The Perils, Pitfalls and Pleasures of Redesigning an Outsourced Supply Chain

1. The Perils, Pitfalls and Pleasures of Redesigning an Outsourced Supply Chain

2. AGENDA • Overview of Why Intuit Wanted to Redesign its Supply Chain • Approach to the Redesign - The Decision • Approach to the Redesign - Implementation • Overall Results to Date • Tips for Companies Wanting to Overhaul Their Supply Chain

3. AGENDA Overview of Why Intuit Wanted to Redesign its Supply Chain

4. Integrated Supply ChainThe “Why” • Maximize profit within shrink wrap business • Address current and future competitive pressure • Customers are requesting new Direct to Store/ Continuous Replenishment capabilities • Move to next level of operational capabilities • Establish core competencies (Internal vs. external) Reduce Cost Increase Revenue Intuit Supply Chain As Competitive Weapon Improve Channel Management Add Customer Value

5. Organizations Rated By Performance Desired State World Class Winners Country Class Current State Above average Survivors Below average Slipping Organizations Losers Troubled Organizations “High Performance Benchmarking: 20 Steps to Success” H. James Harrington

6. Why Redesign? Integrated Supply Chain Benefits Business Objectives ImproveMetrics Strategies & Tactics • Performance Metrics - Customer Satisfaction • - Market Position/ Share - Product Availability/fill-rates - Order-to-delivery Cycle Time - Time to Market • Cost Metrics - Transaction/process Mgmt. - Transportation - Warehousing/handling - Configuration/assembly - Excess/obsolete - Reverse Logistics • Asset Management Metrics - Days Sales Outstanding - Inventory Turnover - Fixed Asset Turnover • Virtual Warehousing • Direct Ship to Stores • Rapid Replenishment • Vendor Managed Inventory • Integrated F/C & Planning • Account Management • Strategic Outsourcing • Electronic Commerce/edi • Systems & Process Integration • Cost Optimization • Lead-time Reduction • Time to Market Reduction • Supply Chain Metrics Increased Revenue Higher Margins Improved Working Capital Mgmt. Intuit’s Supply Chain As Competitive Weapon

7. Shift Towards a more Direct Model Direct % of Rev. by Customer Type Distributor Future (8,000 Potential Storefronts Served) FY99 (769 Storefronts Served) • Direct dominated model • Vendor Managed Inventory (collaborative) • Direct to Store Front Delivery • Distrib. dominated model • Retailer Managed Inventory • Distribution Center Delivery Source: Intuit /MMI executive review presentation

8. The Domino ProjectVision and Mission • Vision • Become a world class software industry leader in operational excellence through supply chain optimization • Mission • To have significant impact to operational capabilities and execution by Intuit’s fiscal 2000 business • Continue supply chainimprovements towards world class • Leverage measurements as change agent

9. Why Is Supply Chain Integration So Good? . Much research has been done about the benefits of an integrated supply chain which moves more to “pull” vs “push” model. Source: PRTM/Supply Chain Management benchmarking study

10. AGENDA Approach to the Redesign - The Decision and Project Mobilization

11. The Partnership • A core strategy to become a “World Class” company was to establish a sole source outsource partnership to manage key operational elements of Intuit’s business. • The intent was to have this partner manage 100% of the outsourcing requirements within this area.

12. Moving to a Single-Source Partnership Quickbooks Quicken Tax Modus Media International • Streamlined Processes and Systems • Leverage Modus Core Competencies • Reduced Costs and Improved Information Mgmt. • Improved Service Levels • Enhanced Capabilities

13. I win Getting Information Transaction/sale based Focused on todays problems Individual contributors Depth of relationship My direction We win Sharing information Business based Future/potential oriented Building a resource team Breadth of relationship Our direction A True Partnership Old Thinking New Thinking

14. Partners Domino e clipse Group, Inc. Project Lead Project Lead Partnership Project StructureThe Domino Project

15. Legend IntuitMMIEclipse Project Domino Structure Key Project Sponsors Cross Functional areas SCOR based areas Strategic Project Leads SOURCE PLAN MAKE DELIVER S u p p l i e r s C u s t o m e r s Anne F. Amy B. Steve C. Anne F. Brett A. Donna S. Glenn M. Todd S. Paul S. Todd S. Kenyon B. John S. World Class Supply Chain Plan Dave Foster Kate Vitasek Todd Schuelke Supply Chain Measurements (financial, operational) Ray Langhaim Bob Zelis Steve Cook Information Management (systems, tools, connectivity) Craig Aufenkamp Matthieu Baissac David Watkins Business Transition Plan and Implementation Brett Aumack Amy Brown Todd Schuelke Partnership Agreement Dave Foster Wes Jess Steve Cook FY99/00 Initiatives Plan Anne Fajardo Kate Vitasek Todd Schuelke

16. AGENDA Approach to the Redesign - Implementation

17. “How To” Vision Action S U C C E S S Mobilize • Envision End State • Identify Champions • Build Team • Gain Commitment • Communicate • Measure • Celebrate and Reward (C & R) Plan • Plan in Detail • ROI/Investment • Determine Metrics/ • Targets • Anticipate & • Remove Roadblocks • Measure • Communicate • C & R Implement • Execute Project Tasks • Manage Timelines • Manage Expectations • Measure • Communicate • C & R Measure & Tune • Measure vs Targets • Tweak as Required • Communicate • C & R TIME Journey of Change in the Supply Chain Redesign

