Leveraging Labor Management to Achieve a Rapid ROI

Agenda • • • MBM History The Situation The Decision The Strategy en. Vista’s M 3 approach ROI Before Go Live Implementation Results Lessons Learned

Company History • Founded in 1947 by J. R. Wordsworth, MBM Corporation, remains a privately held, financially strong, family company. • Over the years, MBM has grown to become one of the nation’s largest privately held companies in the United States with approximately $6 Billion in annual sales • The 3 rd generation of the Wordsworth Family is activity involved in the company’s continuing success.

MBM’s “Family” of Customers

MBM Corporation - History • Beginning with its first Distribution Center in Rocky Mount, NC, today MBM Corporation operates 33 centers strategically located throughout the Continental United States to best service our current customer base

The Situation • MBM currently operates on a “Home Grown” (AS 400) Warehousing System at all of our Distribution Centers • Two different forms • One Third of the Distribution Centers have a “Home Grown” Reserve Inventory System in conjunction with a Voice Selection System – Psion / Vocollect • The remaining DC’s operate on a system where selection is done via Labels, and inventory locations are limited to the Primary Pick Slot (Overstock Locations are not known) • MBM’s Need – Determine if a B. o. B. WMS and/or LMS had a viable ROI, Payback, and base functionality to achieve a rapid return.

The Decision • Through a competitive bidding process MBM selected en. Vista Corporation to do a thorough analysis of MBM’s current capabilities, with regards to both WMS and LMS • As part of the initial engagement, en. Vista provided MBM with a projected ROI on 3 rd WMS and LMS, along with a ROI on MBM’s Development of various missing pieces within MBM’s home grown system • Based on the findings from en. Vista, it was determined to hold on a 3 rd party WMS while making some changes to MBM’s existing system, however it was also decided to engage LMS vendors in their offerings. • MBM Selected MANH for a system-wide rollout of Labor Management

Strategy for Implementation • Working with en. Vista, MBM developed a three pronged approach to the rollout of MANH Labor Management (Lead, Coach Follow) • • Site #1 • Utilize MANH Engineering as “Lead” in engineering process • en. Vista Engineering to “watch and learn” MANH best practices • Work with MANH on Change Management portion of DC Training Site #2 • Shift from MANH Engineering to en. Vista Engineering • MANH plays key role in answering questions of both en. Vista and MBM • MANH still active in process • en. Vista begins to pickup “Lead” as Project Manager Site #3 - #10 • en. Vista Trains MBM Industrial Engineer to take charge of longer term project Site #10 - #33 • MBM Industrial Engineering Team responsible for all engineering and technical configuration

LMS Implementation Timeline DC City/State Voice Status 2012 -Q 1 2012 -Q 2 2012 -Q 3 2012 -Q 4 2013 -Q 1 2013 -Q 2 2013 -Q 3 2013 -Q 4 DC 07 -RMT Rocky Mount, NC N Done DC 05 -COL Columbus, OH Y Done DC 08 -LWS Lewisville, TX N Done DC 09 -ORL Orlando, FL N Done DC 23 -FRK Frankfort, KY N Done DC 52 -PLS Pleasanton, CA N Done DC 20 -MAC Macon, GA N Done DC 06 -LK 1 Lakeland, FL Y Done DC 63 -FTW Ft. Worth, TX Y Done DC 16 -TAY Taylorville, IL Y Done DC 12 -BAT Battleboro, NC N Done DC 30 -ONT Ontario, CA N In Progess DC 03 -MNT Montgomery AL Y In Progess DC 61 -RAN Rancho Cucamonga, CA N In Progess DC 04 -RIV Riverside, CA N DC 31 -MAN Manteca, CA N DC 27 -ABD Aberdeen, MD Y DC 02 -OKC Oklahoma City, OK Y DC 70 -FUL Fullerton, CA N DC 59 -LAN Lancaster, PA N DC 13 -LGR La Grange, GA N DC 15 -SAL Salisbury, NC N

Labor Performance Management Consist of Three Primary Areas: Methods Lean Process Improvement Team Measurement Motivation

The Performance Cycle (Performance, Feedback, Reward and Effort) explains why our M 3 program enables companies to significantly improve performance Non-monetary Rewards and Recognition Self-motivated Associates D RT Monetary Bonuses Less Management Supervision FO W RE EF AR High Performance Work Teams and Levels of Productivity THE PERFORMANCE Develop Management Team Develop Preferred Methods ED FE E BA M CK Perform Follow-up Coaching CYCLE Train Associates to follow Best Practices Provide Timely Feedback R FO C AN Establish Performance Goals & Metrics R PE Implement Tracking Tools

M 3 Keys to Success 1. 2. 3. 4. Involve employees early in the process Tap into employee discretionary effort Self-managed teams can uncover hidden efficiencies Employees respond best to continuous positive reinforcement (Appreciative Inquiry) 5. Optimal work methods have to be developed 6. Engineering standards help define the opportunity 7. Continuous improvement will not be achieved without a measurement system in place 8. Employees respond well to incentives 9. Include a detailed accountability plan 10. Communicate at all levels

Achieving ROI Before Implementation • Start Up Meetings / Stretch and Flex • Have a pre-defined length for this meeting • Breaks and Lunches • Breaks are 15 minutes in length while Lunches are 30 minutes in length • End of Shift Cleaning • Are you getting your Money’s Worth given the time you are providing?

