GM Suppliers Changing the way we work 7 th January 2010

1. GM SuppliersChanging the way we work 7th January 2010

2. Contents • Overview • Summary of changes • Timelines • Detailed change information Please ensure that you have circulated this information to the relevant personnel within your organisation

3. 1. Overview

4. Phase 1: Getting the Basics Right We will deliver changes to the way we work through a number of phases. Phase 1 will include; • Changes to the way we Plan • Changes to the way we Buy • Changes to the way we Move • Changes to the way we Pay These will all be delivered through; • Our processes and procedures • Our ways of working • Our policies Details of future phases will be communicated at a later date.

5. Changes to our processes and procedures Pay Plan Buy Move EDI Implementation • Implementation of industry-standard EDI • Electronic communication of contracts, orders and Supplier invoices • Solutions for large and small Suppliers Greater use ofelectronic communications • Having accurate information about our Suppliers – address, contact details, etc. • Ensure that all product information is accurate and up to date - some additional product data may be required Improving thequality ofour data

6. Changes to our process and procedures (contd.) Pay Plan Buy Move • Focus on PO accuracy and fulfilment. • Simplifying our buying processes for UK and International, to support our International growth aspirations Improvedplanning to drive accurate orders • Clearer rules around quantity and date changes to orders. • Improved information to reduce the number of changes by M&S • All changes submitted electronically Greater controlaround orderamendments

7. Changes to our ways of working and policies Pay Plan Buy Move • Increased use of Regional Offices • Single point of contact for all order and invoice-related issues Clarity ofaccountabilities • Clear KPIs • Accuracy and timeliness of Supplier invoices • Accuracy and timeliness in PO management Aligning policies to new processes

8. 2. Summary of Changes

9. 2. Summary of changes 2.1 Summary 2.2 Implementation of EDI 2.3 Supplier Impact • Policies • Process and Procedures • Ways of working 2.4 Supplier actions

10. 2.1 Summary of the changes Pay Plan Buy Move The changes we are making affect all areas of our value chain: EDI Implementation • Supplier information • Order quantities and EDI for Contracts Plan • PO Management processes • EDI for POs Buy • Extending the use of Editrack • Receiving at line level Move • EDI for invoicing • Single point of query resolution Pay

11. 2.2 Implementation of EDI(Electronic Data Interchange) • EDI is critical to the changes we are making • M&S will offer two formats of the solution: • Business to Business (B2B) solution - where documents can be sent directly between M&S and supplier systems • Web EDI solution for those without full EDI capability – where documents can be sent and received via an external web portal • Suppliers with a significant volume of transactions (greater than 10 invoices per week) are strongly advised to implement the B2B solution, as the IWF solution requires Suppliers to manually enter all invoices • To deliver EDI M&S have partnered with GXS who will manage the on boarding process on behalf of M&S and guide our Suppliers through the set up process. • M&S will require a minimum of web EDI in place with each supplier as we go live with the new systems and processes. Failure to do so may result in suppliers being unable to receive orders or to be paid

12. Implementation of EDI(Electronic Data Interchange) Next Steps: • GXS will contact all Suppliers to complete an on boarding questionnaire which will determine the type of solution for the Supplier • Web EDI Suppliers will then need to register themselves for the system and complete the online tutorial and set up process • B2B EDI Suppliers will be given full details of the specification of interfaces required, in order that they can be developed by the supplier • More detail regarding the EDI solution can be found in the detailed changes section of this document

13. Pay Plan Buy Move 2.3.1 Processes and Procedures Plan • Planned quantity information is currently available in Contracts.com. This information will be sent to suppliers as a contract message electronically (via EDI) • The contract message will contain the cost price • The contract contains an indication of quantity – it will not be a commitment to buy; • For Direct, the commitment to buy will be via the purchase order • For Full Service Vendors, the contract will be updated with authorisation to cut, which in combination with the approved flow, will be our commitment to buy • You will receive separate contracts for product delivered via the UK and product delivered direct to international hubs • We want to improve the quality of our supplier data • We are establishing new processes for capturing and changing information about our suppliers, which will also affect you. This is key to ensuring we have consistent communication between M&S and it’s suppliers. We need to get better at housekeeping our data

14. Pay Plan Buy Move 2.3.1 Ways of Working Plan • Regional Offices will become your key point of contact for all • Agreement on quantities and flows (Direct purchases only) • New supplier and factory set-up (Home suppliers will continue to be managed by the team in the UK) • Changes to supplier details (e.g. names, contact details, addresses, factory details, etc.)

