From Warehouse to WEBhouse: Managing the eFlow of Goods

1. Supply Chain World - 2000 Chicago, Illinois From Warehouse to WEBhouse: Managing the eFlow of Goods Richard J. Sherman SVP, Visioneering EXE Technologies

2. EXE is in the business of providing global one-to-one fulfillment solutions that minimize inventory and operating costs while maximizing customer loyalty. EXE Technologies, Inc. The world's market leading provider of multi-channel distribution software, featuring eFulfillment systems (eFS) and warehouse management systems (WMS).

3. EXE is a global company More than 300 customers worldwide More than 500 employees worldwide 14 offices worldwide Dubai Hong Kong Kuala Lumpur Los Angeles Melbourne Philadelphia Singapore Seoul Tokyo Amsterdam Paris London

4. Radio - 38 years to reach 50 million listeners • Television - 13 years to reach 50 million viewers • Internet - less than 10 years to reach 225 million users and still growing fast putting the Internet into perspective..

5. The Information Superhighway is the Leading Driver of Change in the New Millennium Creating the Future Supply Network “InfoStructure”

6. companies continue to face unprecedented changes in the channels of distribution Changing Customer Requirements “Mass Personalization” New eCompetitors Flat Growth in Traditional Markets/ Globalization Channel Strategy Proliferation Of Distribution Points Intense Price and Margin Pressure Time-Based Strategies Internet based Technology Changing Role of Distributors & Sales Agents

7. what’s visioneering anyway?

8. eCommerce business issues • Emerging Market = Lots of Noise, Converting Opportunity into Profits • Time to Market = Market Leadership • Profitability vs Valuations • Same Discussions in Every Boardroom • Traditional Business must be Supported- Volume won’t Shift Immediately • Channel Blurring and Proliferation • Customer Loyalty - Format Changes

9. Increased Competition - transparent pricing increases need to differentiate Quick Turnaround - consumers expect 24 hour turn around - order today, get it tomorrow Perfect Accuracy - consumers expect deliveries to be accurate High Velocity - changing demand patterns “Spikes” are more pronounced - companies must anticipate and manage Ripple effects of “spikes” through a company’s various supply chains must be managed This puts pressure on order execution Anyone can take an order, can you execute? consequences on the supply chain

10. why are logistics and warehousing important? “A front-end Web site is often the easiest and least differentiating section of an effective Web strategy… A little-discussed, not-so-pleasant fact is that many Web commerce transactions are unprofitable because of back-end fulfillment problems.” Source: Gartner Group, “The Fallacies of Web Commerce Fulfillment” April, 1999

11. eCommerce business considerations • Must Consider Economics of Geographic Dispersion/Demographic Segmentation • Volume, Capacity, Sourcing, Deployment Economics Change Dramatically • Price Elasticity - Customer Service, Cost to Serve, Competition • ABC/Menu based Pricing/Outsourcing • Postponement & Consolidation Strategies Become Critical

12. Business to Consumer (b2c a.k.a eTailing) Business to Business (b2b a.k.a webSaling) Outsourced eCommerce (a.k.a. third party logistics) eCommerce comes in different flavors

13. b2c eCommerce

14. active Internet users by region Rest of Europe 30 m France 6m Germany 11m UK 12m Canada 12 m Japan 20 m USA 110 m Asia/Pacific 20 m Latin America 10 m Africa, Mid East 4 m World-wide total: 225m Source: INTECO research Active “have used the Internet in the last 3 months”

15. $1.3 trillion $43 billion 1998 2003 50% of All Companies Currently Have Web Sites, but Do Not Yet Offer eCommerce Source: Forrester Research b2b eCommerce Poised to grow from $43 billionin 1998 to $1.3 trillion in 2003

