downstream Data Management Profitable Trade-Offs ServicesSustainability Align to Customer Value

7. Supply Chain Excellence: Value Through Operations and Innovation Balance Higher Cash Flow, Profits and P/E 1.How does the supply chain enable my business strategy? 2.What role does the supply chain play in creating differentiation? 3.What is my technology adoption preference? P D S Demand Supply Product Operational Excellence (On-Shelf Availability, Total Supply Chain Cost) Leader Laggard Innovation Excellence (Time to Value, Return on R&D)

8. Span of Control for Retail Supply Chains DCTransportationProcurement DCTransportationProcurementForecasting/Replenishment DCTransportationProcurementForecasting/ReplenishmentNPDISourcing Store OperationsDCTransportationProcurementForecasting/ReplenishmentNPDISourcing Maturity LowHigh Medium High Span of Control

9. Hierarchy of Retail Supply Chain Metrics What It Tells You Customer Fulfillment Effectiveness Financial Effectiveness Operational Effectiveness Customer Performance Trade-Offs Customer vs. Supplier Balance Stability of Processes Driving Value Forecast Accuracy Product Availability SCM Cost Supplier Perfect Order Supplier On Time DC Service Level Supplier Quality On-Time to Store SCM Cost Detail DC Perfect Order Store Effectiveness Accounts Payable Revenue Write- Offs Inventory DOS Product Availability Detail Backroom/Sales Floor Efficiency

10. Systems of Record Systems of Differentiation Systems of Innovation Think of the Different Layers Your Organization Needs … New Ideas Better Ideas Common Ideas

11. 10 Retail Supply Chain Top 15

12. Key Issues for Becoming a Demand-Driven Retailer 1.How do you create a demand-driven foundation? 2.What types of initiatives enable demand-driven retailing? 3.What's the business value of creating a demand- driven retail supply chain?

13. Demand-Driven Retailing Strategies StrategyDescription Understanding and responding to the demand signals Sensing, shaping and responding to the consumer demand signal across sales channels Delivering a consumer-centric supply chain Creating a supply chain that supports and responds to the key merchandising planning and execution activities Fulfilling cross-channel demandCreating effective and efficient fulfillment strategies that support cross-channel and multichannel demands of the shopper Building value networksAligning the people, processes and technology that drive pull- based replenishment models and joint value creation Using the supply chain to support products and services innovation Creating an agile and responsive supply chain that enables and supports innovation across an organization

14. Demand-Driven Retailing Initiatives StrategyDescription Understanding and responding to the demand signals Demand forecasting Demand signal repository Shopper segmentation Delivering consumer-centric retailing Merchandising Space management Life cycle pricing Insights and segmentation (shopper/channel) Fulfilling cross-channel demand Customer, order, inventory management and visibility Execution enablement Building value networks Demand management Merchandising, inventory and operations execution (MIOE) Supply chain segmentation Network design Inventory optimization Using the supply chain to support products and services innovation PLM Cycle time reduction Item management Innovation/inspiration capture and evaluation

15. Demand-Driven Retailing Priorities StrategyGrocery Specialty Retailers Mass Merchant Convenience Store Chain Drug Department Stores Understand and respond to demand signal HL/MHHHM Fulfill cross- channel demand L/MHMLMH Deliver consumer- centric retailing HHMMHH Drive innovation into products and services M/HHMLHH Build value networks MHML/MM/HH Note: Priorities — Low, Medium, High

16. Demand-Driven Initiatives Priorities StrategyInitiatives North America U.K./ Europe Understanding and responding to the demand signals Demand forecasting Demand signal repository Shopper segmentation HM Delivering a consumer-centric supply chain Merchandising Space management Life cycle pricing Insights and segmentation (shopper/channel) MH Fulfilling cross-channel demand Customer, order, inventory management and visibility Execution enablement HH Building value networks Demand management MIOE Supply chain segmentation Network design Inventory optimization MM Using the supply chain to support product and service innovation PLM Cycle time reduction Item management LL

17. Geographic Demand-Driven Maturity Comparison

18. Retail Segment and Geography Maturity Comparison

19. Key Issues for Becoming a Demand-Driven Retailer 1.How do you create a demand-driven foundation? 2.What types of initiatives enable demand-driven retailing? 3.What's the business value of creating a demand- driven retail supply chain?

20. Why Becoming Demand-Driven Matters Based on Supply Chain Top 25 Metrics: Return on Assets (ROA) Inventory Turns Revenue Growth Demand-Driven Leaders Compared With Peers Metric Difference (2009) Difference (2010) Difference (2011) Difference (2012) ROA73.8%2X 27.3%~3X Inventory Turns19.1%4% 23.7%54% Revenue Growth55.0%3X 26.7%~2X

21. Demand-Driven Maturity Value Proposition ReactingAnticipatingCollaboratingOrchestrating ROA-1.1% Inventory Turns 8 Revenue Growth.8% 6.9% 9.1 3.9% 7.5% 10.2 7.7% Source: Gartner Supply Chain Top 25 retail candidates (n=43) TBD Stage 1 to Stage 2Stage 2 to Stage 3Stage 3 to Stage 4 698% 14% 389% 9% 12% 97% TBD

22. Demand-Driven Business Value Growth Service Cost Agility Demand Management MIOE Network Design Supply Chain Segmentation Inventory Optimization Reduction in Out-of-Stocks 20%-30% Gross Margin Improvement 3%-5% Inventory ▼ 15%-30% Obsolescence 10%-15% less Productivity Increase 5%-10% Revenue Improvement 2%-5% Inventory ▼ 15% Cash-2-Cash ▼ 35% Working Capital ▲ 15% Better Service Gross Margin Improvement 3%-5% Asset Utilization ▲ 5%-10% Improved Productivity 3%-5% Profit Growth 2x Asset Utilization 3x Faster Runs 2x Value to Customers Cost/Service Choices Growth Potential Identification Cost of Complexity Unneeded Variability Unique Value and Agility per Segment Better Customer Choice No Negative Service Impact End-to- End Oriented Metrics Supply chain organization design (span of control) Proactive supply chain talent strategy Time-to-Market Lead Time Reduction

23. Demand-Driven Supply Chain Action Plan Monday Morning -Take the DDR self-assessment to gauge current maturity levels. Next 90 Days -Determine the role of your supply chain and how it should enable your business strategy. -Create and administer a supply chain skill set assessment. Next 12 Months -Compare your DDR initiatives to the recommended list. -Create your DDR process and technology road map.

24. Recommended Gartner Research  The 2012 Retail Handbook for Becoming Demand-Driven Mike Griswold, and others (G00229233)  Toolkit: Assess Your Retail Value Chain Maturity Against the Five Demand-Driven Strategies Kevin Sterneckert, and others (G00211566)  Key Issues for Retail Supply Chain Leaders, 2011: Aligning Planning and Execution Mike Griswold, Janet Suleski (G00210875)  Demand-Driven Retailers Align Planning and Execution Across Their Supply Chains by Answering Three Key Questions Mike Griswold (G00209003)  Demand-Driven Retail Supply Chains Use Three Critical Skill Sets to Balance Operational and Innovation Excellence Mike Griswold, Allen Johnson (G00207240) For more information, stop by Gartner Solution Central or email us at solutioncentral@gartner.com.solutioncentral@gartner.com

25. Questions? Kevin Sterneckert – kevin.sterneckert@gartner.comkevin.sterneckert@gartner.com Janet Suleski – janet.suleski@gartner.comjanet.suleski@gartner.com