15. Pay Plan Buy Move 2.3.1 Policies Plan • All direct bought merchandise must be received with a valid purchase order • Our new systems will not allow product to be received or paid for without a valid PO. This includes additional sizes added to orders not on the original PO • Suppliers must not commence production until they have a signed contract seal

16. Plan Buy Move Pay 2.3.2 Processes and Procedures Buy Product bought by purchase order only • Suppliers will receive all purchase orders and purchase order amendments via EDI • Purchase orders will continue to be visible on Contracts.com, with the exception of International direct deliveries and Outlet orders • You will no longer be required to approve purchase orders in Contracts.com from the 24th January • By 24th January Suppliers must have accepted or rejected all purchase orders. • You will receive separate orders for; • product delivered to the UK • product delivered direct to international hubs • Outlets • All direct orders will be bought by Marks & Spencer plc (M&S plc), not through Supply Chain Management (SCM Ltd). Invoices should be made out to M&S plc, not SCM Ltd • Contracts.com will continue to be used for style file information

17. Plan Buy Move Pay 2.3.2 Ways of Working Buy • The Regional Office will be the key point of contact for all • Purchase orders • Purchase order amendments • Purchase order enquiries • You must ensure all changes to purchase orders are submitted as exception reports via Editrack • Suppliers will raise exception reports on behalf of M&S for M&S requested changes

18. Plan Buy Move Pay 2.3.2 Policies Buy • The Purchase Order is our authorisation to buy the product • For full service vendors, the authorisation to cut and the approved flow are our authorisation to buy the product • Orders will be deemed accepted unless highlighted by the Supplier within 48 hours • There will be one status ‘approved’ when a Purchase Orders is sent to you • No amendments maybe made to the purchase order within 7 days prior to M&S taking ownership

19. Plan Buy Move Pay 2.3.3 Processes and Procedures Move Product bought by purchase order only • All order tracking will be managed through the Editrack system • All stock will be checked and measured at line (UPC) level 2.3.3 Ways of Working Move • The Regional Office will be the point of contact for all shipping amendments

20. Plan Buy Move Pay 2.3.3 Policies Move • All despatched stock must have an electronic packing list • All direct bought merchandise must be received with a valid purchase order • Our new systems will not allow product to be received or paid for without a valid PO. This includes additional sizes added to orders not on the original PO

21. 2.3.4 Processes and Procedures Pay • We require one invoice per PO • We will not be able to process invoices with multiple POs • All invoices should be made out to M&S plc and not SCM Ltd • Letters of Credit – All relevant paperwork should also be made out to M&S plc and not SCM Ltd • There are strict rules as to what must appear on the invoice (these are shown in the detailed change information) • Debit / Credit adjustments will be sent via EDI • An invoice acknowledgement will be sent via EDI. This will also detail invoice submission errors • All remittance advises will be emailed to the supplier Plan Buy Move Pay

22. 2.3.4 Ways of Working Pay • The Regional Offices will act as the point of contact for all invoice related queries • Escalation to Supply Chain, Buying or Financial Services will be managed by this team • All queries will be resolved within a timely manner to defined SLAs Plan Buy Move Pay

23. 2.3.4 Policies Pay • Payment terms will commence from the date of the invoice being receipted onto the M&S system and not the invoice date • Suppliers submitting compliant invoices via EDI on the date M&S take ownership for the goods will ensure that they are paid to the current payment cycle. Any delay in invoice submission will delay the payment process • Invoices submitted prior to the date M&S take ownership for the goods will be rejected • All invoices must be received via EDI – invoices received manually or via email will be returned to the supplier unpaid • Stock received without a PO will not be paid for • Invoice to PO to Goods Receipt matching will be completed at line (UPC) level. Match failures may result in delayed payment Plan Buy Move Pay

