Managing the Extended Enterprise to Mitigate Risk in Supply Chains. Kevin Lane Principal & Retail EERM Leader Deloitte Advisory

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2 Managing the Extended Enterprise to Mitigate Risk in Supply Chains Kevin Lane Principal & Retail EERM Leader Deloitte Advisory

3 The Extended Enterprise A network within a network The Extended Enterprise is the concept that an organization does not operate in isolation, because its success is dependent upon a complex network of third-party relationships. Illustrative example of the extended enterprise

4 Industry Quadrant Maturity of industries Legend High Maturity level of entity s adopted approach Low Low Retail Technology P&U Investment Management Insurance Health Care Plans & Providers # of departments across entity adopting Extended Enterprise Risk Management approach Banking & Securities Life Sciences High Industries have wider focus over third party relationships across buy-side, sellside and infrastructure. Regulatory requirements have enforced more focus on extended enterprise risk management program development and maintenance Roles and/or responsibilities have been created for the management of EERM program Industries focus their EERM program on their supply chain. Other third party relationship management and program is not as formalized Recent public and media scrutiny of crisis events have led to reactive focus on other non-supply chain relationships such as Cyber, Contractors etc.

5 Core Capabilities The EERM framework identifies capabilities within each of the six operating model components : Performance management i.e., SLAs, KPIs, KRI etc. Operational issues management Performance/operational governance Service request management Third party satisfaction Third party inventory Risk segmentation strategy Risk management i.e., overall risk framework, risk indicators etc. Ongoing risk assessment Pre-contract due diligence Post- contract ongoing monitoring Remediation Compliance Analysis and reporting Contract management i.e., changes, obligations, etc. Financial management including cost and revenue recovery Document management Contract assessments Contract analytics Issues & disputes management Contract & commercial governance Invoice management Business case tracking and benchmarking Contract and Commercial Management Performance Management Extendedd Enterprise Management Program Office Risk Management Multi Service Provider Integration Transition / Transformation Cross-Supplier standards and procedures Track and report end-to-end SLA s Joint performance metrics Develop, negotiate, draft and execute OLAs Multi-Supplier governance forum Transition Planning Monitoring & reporting Due Diligence and Reconciliation Retained Organization Design Change Management and Communications Transition and Transformation Governance Charter and vision statement Business Alignment and sponsorship Operating model- 3 lines of defense Roles and responsibilities Policies and standards Governance and oversight Executive governance and relationship management (including Executive Performance Indicators) EERM tools and technology Performance level framework Recruitment strategy Continuous improvement/innovation Crisis management

6 Managing the Extended Enterprise to Mitigate Risk in Supply Chains Robert Wilson SVP Global Operations Fossil

7 Fossil Facts Global design, marketing and distribution company that specializes in fashion accessories 2015 Sales - $3.2 Billion Sales channels include company owned retail and outlet locations, department stores, specialty retail, mass market and E-commerce Global company locations Sold in 150 countries worldwide

8 3 rd Party Risk Events Suppliers - Japan tsunami - Foxconn - Supplier diversification - Social Audit programs Logistics - Hanjin bankruptcy - West Coast port strikes - Smart & Lucky - Port diversification & Panama Canal Infrastructure December 2015 Tornado outbreak in North Texas - Disaster recovery play book &action plans ( real estate, IT, communication providers, personnel)

9 Continuous Actions Evaluating emerging countries and sources of suppler bases Expanding audit programs and providing support to drive change Monitoring 3 rd party company performance and financial health Strategic partnerships payoff in times of uncertainty Practice and update your disaster recovery activities as a complete organization

10 Managing the Extended Enterprise to Mitigate Risk in Supply Chains Robert Fredman Director, Global Logistics Big Lots!

11 Corporate Overview Big Lots is a specialty retailer with exceptional values at prices below the competition FURNITURE / SEASONAL / HOME / FOOD / CONSUMABLES / TOYS / Key Facts Sales of $5.2 Billion in 2015 Over 1,445 stores in 48 states Over 36,000 associates $3.6M in sales and 27,000 sq. ft. per average store Mixture of never-out, in-and-out and close-out merchandise Focused on ownable/winnable categories ELECTRONICS

12 Enterprise and Risk Management Big Lots considers business enterprise and risk management across three core dimensions Supplier Management Business Continuity Legal and Compliance Sourcing Strategy Financial Health Social/Ethical Compliance CTPAT Compliance Business Continuity Planning Crisis Management Disaster Recovery Limits of Authority Contractual Terms Security and Asset Protection Internal Audit Sourcing Logistics Store Ops IT Asset Prot. Fin/Acc Legal

13 Priorities for 2017 Big Lots approach to supplier and risk management continuously evolves in anticipation of, and response to, the global environment Event West Coast Port Disruptions Hanjin Bankruptcy Supplier Direct Fulfillment Response Broadened relationships across the supply chain In-depth financial analysis of suppliers Top-to-top meetings Alternate sourcing partners Modified distribution network/ channels

14 Managing the Extended Enterprise to Mitigate Risk in Supply Chains Valerie Perkins Vice President of Supply Chain Management Signet Jewelers

15 About Signet: The World s Largest Retailer Of Diamond Jewelry Signet: the World s Largest Retailer of Diamond Jewelry Total Annual Pro-Forma Sales: Approximately $6.55 billion Kay Jewelers #1 Jewelry store in the U.S. Sales: ~$2.5 billion Stores: 1,129 in 50 states Jared The Galleria Of Jewelry #1 U.S. Off-Mall Specialty Jeweler Sales: ~$1.2 billion Stores: 270 in 39 states Zales Jewelers A leading brand in jewelry retailing in the U.S. Sales: ~$1.2 billion Stores: 730 in 50 states and Puerto Rico H.Samuel #1 in the U.K. Sales: ~$375 million Stores: 301 Ernest Jones #2 in the U.K. Sales: ~$361 million Stores: 202 Peoples Jewellers #1 in Canada Sales: ~$214 million Stores: 145 in 9 provinces Note: Sales and store numbers for Fiscal 2016

16 Do The Work Upfront Build partnerships that are relationship based Is the Supplier in this for the long haul? Can they do what they say they can? Sourcing process consistency & fair Ask the right questions Mitigate risk by: Safeguards - social audits, reference checks, D&B reports, social media search Equalize the risk contracting Implementation oversite Keep your word cash flow/order quantities/requirements

17 Ever Us Collection Case Study October 2015: Launch of first Signet Iconic Global Strategy of Ever Us two-stone beacon jewelry collection Part of the strategy was the exclusive packaging Supply Chain strategically supported the overwhelming demand during the launch and all-important holiday season

18 Ever Us Commercial

19 How did we manage the risk? Chose the right supplier Upfront about our level of sales uncertainty Developed two contingency plans for supply flow Balanced the risk between supplier and Signet Committed to a full purchase plan Prepared for a last minute rush shipment Open lines of communication Data sharing

20 Thank You! Valerie Perkins Vice President, Supply Chain Management Signet Jewelers p