18. Shift of Core Competencies The scope included shifting many of the Supply Chain activities performed by Intuit over to Modus Media that were deemed MMI’s core competencies. PLAN SOURCE MAKE DELIVER Procure - ment/ Vendor Mgmt/ MRP Fin. Mgmt/ Customer Invoicing Product Configuration Fore- casting Order Entry/ Mgmt Inventory Mgmt Produc- tion Distri- bution Trans Mgmt Metrics Mgmt Returns Credit authorization Invoicing and A/R Mgmt Intuit Intuit Intuit Intuit 3 Supp. Intuit (MMI) 3 Supp. Intuit Intuit Intuit Start Intuit Intuit - MMI - MMI MMI Intuit (MMI) MMI MMI Intuit MMI Intuit FY00 MMI Intuit Intuit - APS MMI MMI MMI MMI - VMI MMI MMI Intuit or MMI? MMI web based? MMI? FY01 Areas of significant change.

19. Intuit’s Business SituationSoftware Shrink Wrap Business: Retail and Direct Channels 61% (30%)1 Supplier Retailer Disti Customer Owned Facility 61% (70%)1 Retail Business Customer Supplier Retailer Direct to End User Business 39%1 Supplier Returns Vendor 1 70% of accounts were through the distributor and 30% are direct to the retail store at beginning of project

20. Supply Chain Redesign (Phase 1) • Consolidates Banta/Alom manufacturing to MMI • Reduced admin to manage vendors • Core competency shift to MMI increases productivity and reduces HC at Intuit • Consolidated manufacturing leverages MRP/Production runs for high volume SKUs 61% (30%)1 Retailer 61% (70%)1 Customer Retail Business MMI Dist Retailer • Consolidates shipment volumes which decreases cost • Reduced # of shipments to manage Direct to End User Business 39% Customer Owned Facility Returns Vendor 1 70% of accounts were through the distributor and 30% are direct to the retail store at beginning of project

21. Supply Chain Redesign (Phase 2) • Intuit shifted retail customers to direct relationship - improves margins as do not have to give Disti discount on 70% of retail volume 61% (80%) Retailer 61% (20%) Customer MMI Disti Retail Business Retailer Direct to End User Business • Intuit takes direct customer orders and MMI combines direct and retail volume for improved economies of scale in purchasing and manufacturing 39% Customer Owned Facility Returns Vendor

22. Supply Chain Redesign (Future) • Adopt more advance planning and forecasting methodologies to better align supply and demand • Continue to address supply chain velocity in the Direct Store Delivery Model • Leverage new technologies in eCommerce • MMI to manage returns business? • MMI to begin taking orders directly from customers?

23. AGENDA Overall Results to Date

24. Supply Chain Report Card Deliver Source Make MMI and Intuit developed and began using a SCOR based Supply Chain Report Card to drive improve-ment perform-ance in the Supply Chain Plan Executive Summary • Volume & Activity • Total Units Shipped • Average Orders/day • # Ship-to Addresses • Quality & Service • % Shipped on Time • % Orders Accurate • Forecast Accuracy • Cycle Times • Total Order Lead Time • Cost & Assets • DSO • Channel Inventory $ • Channel Inventory Weeks • Channel Returns • Total Inventory at MMI • Total Inventory Turns • Cash to Cash • Total Transportation Cost • Material Cost Index

25. Supply Chain Improvements • Intuit now accepts orders electronically from over 80% of retail accounts, up from 20% in FY99 which has • increased order capacity by over 300% • shifted the retail channel from a predominantly distributed-based to a direct-store-delivery model • Moved from Intuit’s excel spreadsheet based MRP to a MMI’s MRP planning system • Adopted MMI’s systematic supplier report card process for an overall “Supply Chain Report Card” - collecting over 60 SCOR based metrics

26. Supply Chain Improvements • Implemented complete shipping capabilities on West Coast for an East Coast/West Coast solution to optimize transportation costs and delivery cycle times • Increased DSD capabilities from 665 storefronts to 2,800 storefronts, with plans to get up to 8,000 • Implemented POD (Proof of Delivery) capabilities to track POD shipments to the storefronts • Implemented case break, ASN and UCC128 capabilities which Intuit can now offer to it’s Retail Customers • Integrated supply chain management and systemic improvement is leading to a 98% order fill rate on a standard five day order delivery cycle

27. Why Is Supply Chain Integration So Good? Intuit and Modus Media were able to realize most of the significant Supply Chain improvements they were hoping for.         Source: PRTM/Supply Chain Management benchmarking study

28. AGENDA Tips for Companies Wanting to Overhaul Their Supply Chain

29. Tips For a Managing a Supply Chain Redesign Project • Ensure executive management buyoff from all companies involved • Take into consideration change management and the company cultures involved • Put in place a SCORcard right away to understand the areas you want to focus on and drive improvement • it takes a lot longer than you would think • Consider having professional project management help/support