24. 2.4 Actions • GXS have a plan for on-boarding suppliers to the new EDI solution. Respond quickly to requests from GXS for implementation of EDI • By 24th January Suppliers must have accepted or rejected all existing purchase orders • Send changes to contact details through to the appropriate team in a timely manner. We will implement service level agreements (SLAs) to ensure details are maintained promptly • Reducing our PO amendments is our key priority. Review current processes and procedures to drive a reduction in purchase order amendments • Focus on PO and despatch accuracy – all goods will be checked and reconciled at line level • Keep Editrack up to date with the latest position regarding purchase order despatch • Stock must only being shipped against a valid purchase order • You will need to ensure you are regularly checking your systems for new or updated purchase orders • Review invoice processes to ensure that they adhere to the new requirements and that invoices are submitted in a timely manner

25. 3. Timelines

26. When it’s Going to Happen • We will deliver Phase 1 in six adoptions from January to July 2010 Phase 1 Future phases 1 2 3 4 5 6 Jan Mar Apr May July June Aug Feb Oct Sept Nov 1 2 3 4 5 6

27. Phase 1: Getting the Basics Right Phase 1 Timings: • All of the changes mentioned above will take effect in line with each departments transition to the new ways of working • This will mean that some suppliers are working in both the current way (for departments that have not transitioned) and the new ways at the same time • Information regarding detailed transition processes for your products will be sent one month prior to go-live for each adoption

28. Contacts If you have any questions relating the any of the content of this presentation then please contact one of the following for further information

29. 4. Detailed Change Information

30. 4. Detailed Change Information 4.1 EDI The remaining content has then been split into three sub sections tailored for the appropriate supply base; 4.2 Direct 4.3 FSV 4.4 Home

31. 4.1 EDI (Electronic Data Interchange)

32. Electronic Communication • To help improve communication with our Supplier base M&S will introduce industry standard EDI communication which Suppliers will need to migrate to, prior to the transition of their product department onto SAP. • The move to EDI will streamline the flow of communication to our Suppliers and provide Suppliers with more accurate and efficient information from M&S. • M&S will offer two formats of the solution: • Business to Business (B2B) solution - where documents can be sent directly between business systems. • Web EDI solution for those without full EDI capability – where documents can be sent and received via an external web portal. • Suppliers with a significant volume of transactions (greater than 10 invoices per week) are strongly advised to implement the B2B solution, as the IWF solution requires Suppliers to manually enter all invoices • To deliver EDI M&S have partnered up with GXS who will manage the on boarding process on behalf of M&S and guide it’s Suppliers through the set up process. • Next Steps: • GXS will contact all Suppliers to complete an on boarding questionnaire which will determine the type of solution for the Supplier. • Web EDI Suppliers will then need to register themselves for the system and complete the online tutorial and set up process • B2B EDI Suppliers GXS will contact Suppliers to guide them through the set up process

33. The Two EDI Solutions B2B (Business to business) EDI Web EDI or IWF (Intelligent Web Forms) EDI Messages EDI Messages IWF Web connection EDI Messages SupplierSystems Suppliers Suppliers log onto a web site to view and submit messages Messages are sent directly to and from systems

34. Electronic Communication • M&S will be using EDI in order to communicate a number of different business messages to its Suppliers. • Messages Suppliers can expect to receive include; • Contracts: The contract is only an indication of quantity from M&S for a given period and not a commitment to buy • Direct Suppliers commitment to buy will be via the purchase order • FSV Suppliers commitment to buy will be in the form of an updated contract with authorisation to cut along with an approved flow • Purchase Orders: Purchase Order represents an agreed quantity, cost price, delivery date and site of manufacture, between the Supplier and M&S, and hence an official commitment to purchase by M&S. Any subsequent Purchase Order Amendmentswill be sent via EDI to the Supplier. • Invoices and Self Bill Invoices: Suppliers must submit all invoices via EDI. For Suppliers on self bill invoices, M&S will continue send the invoice to the Supplier via EDI. • Invoice Acknowledgement: For all submitted invoices, M&S will return an Invoice Acknowledgement message, which will either be confirmation of successful receipt of the invoice, or notification of any errors. • Credit/Debit and Self Bill Credit/Debit: notes: For all adjustments raised resulting from differences between the invoiced quantity and the goods receipt quantity these will now be communicated via the EDI process. For Suppliers on self bill, credit/debit notes will also be sent to suppliers via EDI. (Note: Self Bill options are currently only available to Suppliers providing FSV Outlet product and only available via the business to business EDI format)

