White Paper End-to-End Visibility: Retail aspirations are high, is the supply chain foundation enough?

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1 White Paper End-to-End Visibility: Retail aspirations are high, is the supply chain foundation enough? Kurt Salmon and GT Nexus surveyed retail executives to assess their goals and confidence levels for supply chain visibility and fulfillment. Our survey report identifies specific areas of improvement that can deliver significant ROI.

2 Winning in Retail is Difficult Today When Nancy thinks of shopping today, she wants faster, better, newer and cheaper; she also wants it right now and right here. A retailer who wants a share of Nancy s wallet better be prepared. Retailers identify their essential priorities and goals: Omnichannel 88% Speed to Market 78% Supply Chain Agility 72% Cost Takeout 68% To win a share of Nancy s wallet, retailers have prioritized Omni Channel, Speed to Market and Supply Chain Agility/Flexibility. Great aspirations indeed but do capabilities exist to build and support these goals? The numbers below speak for themselves. 41 % 70 % 90 % 41% struggle to determine inventory position 70% cannot predict shipment delays 90% have no ability to measure total cost of ownership

3 Retail is a challenging battleground, both physically and digitally. Retailers are battling on two fronts. Traditional: Competition amongst retailers Non traditional: Uberization and Amazonization of commerce, CPGs going direct etc. Today, this battlefield is dark. Information exists but it is beyond the control of the organization. It is invisible. 80% of the information that is needed to make decisions resides with external parties such as suppliers or 3PLs. Think about the advantage that a company can get if it were to deploy night vision goggles based on true end-to-end supply chain visibility. End-to-End Visibility = Actionable Information Accurate Timely Decisive Right level of detail Supplier Right level in the organization Right level of control Own DC In Transit (Including Brokers/Customs) Factories Stores/Customers

4 During the past three decades of information revolution, organizations have invested millions of dollars in pursuit of actionable information ERPs, CRMs, WMSs are a few examples. Unfortunately, many of these provide linear and limited information. The end-to-end picture that can dynamically tie cause and effect is still missing. Multi-enterprise collaboration today is a market winning capability. Tomorrow it is going to be necessary for survival. Leaders must be willing to embrace new ideas, disruptive models and supporting technology. Traditional five year long enterprise application implementation programs won t work. Speed is paramount. Organizations that choose visibility platforms that are easily deployable and broadly accepted trade entities (e.g. 3PLs, vendors in Asia, banks, customs brokers etc.) will have an advantage. Retail Leader-speak: Current Challenges Information we can trust what is that? I know, my vendors know but together, we don t know If only our systems could tell us that a shipment was late I am happy to make a decision to reposition product but it takes me three days to understand the impacts of that decision Thoughtful urgency is critical if supported by data that I can trust I cannot get you data in two weeks. If I do, it will not be accurate Until I call, I don t know that production at the factory is delayed

5 We categorize supply chain visibility into four key buckets inventory, product flow, factory floor and performance. INVENTORY The Need Understanding true inventory levels: in store, in DC, at the vendor, on water Ability to dynamically decide inventory that can be committed Confidence to reposition inventory and capture trends that pop up mid-season The Problem 41 % 75 % >75 % 41% struggle to determine inventory position 75% need more than a full working day to do so >75% have to rely on multiple manual reports and phone calls The Impact 78 % 27 % 65 % 78% cannot reposition inventory 27% struggle with aged inventory & resulting markdowns 65% doubt that they have optimal inventory

6 PRODUCT FLOW The Need Understanding product movement in different channels Ability to point and shoot product as needed Minimizing inventory buffers to compensate for lead time variability, missed ship windows, etc. The Problem 46 % 78 % 70 % 46% take more than 3 days to identify product location 78% rely on manual reports or s 70% DO NOT have any ability to predict delays The Impact 55 % <10 % 15 % 55% suffer from high transit lead time variability (> 1week) <10% can reallocate or redirect product in transit Only 15% can take advantage of low spot freight rates

7 FACTORY FLOOR The Need Ability to predict bottlenecks in WIP Measure against excessive bull whip Understanding true factory capacity and cost of peak demand (e.g. holiday season) The Problem 21 % <50 % 22 % Only 21% have visibility to factory capacity and bottlenecks Delays discovered only when calling the factory (>50%) Delays uncovered after shipment is delayed (~22%) The Impact 64 % 27 % 64% cannot predict bottlenecks Only 27% can continuously track actual production against plan

8 PERFORMANCE & COMPLIANCE The Need Understand total cost of ownership for each vendor Collaborating both pre and post purchase order Managing VAS such as hold & flow, VMI Understanding carrier, 3PL performance The Problem <30 % 92 % <20 % Less than 30% can determine vendor performance across functions 92% rely on multiple systems & manual steps to determine vendor performance <20% can determine carrier performance without manual effort The Impact >80 % >90 % >80% do not have visibility to cost drivers >90% cannot determine total cost of ownership for vendors