Achieving ROI Before Implementation • Slotting • While your slotting may have made a great deal of sense 5 years ago, does it still make sense today? • “MBWA” – Management by Walking Around • Let the employees see their manager on the floor throughout the shift • Observations – DC Vitamin Pills – One-A-Day • Begin doing standardized observations prior to LMS in order to correcting bad habits.

One Second Labeling • Prior to LMS, associates apply label after picking the case (wasted motion). • By implementing a LEAN process, associates are required to apply the label as they pick which saves one second per case. • What does that mean in potential $$ Savings?

Assessment • MBM Sr. Management and Operations Training • Build Coordinate Map of DC – 2 Days • Vehicle Timings – 1 Day • View Operational Segments – 1 Week • Unloading • Receiving • Put-away • Replenishment • Selection • Loading • Meet with DC Management on Any Pre Implementation Changes • Identify Pre Implementation ROI • Gain Top-Down DC Buy-in

Week 1 • Engineering • Review Existing Processes • Documenting each Step • Create LEAN Process • Determine Value Add and Non Value Add Activities • Implement Best Practices • Eliminate Waste (Non Value Add – Non Required) • Develop SOPs for each Process

Week 2 • Develop Frequencies • Pre-Determined Time Elements • Obtain Travel Distance for Elements • Take Preliminary Time Studies • Time and Motion Elements • Develop ELS File • Input Frequencies, Distances • Develop New Elements (if needed) • Configuration of Standards in LM System • UOMs, Elements, Activity, Travel Adjustment

Week 3 • Test Configuration • Custom UOM, Travel, Reflective Standards • Take Preliminary Time Studies • Determine if Elements need to be Adjusted • Update System and ELS File • Training • Supervisor/Leadership Training • Change Management Training • Questionnaires/Opinions • Observation with Supervisors

Week 4 • Validation of Standards • Has to be +/- 5 percent • Delay Timings • Update PF&D • Observations with Supervisors • Sign Off from en. Vista on Standards • MBM DC Management then Responsible to Observe and Approve Standards • 1 – 2 weeks

After Implementation • Six Week Ramp Up • Once Standard has been Approved • Observations Critical • All Employees need to be at 100% • Post Ramp Up • HR Discipline Policy Enforced • Incentives Begin

Results of LMS • Achieving 10% Reduction in Labor Cost • Could see Higher Return but MBM is not Currently Holding Employees to HR Policy • 5 LMS DCs are in the Top 10 DCs • Variable Cost Report • Improvement Report • Thru-put Improvement Report • Sustained Improve for Subsequent Years • Standardization of Processes • Uncovered Additional Areas for Improvement • Purchasing • AS 400 Inconsistencies • Incorrect Weight and Volume Measurements

Benefits Outside of Scope • Forecast business requirement for new DC • Identify overspend on specific areas within labor pool • Identify overspend caused by high volume (congestion) • Relate to DC management how non-value activities impact bottom line performance • Lost Time Report • Excessive Event Adjustments • Poorly Directed Work

Identifying ‘Low Hanging Fruit’ • Employees who miss standard on events or receive event adjustments to compensate for unanticipated occurrences are identified through customized reporting. • Every non-standard event is evaluated for business need, including start-up, breaks, and clean-up time. • Events where an employee misses standard by at least 10 minutes are flagged for evaluation. • A ‘What-if’ analysis is created to illustrate the cost difference of these missed opportunities.

Lost Time Report

‘What – if’ Analysis • The highlighted Lost Time Events fall into 1 of 3 categories: 1. Start of Day • Make sure your employees go to work immediately after start-up meeting. 2. Around Breaks/Lunches • Ensure that employees take breaks and lunches at the scheduled time. 3. End of Day • Make certain folks don’t slack off on their final assignment for the night.

Lessons Learned • Change Management – Spend as much time as possible • Getting Management to truly embrace the change • Understanding how small but repetitive mistakes add up • Knowledge transfer is crucial in “Lead – Coach – Follow” • Need buy-in from multiple departments from across the organization • Purchasing • IT • Transportation • Work with clients to find solutions to problems outside of LMS • Delay Increases as Volume Increases • Have an member of IT staffed on the LMS project

Lessons Learned • Empower employees when determining preferred methods • Slotting, Staging, etc. • Be creative with observations • Make a believer out of the most resistant employee to gain buy in from employees • Be sure to get all relevant information before meeting • Video and Group Observation • Accountability goes all the way to the “Top” • Managers need to set expectations and hold associates accountable to standards • Most people perform to the expectation as they understand it • Find ways to reduce “event adjustments” • Event Adjustments cost MONEY!!!!

Questions