35. EDI Solution Matrix • The level of information via EDI will depend on the solution a Supplier uses. • Each EDI solution will contain the following fields: • Determining factors to a Suppliers EDI solution will include amongst others and by no means exhaustive: • Volumes of orders and invoices • Current EDI capability • Supplier type • Does the Supplier currently work with GXS

36. EDI Matrix By Vendor Type • Based on the Supplier type the following table provides a summary of the M&S EDI business documents that they can expect to use: • * These business documents are not available using the web EDI solution. • All Suppliers are expected to have a minimum of Web EDI in place by go live. Failure to do so may affect the receipt of future contracts and orders.

37. 4.2 Direct and Indirect Suppliers

38. Pay Plan Buy Move M&S Head Office Supplier / Factory Set Up 1 Request for new vendor 4 1 Request for new vendor Validated vendor information 1 Request for new vendor 2 Request for vendor information (form) 3 Completed vendor information Supplier M&S Regional Office

39. Pay Plan Buy Move M&S Head Office Contract Flow 2 1 Contract changes requested Automatic Contract via EDI Confirmed contract changes Updates to Contract via EDI 5 6 3 Negotiate change to contract 4 Confirm acceptance of change Supplier M&S Regional Office

40. Pay Plan Buy Move M&S Head Office Production Plan Flow 1 Required order drops Confirmed drops 4 2 Negotiate drops / across multiple BUs Confirm production Supplier M&S Regional Office 3

41. Pay Plan Buy Move Managing Supplier Data • M&S Regional Offices will continue to be the key point of contact for all Supplier information including: • New factories • New Supplier set up process • Managing all audit information received as part of any new Supplier/ factory process • Any amendments or changes to current contact details .i.e. names, e-mail and telephone details. • A new electronic form will be used to manage this process going forward. • All Suppliers are responsible for communicating any changes to their details in a timely manner. • Details of the process will be provided closer to your go live date.

42. Pay Plan Buy Move Changes To Contracts.com • From 24th January, all cutting limits will be removed from Contracts.com. • The contracting screen will no longer show 'Uncut Commitment' but prior to a department going 'live' on SAP all uncut commitment will be added to 'Auth to cut' and the uncut commitment column removed from view. • The total actual commitment will remain the same but will all show under the 1 column 'Auth to Cut' • Planned quantity information is currently available in Contracts.com. This information will be sent to suppliers as a contract message electronically (via EDI) • All new EDI contracts are raised as an intent to purchase by M&S for a given period. Any intent becomes legally binding when and only when an official M&S PO has been submitted and agreed with Supplier. • Contracts (and POs) will no longer be raised at Supplier country level but instead at factory level. • For all factory groups, Contracts.com will continue to assign a lead factory. • Suppliers must ensure they notify M&S as early as possible as to where their product will be manufactured, this is to meet our Plan A objectives. • Suppliers will no longer be required to approve POs in Contracts.com, POs will subsequently appear in Contracts.com automatically approved. This will take effect from 24th January 2010 and will impact ALL Suppliers. • Suppliers will not receive notification of any new POs and hence will be responsible for regularly checking their systems. • Style files will continue to be maintained in CMS

43. Pay Plan Buy Move UK & International Orders • Suppliers should expect to see separate contracts raised for each of the following areas; • Contracts for the UK inclusive of stock for the Republic of Ireland and International stock travelling via the UK network • Contracts for any of the International M&S Hub’s • All contracts will be EDI only, more details can be found under section 4.1 EDI. • Contracts.com will show three quantity fields, these will be; • A UK total inclusive of stock for the Republic of Ireland and any international stock travelling via the UK network • An aggregated total of all hub level quantities (i.e. no split will be visible at hub level in Contracts.com) • A total order quantity

