1. Retek Case Study : BestBuy Launch Pad to Customer Centric Supply Chain

2. The BestBuy Evolution
Best Buy Co., Inc is founded in 1966, North America's number-one specialty retailer of consumer electronics, personal computers, entertainment software and appliances.
Operates 830 retail stores across US and Canada.
Annual sales $27, end of Feb, 2005
©2005 Retek Inc. CONFIDENTIAL

3. Launch Pad project started from the crisis in 1996
Growth ≠ Profit
1996年、BBYはACと契約、新システムの導入・ビジネスプロセス改善を目指す。
改革の4本柱は、在庫・アソート・調達・販促。
粗利益率が前年に比べて改善しているにも関わらず、営業利益が落ち込み・最終利益が赤字となった理由は主にSGAを押さえられなかったことと10Kレポートでは説明している。この年のSGA%は12.9%で前年の11.3%に比べ1.6%の増加。
既存店売上が前年を下回ったことに加え、固定費の増加(設備・物流・店舗サポート)傾向が続いたことを上げている。
より大型の店舗をより良い立地に出店する戦略をとり続けたことで、1店舗あたりの出店コストが膨らみつづけていた。売上に対する営業経費の割合も上昇を続けていた。また競合の激化から販促コストも前年に比べ増大。
©2005 Retek Inc. CONFIDENTIAL

4. Project ‘Launch Pad’
Company Transformation project was named as ‘Launch Pad’ ( )
In 1996, Best Buy, the largest name-brand consumer electronics retailer in
the United State, faced one of the greatest challenges in its history.
This $8 billion retailer had grown furiously, tripling its size in three years.
But it had done so with very few changes to its operations and business
processes. As a result, profitability was dwindling.
In 1997, they started ‘company transformation project and set up four
strategic goals:
Optimized Space and Assortment
Promotion Effectiveness
Precision Pricing
Strategic Sourcing and Vendor Relations
Value Goal for Implementation
Retek Modules implemented at Best Buy
Build world class infrastructure
Provide ‘real-time’ visibility to inventory
Improved customer service
Improve top line growth
Increase data accuracy
Repeatable, scaleable model that extends to
all current and future business entities
RMS Retek Merchandise System
ReSA Retek Sales Audit
ReIM Retek Invoice Matching
ARI Active Retail Intelligence
RSS Retek Store System*
*RSS has been renamed as Retek Store Inventory Management
©2005 Retek Inc. CONFIDENTIAL

5. Implementation Strategy: Phased in enterprise functionality over time
Implementation Time line 16 – 24 month with phased approach:
Phase 1 RMS Foundation Data - May 7, 2001 (Item, Location, Hierarchy)
Phase 2 RMS Zone Level Pricing - July 10, 2001 (Permanent, Promotional, Competitive, Cost)
Phase 2A RMS Store Level Clearance Pricing - October 7, 2001 (Clearance)
Phase 3 RMS / ReSA Dot Com Integration - October 18, 2001 (eSKU conversion, Sales Audit Readiness)
Phase 3 ReSA Sales Audit Pilot - November 4, (Trickle Posting, Sales Audit)
Phase 3A ReSA Sales Audit Rollout - February - March (Trickle Posting, Sales Audit, High Volume, Automation, Restart / Recovery)
Phase 4 RMS Purchasing and Inventory - June 4, 2002 (POs, Perpetual Inventory, Stock Ledger, Vendor Deals
Phases Currently In Development
Phase 5 RSW Store Pilot - September 2002 (Receiving, Transfers, RTVs, Inventory Management, Item Inquiry)
Phase 5 RSW Store Rollout - February - June 2003 (Receiving, Transfers, RTVs, Inventory Management, Item Inquiry)
Value Goal for Implementation
Build world class infrastructure
Provide ‘real-time’ visibility to inventory
Improved customer service
Improve top line growth
Increase data accuracy
Repeatable, scaleable model that extends to
all current and future business entities
©2005 Retek Inc. CONFIDENTIAL

6. Why We Lead Richard M. Schulze Founder, Chairman & CEO
Mr. Richard Schulze, Founder, Chairman & CEO stated their strengths and competitive advantages as ‘Why We Lead’ at the analyst meeting and Shareholders meeting in Mr. Schulze resigned CEO later, so these are his last message for investors as CEO of Best Buy.
Richard M. Schulze
Founder, Chairman & CEO
Innovative Store Design
Process to Profit
Ad Effectiveness Analysis
SOP (Standard Operating Platform) Culture
Knowledge Management
Efficient Logistics
Financial Strength
©2005 Retek Inc. CONFIDENTIAL

7. New Approach to Customer Centricity
New Approach – CRM in 2002 defined as Customer Centricity
In 2003, BestBuy defined their CRM as ‘Customer Centricity’ and put it at the center of their growth strategy.
Comprehensive analysis and research had been processed through BestBuy.com、promotional coupons analysis, BestBuy defined targeted customer segments and build new offering based on Lab stores and pilot stores.
FY2004
FY2002
FY2003
In 2002, Best Buy announced that they would focus CRM as next step to leverage their competitive advantage and continue company transformation
©2005 Retek Inc. CONFIDENTIAL