16. b2b market potential • Small businesses — defined as companies with fewer than 100 employees — have not traditionally benefited from large areas of business services, automation and trade • Yet they account for a huge piece of the economy — growing from 7.2 million companies in 1997 to 8 million in 2002 (IDC) • The Internet levels the playing field — more than 3 million small businesses are projected to sell products online by 2002, representing 38% of the total (IDC, BRS) • Moreover, the Internet reaches globally — to international customers and suppliers that businesses have typically worked with • Business and international participation vastly expands the spectrum of the B2B market • Dell Computer reports online sales in Q1 1999 of $18M/day, accounting for 30% of the company’s revenues. Dell expects this percentage to increase to 50% by 2000 Sources: IDC, BRS

17. outsourced eCommerce: managing the b2b and b2c flow of goods Retailer Manufacturing Distribution Consumer Raw Materials b2c b2b eCommerce initiatives require more complex value added processing, postponement, and consolidation strategies creating a major opportunity for third party logistics services! Packaging • b2b and b2c flow of goods is different from traditional as it: • Is more complex • Often has unique characteristics • Requires collaboration • Involves global markets Finished Goods Parts Shipping Warehousing Final Delivery

18. C-Commerce:The Next Stage in Supply Chain Evolution? Collaborative Commerce Source: Gartner Group

19. SCM issues: Managing Across Channel Process Boundaries Supplier Consumer Source Make Deliver Manufacturing Supply Chain Point of Sale Source Make Deliver Source Deliver Make Source Supplier’sSupplier Customer’sCustomer Manufacturer Supplier Customer Plan Manufacturer Distributor Wholesaler Retailer Sourcing/ Purchasing Materials Management Physical Distribution Deliver Lines of Fracture in Pipeline Flow • Organizational Boundaries • Geographic Boundaries • Decoupling Points • Where Plan Driven and Customer OrderDriven Activities Meet • Normally Coincide with Time/Capacity/Inventory Buffers Against Uncertainty Source: R.Sherman, W.E.R.C. “SCM for the Millennium” “We can’t deliver beer over the Internet”

20. implementing Internet strategies requires New Logistics Models Traditional SCM Evolving to Supply Network Mgmt - Requires Global Views and Partnerships Traditional SCM Issues: -Seamless ePi peline -”Fractured” Physical Flow of Goods Pi peline Global Requirements: -Flexibility -Adaptability -Scalability -Maintainability -Supportability “Integrated Market Response Systems” (IMRS) “Goods” are required at every “Point of Interaction” across the channel requiring: eBusiness Collaboration Global Flow Control: Supply Network Management

21. Supply Planning Replenishment Planning Material Flow Control Merchandise Flow Control eCommerce execution: optimal economic response “Goods that seldom pause vs Goods that seldom move!” Flow of Goods (FOG) Physical InfraStructure: eBusiness Process Execution Suppliers Source Manufacturers Make Distributors Deliver eFulfillment Solutions for Collaborative Execution Supply Deployment Demand Response Electronic InfoStrucure: eBusiness Process Optimization Flow of Information (FOI)

22. implementing Internet strategies requires eMarket Response Traditional SCM Evolving to Supply Network Management Traditional SCM Issues: -Seamless ePi peline -”Fractured” Physical Flow of Goods Pi peline Internet Changes Everything: Multiple Channels = Multiple Flow of Goods Process Support Global Requirements: -Flexibility -Adaptability -Scalability -Maintainability -Supportability “Integrated Market Response Systems” (IMRS) “Goods” are required at every “Point of Interaction” across the channel requiring: eBusiness Collaboration Logistics systems will have to support many Flow of Goods process initiatives in an eBusiness environment Global Flow Control: the “eFulfillment Center”

23. implementing Internet strategies requires multi-channel distribution Traditional SCM Evolving to Supply Network Management B2C: eTailing Flow of Goods Traditional SCM Issues: -Seamless ePi peline -”Fractured” Physical Flow of Goods Pi peline Internet Changes Everything: Multiple Channels = Multiple Flow of Goods Process Support Global Requirements: -Flexibility -Adaptability -Scalability -Maintainability -Supportability “Integrated Market Response Systems” (IMRS) Logistics systems will have to support many Flow of Goods process initiatives in an eBusiness environment B2B: webSaling Flow of Goods “Goods” are required at every “Point of Interaction” across the channel requiring: eBusiness Collaboration Traditional: eMarket Flow of Goods Global Flow Control: the “eFulfillment Center”