44. Pay Plan Buy Move M&S Head Office PO Flow 1 2 M&S initiated Change request Automatic PO via EDI 5 PO updates (electronic) 2 PO change request via Editrack For both Supplier & M&S initiated changes 3 Negotiate PO changes 4 Confirm changes 5 Supplier M&S Regional Office Updated PO via EDI

45. Plan Buy Move Pay GM Direct Orders From M&S • All direct POs are currently raised under SCM Ltd who is a subsidiary of M&S. In line with departmental transitions all direct POs will be raised under M&S plc and no longer by SCM Ltd. • Once the transition by individual department has taken place all invoices for M&S POs must be addressed to M&S plc and not SCM Ltd. Suppliers who supply multiple departments maybe required to submit both EDI and manual invoices for an interim period. • Example: A Supplier who provides both menswear (adoption 2) and womenswear (adoption 6) product would be required to submit EDI invoices for the menswear product once department has gone live and continue to submit manual invoices for the womenswear up to the point it also goes live. • Invoices received after the departmental transition addressed to SCM Ltd will be rejected and may cause delay in payment for goods. • The PO header will state either SCM Ltd or M&S plc Suppliers should refer to this during the rollout process. • Any debts owed will automatically be transferred from SCM Ltd to M&S plc. • All details of this transition and how it will work will be provided closer to your go live date. NOTE: The processes for Per Una for phase 1 will remain unchanged, i.e. those people trading with Per Una will continue to do so.

46. Plan Buy Move Pay Splitting GM Direct POs • Once a department has transitioned onto SAP and EDI, Suppliers will receive separate POs for each of the following areas of the business: • UK (including Republic of Ireland and product for our International business travelling via the UK) • Hub level POs to support our international business • Outlets • Only POs destined for the UK (excl Outlets) will be visible to Suppliers on Contracts.com. • All POs will be available via EDI (more details can be found under section 4.1 EDI) • POs will not require approval by the Supplier, and will be deemed accepted by the Supplier if we have not heard otherwise within 48 hours.. • Any intent to purchase stock by M&S only becomes legally binding when an official M&S PO has been submitted and agreed with the Supplier.

47. Plan Buy Move Pay Clarifying Accountabilities • The Regional Office Production Merchandiser will be the first point of contact for all PO queries. • Both Supplier and M&S initiated changes to a PO will continue to be submitted via Editrack, using the exception report process. • Suppliers will be able to submit exception reports at UPC level rather than at PO level. • No changes will be allowed 7 or less days prior to shipment. • Only one PO exception request can be raised at any one time. Any attempt to raise a further exception request against a PO, whilst one is still pending will be rejected by the system. • Once an exception request has been accepted it will be considered final and the PO updated. • An exception request can only be raised prior to the PO being authorised to ship. If the PO has been authorised to ship and a further exception request submitted, then it will be rejected. • Freight forwarders will continue to receive updates in their normal way.

48. Plan Buy Move Pay Changes to Editrack • From the 18th January, all exception reports in Editrack must be entered at line level, not total PO level • For launch packs orders (order type L in Editrack) Suppliers can only report changes to the pack quantities, and not single UPC quantities. • Once submitted Suppliers will receive a reply to any request within 24hrs. If the Merchandising team rejects a Suppliers request, then a further 24hrs is permitted for any amendment to be sent, and accepted by the Supplier (48hrs in total) • Suppliers must ensure that when submitting an exception report they are using the correct reason code for the change. These reason codes are used to review Suppliers performance • All M&S initiated changes to POs will be communicated to Suppliers via the Regional Office Production Merchandiser and an updated PO sent once agreed. • Electronic packing lists will be required to be submitted via Editrack for all goods despatched

49. Plan Buy Move Pay Editrack Exception Report Screen Changes Current Editrack exception report screen New Editrack exception report screen New field to enter qty change at line level

50. Plan Buy Move Pay Simplifying Our Processes • In order to be able to streamline our working practices across Supplier types we will be making the following changes: • POs will be transmitted via EDI and not through Editrack • Order tracking will continue to be managed via Editrack • Regional Offices will be accountable for PO management activities • Regional Offices will manage invoice and payment queries