2006, FJA Confidential – Do Not Distribute - Property of FULLER, JONES & ASSOCIATES, INC. 1 A Radically Simple Approach To Reducing Returns Returns In A Box

2006, FJA Confidential – Do Not Distribute - Property of FULLER, JONES & ASSOCIATES, INC. 2 Introduction Introduction The Model For Reducing Returns The Model For Reducing Returns The Returns In A Box (RIAB) Tool The Returns In A Box (RIAB) Tool Demonstrated Capability Demonstrated Capability Implementing The RIAB Approach Implementing The RIAB Approach Table Of Contents

2006, FJA Confidential – Do Not Distribute - Property of FULLER, JONES & ASSOCIATES, INC. 3 Why is effective reduction of returns important to the industry? A Sample Of Recent Returns Issues In The Industry Press: Studios Stricter With Returns, Universal Leads With 15% Cap; Warner, Buena Vista At 20% - Video Business 3/31/06 Disc Return Snafus Cause Studios Grief, Pixar Revised Guidance To Leave Bigger Cushion For Incredibles Returns – Variety 7/24/05 Price Cuts Come Earlier To Nix Need For Returns – Video Business 6/3/05 Suppliers Hit With Faster Returns As Inventory Efficiency Tightens – Video Business 5/27/05 Indies Adopt Inventory Control, Ventura, Platinum Using VMI Systems – Video Business 8/5/05 The Industry Needs A Tool That Forecasts Demand +90% Accurate Based On First Day Sales Introduction – Entertainment Industry

2006, FJA Confidential – Do Not Distribute - Property of FULLER, JONES & ASSOCIATES, INC. 4 What Is Returns In A Box (RIAB)? End To End Process Review And Alignment A Re-ship Tool An Initial Ship Tool A Performance Reporting Tool A New Capability That Explicitly Links Initial Ship Quantities And Supply Chain Capabilities To Re-ship Needs A Way To Manage Inventory Risks Introduction – Returns In A Box A Straight Forward Approach To Simultaneously Reducing Returns, Obsolescence and Stock Outs By Only Having To Manage Key Releases

2006, FJA Confidential – Do Not Distribute - Property of FULLER, JONES & ASSOCIATES, INC. 5 How Does The RIAB Tool Work? FJAs Tool Uses An Innovative Approach To Historical Sales Trends To Serve As The Basis For Forecasting Retailer Inventory FJAs Approach Allows Equal Use Of All Data Instead Of Like-Type Algorithms That Only Uses Some Of The Data The RIAB Tool Can Be Used For Either Customer Or Territory Specific Forecasting, Or Global-level Forecasting Leverages Most Recent Data To Avoid Basing Decisions On Outdated Decay Curves Introduction (RIAB cont.) FJA Has Developed An Innovative Approach To Forecasting That Does Not Rely On Like-Type Analysis

2006, FJA Confidential – Do Not Distribute - Property of FULLER, JONES & ASSOCIATES, INC. 6 How Accurate Is The Tool? The RIAB Tool Has Consistently Shown +90% Forecasting Accuracy From The First Sales Data Point Available (Eg. Hour 1, Day 1, Week 1, Etc.). Other Tools Typically Need Multiple Data Points To Achieve The Same Level Of Accuracy. Thus, Useful Accuracy Is Achieved Only After The Critical Period Has Passed Focuses the analysis on the drivers of returns: those releases that drive >80% of your returns Introduction (RIAB cont.) Consistently Demonstrated +90% Accuracy From Only The First Point Of Sales Information

2006, FJA Confidential – Do Not Distribute - Property of FULLER, JONES & ASSOCIATES, INC. 7 Business Inputs Performance Outputs People and policies MaterialMaterial InformationInformation QualityQuality CostCost DeliveryDelivery Supply Chain Capability Feedback loop Initial Ship Forecast Re-Ship Management Effective Management Of Returns Requires Explicit Connection Of The Key Process Factors Based On Best Practice Capabilities Key Process Factors Managing Returns

2006, FJA Confidential – Do Not Distribute - Property of FULLER, JONES & ASSOCIATES, INC. 8 Initial Ship Re-Ship Supply Chain Capability The RIAB Tool

2006, FJA Confidential – Do Not Distribute - Property of FULLER, JONES & ASSOCIATES, INC. 9 1.Enter Estimated Sales (1 day, 1 week, 2 weeks, etc.) 2. Enter Proposed Initial Ship Quantity 3. Examine WOS 4. Adjust Initial Ship Quantity As Needed Example: Initial Ship A Simple Interactive Approach To Establishing Initial Ship

2006, FJA Confidential – Do Not Distribute - Property of FULLER, JONES & ASSOCIATES, INC Enter Actual Sales 2. Examine Estimated Sales and WOS 3. Plan Potential Reship Example: Re-Ship Forecast With +90% Accuracy The 1 st Month Sales Based On Day 1 Sell-Thru

2006, FJA Confidential – Do Not Distribute - Property of FULLER, JONES & ASSOCIATES, INC. 11 Deployed In 06 Q1 World-Wide at One of the Largest Music Companies in the World Reduced Overall Unnecessary Shipments From Q1 05 to Q1 06 By > 26% Value Of Savings (COGS only) For Q > $5.5 M Reduced Risk And Occurrence Of Stock Outs Savings From A Single 1M Unit Release are Typically $312,000 Demonstrated Capability

2006, FJA Confidential – Do Not Distribute - Property of FULLER, JONES & ASSOCIATES, INC. 12 Process Assessment Initial Data Request Wk 1Wk 2Wk 3 Data Recd / Tool Built Develop Case Studies Wk 4 Validate Tool Project Milestone Review Develop Rollout Plans For After Pilot Is Complete Client Gathers Data Define New Process Straw man Wk 5Wk X Initiate Training Formal Process & Tool Handoff Wk 8 Post Pilot Roll-out Until Full Implementation Has Been Accomplished Implementation Summary: Overall FJA Timeline – 8 Weeks On-Site – 4 Weeks Remote Support – 4 Weeks Wk Y Pilot … Key Activities: Map Out Development, Release and Post-Release Process Collect Necessary Data Validate Tool Accuracy Via Cast Studies Conduct Pilot Full-Scale Launch Implementation Activities/Timeline Deployment In Only 8 Weeks!!

2006, FJA Confidential – Do Not Distribute - Property of FULLER, JONES & ASSOCIATES, INC. 13 Let FJA Provide A Live Demonstration

2006, FJA Confidential – Do Not Distribute - Property of FULLER, JONES & ASSOCIATES, INC. 14 FULLER, JONES & ASSOCIATES, INC Pimlico Drive, Suite 114 Pleasanton, CA Tel: Fax: Dr. Howard T. Fuller Andrew M. Jones, MBA Direct: Direct: Thank You!