24. Acquire Convert Retain the eCommerce process. . . . . . customer loyalty is the ‘pot of gold’

25. AMR Research - Retention Model

26. Execution Multi-channel Large Number of orders/small number of lines per order Piece pick 1-1 Fulfillment Unpredictable demand Returns Customer Service Short order to delivery times Increased requirements to inform the customer Increased accuracy requirements Merchandising Virtual Merchandising Mass customization 1-1 Marketing Globalization World-wide distribution Language barriers Cross Border Financial Issues Technology Scalability Reliability Multi-platform API eCommerce challenges

27. AMR Research- 1999 “The Awakening”

28. succeeding in e-Commerce requires flawless execution across the entire enterprise Front End Functionality Back End Functionality User Experience Sourcing Logic Fulfillment Returns Delivery Merchan- dising Design Order Validation & Status Source Routing Ware- housing Merge In Transit eCRM Content Development Value Added Services Data Analysis Customer Profiles Marketing Payments Web Infrastructure Multi- Touchpoint Customer Service Assortment Planning Pricing Validation Hardware Software Processing Branding Promotions

29. “CUSTOMER FACING” “CUSTOMER FULFILLMENT” eFulfillment System Catalog Management/Merchandising Returns Pick Pack Ship Receive Putaway Customer Relationship Management Manifest Order Management Order Entry Quality Value Add Crossdock Web Site Order Visibility Order Broker API Links Activity Based Costing and 3PL Billing Payment Processing Labor Management eBusiness Process Management Order Status Customer Service Optimization Service Alerts Events Monitor Planning & Collaboration eCommerce application framework TechnologyInfrastructure Enterprise Applications

30. Speed Time-to-market Order-to-fulfillment cycle time Agility Wide Assortment Personalization Multi-channel distribution Precision Deliver the right product at the right time achieving customer loyalty with eFulfillment

31. AMR Research- fulfillment is the key

32. Traditional Warehouse Receive Putaway Replenish Pick Pack Ship eFulfillment Center Traditional WMS Crossdocking/Merge-in-Transit Value Added Processing Kitting /Assembly Packaging/Labeling 1 to 1 Marketing, etc. Returns Quality Assurance Dynamic Customer Service meet the eFulfillment Center (eFC)

33. Flow of Goods Communication Communication Execution Communication Optimization the eFulfillment process Consumer Supplier BusinessCustomer Retailer “Customer Loyalty Process”

34. the eFulfillment process in action RMA ASN Supplier Return • eFulfillment • Receiving • VAP • Crossdocking • Pick & Pack • Shipping • QA • Returns Order Delivery Customer Experience Order Order Delivery Service Customer Delivery • eFulfillment • Receiving • VAP • Crossdocking • Pick & Pack • Shipping • QA • Returns Order Broker Order Alerts Inquiry Availability Delivery Delivery Confirmation Visibility Alerts Service • eFulfillment • Receiving • VAP • Crossdocking • Pick & Pack • Shipping • QA • Returns Pickup or Return

35. pick from store Store 1 Store n Store 2 • eFulfillment • Receive • Crossdocking • Putaway • Pick and Pack • Quality Assurance • Pickup/Shipping • Routing • Dynamic Customer Service • Returns Consumer Order Store Inventory Consumer Experience CustomerPickup CustomerPickup CustomerPickup Delivery Delivery Delivery Delivery Confirmation Consumer Experience

36. pick from d.c. (eFulfillment Center) Returns Freezer Dry Goods (Ambient) Chilled Store 1 Store n Store 2 Pick and Pack Center Distribution Center • eFulfillment System • Receive • Putaway • Pick and Pack • Quality Assurance • Shipping • Routing • Dynamic Customer Service • Returns Consumer Order Existing WMS Consumer Experience Pick and Pack Center Replenished as a Store Delivery Delivery Confirmation Consumer Experience