8. New Approach to Customer Centricity
1.Discovering potential customer segment and clear definition
Comprehensive survey held through store customers, promotional coupons, market
research company (2002 – 2003)
Based on survey and Lab store analysis, 5 customer segment groups were defined (2003)
2.Defined merchandise assortment and new service offering
Though Lab store operation, merchandise assortment and new service offering were
defined for each customer segments (2003) This is still on going.
3.Launched 68 Pilot Stores
　 68 stores located in California converted to Pilot stores aimed at five specific customer
segments. (2004)
4.Training and building store associates as specialist.
Located associates by segments such as shopping assistant and technology experts.
5.Transform proto type stores to customer centric stores
　Plans to accelerate the conversion of its stores to its customer-centricity operating model.
150 – 200 in this year and first Lab stores in China.
©2005 Retek Inc. CONFIDENTIAL

9. New Approach to Customer Centricity
CCSC Customer Centric Supply Chain: New product and service offering with professionals
Business Professionals
‘Supporting small business’
Magnolia Home theater Consultants
‘Custom installation’
Personal Shopping Assistants
Appliance Experts
©2005 Retek Inc. CONFIDENTIAL

10. New Approach to Customer Centricity
Pilot stores, Lab stores and Customer Segment
Customer Segment
Pilot Stores 1
Small business customer who has specific needs related to growing sales and increasing the profitability of his or her business. 24 2
Affluent professional who wants the best technology and entertainment and who demands excellent service. 16 3
Family man who wants technology that improve his life – and that lasts. 4
Busy suburban mom. 12 5
The young, active early-adopter. 11
Comparison based on 32 Lab stores and Existing BestBuy Stores
Comparable Sales Growth Rate Lab Store 17% vs. Existing Store Average 10%　・・・ 7%+
Average Transaction Volume Lab Store $104 vs. Existing Store Average $100　・・・ 4%+
Conversion Rate Lab Store 57% vs. Existing Store Average 51% ・・・6%+
©2005 Retek Inc. CONFIDENTIAL

11. Best Buy Requirements: Customer Centric Supply Chain
Planning Summary
--Future State Footprint--
Rollups on hierarchy and alt- hierarchy
Reconciliation with financials
Unit Planning
Collaboration (CPFR)
Store Orders
Demand forecasting
Demand aggregating
Inventory Planning
Event Planning
Transition Planning
Cannibalization
Sales forecast collaboration
Receipt forecast collaboration
Tolerance levels
Trigger point
Forward buy analysis
Frozen forecast period
Store sensitivity
Location activation
Presentation and display management
Profile management
Store Allocation
Demand forecasting
Time phased inventory planning
Lead time forecasting
Min / Max
Fringe (buy one sell one)
Rapid replenishment
Space capacity constraints
Returns to DC
New store modeling
DC Allocation
Vendor Purchase Orders
Demand forecasting
Demand aggregating
Inventory balance
Understock
Overstock
Space capacity constraints
Time phased inventory planning
Shipment detail
Order point / Order to logic
Incorporate safety stock, lead times, cycle stock
Lead time forecasting
Returns to Vendor
Reporting
Lead Time
DC/store balancing
Forecast error
Projections
Promotional
Operational measures
Price moves
Category build comparisons
©2005 Retek Inc. CONFIDENTIAL

12. Best Buy choose Retek again
Best Buy choused Retek again to support their Customer Centric
Supply Chain
Selected Retek Modules:
Forecasting (Went Live on Oct. 2004)
Allocation (Went Live on Jul. 2004)
ASO
Item Planning
Financial Planning
AIP
Plan to CRP and implement the full footprint, shift business to the new platform over time
How the deal was won:
Why did they choose Retek?
“elevator”/background story of the deal?
What potential benefits are they expecting?
Duration of Sales Cycle
What are their future plans?
What areas/products are potentials for up-selling/cross-selling?
What is the client’s implementation strategy?
©2005 Retek Inc. CONFIDENTIAL

13. Best Buy choose Retek again
Why did Best Buy choose Retek?
Best Buy was an existing Retek customer and knows well about Retek.
Retek was seen as the default software vendor for Best Buy’s Customer Centric Supply Chain program
Best Buy heavy focus on implementing “vanilla” product with configuration versus custom development and found good fit for Retek’s Planning, Forecasting & Optimization Platform.
What potential benefits are they expecting?
CCSC, Customer Centric Supply Chain is planning to drive $450M in benefit from the supply chain
How the deal was won:
Why did they choose Retek?
“elevator”/background story of the deal?
What potential benefits are they expecting?
Duration of Sales Cycle
What are their future plans?
What areas/products are potentials for up-selling/cross-selling?
What is the client’s implementation strategy?
©2005 Retek Inc. CONFIDENTIAL

14. Summary of Retek Modules at BestBuy
Summary: The BestBuy Evolution
Summary of Retek Modules at BestBuy
Launch Pad Project
CCSC Program Project
RDF (Retek Demand Forecasting)
Allocation (Allocation)
ASO 　　　 (Assort Optimization)
Item Plan (Item Life Cycle Plan)
Financial Plan (Merchandise Financial Plan)
AIP (Advanced Inventory Planning)
RMS　(Merchandising System)
ReSA (Retek Sales Audit)
ReIM (Retek Invoice Matching)
ARI (Active Retail Intelligence)
RSS　(Retek Store System)
Best Buy Customer Centric Transformation
©2005 Retek Inc. CONFIDENTIAL