9 In a world that is moving towards autonomous vehicles, drone deliveries and 3D printed apparel, the Supply Chain Visibility picture in retail is grim. While top quartile players tend to perform well on all visibility dimensions, most others are struggling. Dimension Max Possible Score Avg. Top Quartile Respondent Score Average Score for All Respondents Percent Difference Between Max and Mean (All Respondents) Inventory % Product Flow % Factory Floor % Performance & Compliance % Inventory and Factory Floor are the biggest improvement areas Retail Elite: A Major Gap Exists Between Top Quartile Performers in Visibility, and the Rest of the Industry Key Gaps in Inventory and Factory Floor Inventory Dimension Factory Floor Theme Ability to determine inventory position accurately and timely Ability to use inventory optimally Automated/systematic determination of inventory Determining raw material inventory Ability to predict bottlenecks and delays Ability to track product in factories Production lead time variability Avg. Top Quartile Respondent Score Average Score for All Respondents Percent Difference Between Max and Mean (All Respondents) % % % % % % % This is possible only when technology is available and can be easily deployed throughout the supply chain from the consumer way back upstream to raw material suppliers.

10 The reasons? Functional vs. end to end focus: Production and inventory data remain fragmented. Visibility is sparse across the enterprise and throughout the supply chain, despite the existence of collaborative network tools that can overcome barriers and silos. Supply Chain Visibility Lacks Clarity: Supply chain visibility means different things to different people and organizations. Many still think of it as shipment tracking. The discussion remains to be escalated from tactical to strategic in many retail organizations. Strategic Misalignment: It s important for retailers to recognize gaps that exist in their supply networks, but there s only value derived here if retailers and their suppliers actually take steps to execute. 83% of survey respondents say that their suppliers are at least willing to consider sharing capacity detail, but only 25% have suppliers who proactively collaborate on forecasts and capacity. While many indicate great intentions, suboptimal execution exists and much of it comes down to technology: Limited agreement exists on outcomes of large scale technology initiatives e.g. supply chain visibility is a grand project but what should we aim to get out of it? Investment is being made in a host of enterprise applications but NO single end to end platform connects it all Over-dependence on vendors and 3PLs as it relates to visibility and technology, continues to be a hindrance. The VP of Logistics and Distribution at a Fortune 100 brand commented, Our technology is great but our vendors and 3PLs are way behind the curve. Limited understanding of what supply chain visibility means to most it is still shipment tracking. Tying supply chain visibility to tangible fi nancial benefi ts is not a linear exercise. Retailers who have invested in technology tend to have better supply chain visibility.

11 The Outlook: Not all is grim and dark Retailers (many > $5B) have been investing in supply chain visibility and have convinced their partners in doing so too. The top performers have realized that this is not a functional play. The focus is end to end. In fact, average overall top performers turn out to be leaders in visibility dimensions. Some aspects of visibility have already moved online and retailers are reaping strong benefits from this: Communication with suppliers regarding packaging information (60+% online; 80% get system alerts about packaging changes/customs requirements) Customs documentation has been digitized and errors reduced (>90% clear customs on time) Factories are becoming information savvy and while there is still opportunity to preempt issues, in-factory variability is on the wane (91% have less than 20% production lead time variability) Retailers, it is time to sharpen your swords! Every organization should map its information and visibility requirements. It is imperative that visibility be considered a strategic Business Transformation and not a band aid to resolve tactical supply chain issues such as delayed shipment at the port. Visibility is the foundation that can support capabilities like speed to market. A tactical approach, on the other hand, will result in ad-hoc solutions that cannot scale, are not well utilized and do not provide a good return on investment. Not all information troubles can be resolved by a visibility platform. It is equally important to define the need for visibility, the underlying enablers (e.g. process compliance, org. discipline) and the results expected from a visibility program. Organizations would do well to understand specific areas where information is either inaccurate, unavailable or available but not acted on. Constraints in these areas could be better tied to processes and organization than to the information platform(s). The time to start is NOW! A three point plan for developing end to end supply chain visibility can help in speeding up the process. 1. Understand: Collect inputs from different levels, functions and geographies in the organization to truly understand visibility needs. Visibility should be a topic of discussion during vendor business reviews, quarterly meetings etc. 2. Align: Use cross functional and global workshops to agree on the end to end true visibility needs and successful visibility outcomes for the organization. These should typically be initiated by C-level leadership and conducted by senior (VP level) leadership. 3. Chart: Define visibility goals (What would a successful visibility program look like? What is the ROI?) and timeline (some organizations do well with a big bang approach; others need a slower iterative plan). Assign an executive champion for the program and if needed, consult with a visibility subject matter expert to help with further planning and execution.

12 Authors Akshay Madane Senior Manager Kurt Salmon, Part of Accenture Strategy Praveen Kishorepuria Managing Director Kurt Salmon, Part of Accenture Strategy Jamie O Halloran Director, Strategic Alliances GT Nexus Research credit: Taylor Jordan Kurt Salmon, Part of Accenture Strategy About GT Nexus: GT Nexus provides the cloud-based collaboration platform that leaders in nearly every sector rely on to automate hundreds of supply chain processes on a global scale, across entire trade communities. To learn more, visit Copyright 2017 GT Nexus, an Infor company. All rights reserved.