37. hybrid solution - pick from d.c. and with direct delivery and/or store/LCP-based customer pickup Store 1 Store n Consumer Order • eFulfillment System • Receive • Putaway • Pick and Pack • Quality Assurance • Shipping • Routing • Dynamic Customer Service • Returns Consumer Experience Pick and Pack Center Delivery CustomerPickup CustomerPickup Consumer Experience “Lifestyle Collection Points”

38. implementing Internet strategies requires collaboration Traditional SCM Evolving to Supply Network Management B2C: eTailing Flow of Goods Traditional SCM Issues: -Seamless ePi peline -”Fractured” Physical Flow of Goods Pi peline Internet Changes Everything: Multiple Channels = Multiple Flow of Goods Process Support Global Requirements: -Flexibility -Adaptability -Scalability -Maintainability -Supportability “Integrated Market Response Systems” (IMRS) Logistics systems will have to support many Flow of Goods process initiatives in an eBusiness environment B2B: webSaling Flow of Goods “Goods” are required at every “Point of Interaction” across the channel requiring: eBusiness Collaboration Traditional: eMarket Flow of Goods Global Flow Control: the “eFulfillment Center” As eBusiness Initiatives Evolve, New Platforms Will Be Utilized; such as, Exchanges, ASP, Portals, etc. while maintaining integration to traditional platforms and all electronic processes will be physically enabled resulting in collaboration across multi-channel eFulfillment Centers

39. the need for collaboration:“Forecasting Myth versus Logistics Execution Reality” • Not everyone can nor will behave according to plan/forecast • Too many different organizations, functions, processes, activities, and people…globally! • Each with different economic drivers, objectives, andperspectives! “Many things must be done right to succeed, but only one thing done wrong can cause failure!”

40. Collaborative Planning, Forecasting, and Replenishment (CPFR) The Linchpin to Collaborative Commerce Originally CPG Industry Initiative Guidelines published in June 1998 with pilot studies to be published late 1999 CPFR under review by high tech (RosettaNet) and automotive (AIAG) CPFR requires Collaborative Execution

41. C-Commerce Partner Supplier Manufacturing Distribution Retailer Consumer collaborative execution C-Commerce Partner Messaging Messaging Messaging “Customer Loyalty Process”

42. implementing Internet strategies requires External Channel Relationships Traditional SCM Evolving to Supply Network Management B2C: eTailing Flow of Goods Traditional SCM Issues: -Seamless ePi peline -”Fractured” Physical Flow of Goods Pi peline Internet Changes Everything: Multiple Channels = Multiple Flow of Goods Process Support Global Requirements: -Flexibility -Adaptability -Scalability -Maintainability -Supportability “Integrated Market Response Systems” (IMRS) Logistics systems will have to support many Flow of Goods process initiatives in an eBusiness environment B2B: webSaling Flow of Goods “Goods” are required at every “Point of Interaction” across the channel requiring: eBusiness Collaboration As eBusiness Initiatives Evolve New Platforms Will Be Utilized such as Exchanges, ASP, etc. while Traditional Platforms will have to be maintained and all electronic processes will need to be physically enabled resulting in eFulfillment Centers Traditional: eMarket Flow of Goods Global Flow Control: the “eFulfillment Center” Traditional & eBusiness Initiatives will stimulate growth in 3PL Market: 3PL & “4PL“ will provide the future “eCollaboration Integration of Electronic “InfoStructure” & Physical “InfraStructure” “Outsourced eCommerce”

43. the new eCommerce paradigm:Implementing A Collaborative Supply Network that Manages the Convergence of Execution InfraStructure & Planning InfoStucture Sourcing Channel Partners Warehousing Materials Demand Planning Consumers Transportation Marketing/ Sales Manufacturing Strategic Planning Supply Partners 3PL/4PL Partners

44. Vision: Where we want to be Engineer: Develop Alternatives, Cost & Returns creating a new paradigm: the collaborative supply network Execution: Getting it done!

45. Your Next Competitor May Be “MitchCo”! “Just Do It!” Rich Sherman, SVP, EXE Technologies, Inc. 1-508-366-8022 / richard_sherman@exe.com EXE Home Page: http://www.exe.com Thank You!