WAYNE L WEBB CAO Project Manager CAO

WAYNE L. WEBB CAO Project Manager

CAO Concept • Automated order forecasting and generation system • Utilizes historical sales data • Limited human intervention • Seeks to achieve just-in-time inventory management

Year-End Customer Satisfaction Survey: “Well-stocked, Full Shelves” • Overall average score for CAO stores – – – – 2002 – 4. 20 2003 – 4. 25 2004 – 4. 36 2005 – 4. 38 2006 – 4. 48 2007 – 4. 49 2008 – 4. 50 • Steady increase since CAO deployment in January 2002

CAO Benefits • Increased customer satisfaction – Higher in-stock rates – Increased Commissary Customer Service Survey (CCSS) scores • Reduced inventory levels – Higher inventory turns – Loss theft indicators • Informed decision making • Improved shelf space allocation • Increased sales

Communication Good communication = success • Manager / Supervisor / Merchandiser • Other CAOSs • QAEs • Admin office – VCMs • Distributors • Industry / sales representatives • Vendor / contract stockers • Cashiers • Receiving personnel • Janitors

Order Requirements Sales Data BOH Recommended Order Shelf Maximums

Order Requirements Sales Data • Sales data – Average weekly sales – Projected weekly demand – Day of the week index – Forecast error safety stock

Order Requirements Sales Data BOH • Balance on Hand (BOH) – On-hand inventory of shelf and backroom • Sales Promotion System (SPS) Reserve – Inventory on hand for future promotions • Quantity available – BOH minus SPS Reserve

Order Requirements • Shelf maximums set based on: Sales Data BOH – Existing shelf space – Set higher for never-outs – Set lower for low demand • Shelf minimums not part of Shelf Maximums order calculation when shelf max is in place • Facings are informational only

Order Requirements 3 Vital Factors Control Ordering Sales Data BOH Recommended Order Shelf Maximums Without all three being completed with correct information, the system does not function correctly

Order Requirements • If demand exceeds shelf maximum, CAO will order to fulfill demand safety stock requirements • A report generates detailing these items and can be used: – To expand shelf space – As a pull sheet • Phased out/deleted items – CAO continues to order phased out items until item is flagged as deleted – once deleted, the item will be automatically deactivated

Fact 66% of the active items at Langley AFB Commissary sell less than 21 units per week less than 3 units a day … As of 8/11/06

Other Elements of the Algorithm • Safety Stock – Velocity Code Safety Stock • Safety Stock Based on an Item’s Velocity Code (A thru F) Velocity Codes A B C D E F Range of Velocity Codes 5% 10% 20% 30% 20% 15% Safety Stock Percentage 30% 15% 10% 0% 0% Case Rounding Factors 85% 90% 95% – Forecast Error Safety Stock • Additional safety stock calculated based on a comparison of the order forecasts of the last 2 weeks to actual sales during that period

Other Elements of the Algorithm • Lead time – The number of days between the date of the order creation and the required delivery date (RDD) • Period to Order For (PTOF) – The number of sales days that the order being calculated is to cover

Other Elements of the Algorithm Ordering Scenario • Order builds on Wednesday, RDD on Friday, PAD on Saturday • Shelf maximum: 48 • UPK: 12 • Velocity code B – case rounding factor = 85% (10. 2 units) • Starting BOH: 36 • Due-in: 12 • Lead time demand: 12 (Wednesday-2, Thursday-4, Friday-6) • Put away demand (Saturday): 9 • 36 + 12 – 12 = 36 (Virtual BOH, Friday night) • The difference between virtual BOH and shelf maximum is greater than 85% of UPK, so one case will be ordered • Shelf maximum (48) minus virtual BOH (36) = 12

Store Ordering Schedule • Store manages their own order / distributor schedule • Accommodates holiday store closures, distributor closures for inventory, etc. , using an override feature • CAO will recalculate projected orders based on the new schedule • Can create multiple orders with multiple RDDs

Factors Impacting BOH Accuracy • Shippers, floor stands / pallet modules • Items received via the Case and Truckload Sale (CATS) system • Demos • VCMs – merchandise returned to vendor • Mis-picks • Unidentified shortages

New Items • Store runs CAO Facility New Item Report • Generates distinct pull once a week using FDS • Upon receipt, merchandise to shelf • Activate and establish shelf maximum • CAO orders to fill shelf • Ordering initially based on replenishment • Forecast developed when there is history of sales

RF HHT Functionality • Maintain orders – Edit current order – Review two-week order history • Manage counts – Establish / correct BOH – Process salvage – Transfer items – Flagged Item Report (NIS, highs, and lows)

RF HHT Functionality • Manage items – Set shelf maximums and facings – Activate / deactivate items – View CAO Item Detail • Reports – Salvage – Transfer – Flagged Item Report

Sales Promotion System (SPS) • Lists items and average weekly demand unique to store • Can be created and released in advance • If released in advance, due-ins put into reserve • If received in advance of promotion start date, BOH put into reserve (SPS Reserve) • SPS Reserve enables CAO to continue to order for shelf • Once promotion starts, CAOSs must order manually to keep displays full

Managing Sales History • Flag local promotions in CAO – RF HHT used to capture items promoted outside MBU window to prevent over-ordering after promotion – Can be used to flag items heavily demo'ed, couponed, or advertised

Salvage Program • Two functions – markdown and (store / vendor) throwaway • Process streamlined by requiring fewer key strokes • Automatically computes markdown price • Saves item information for 2 months plus current month • Salvage report has various sort options, enabling user to print by vendor number, PIIN number, distributor, and department

Order Ramp Factor • User defined date range – applies to sales days • Will temporarily modify shelf maximum factor value for date range specified • User will define shelf maximum factor percentage (+/-) for various combinations of D/C/G, distributor, and velocity code

What You Can Do to Help • Identify non-MBU promotions • Give advance notice of heavily couponed items • National advertising • Spot BOH discrepancies • Reduce mis-picks and shortages • Follow-up with vendor stockers

Enhancements • Past – Payday demand - based on last 8 payday weeks – Non-payday demand - based on last 8 non-payday weeks – Override schedules – Shelf max – Visibility of 856 • Future – Daily forecast

Item Movement Review Item Movement Data

Weekly Demand / Promotions Check Average Weekly Demand Check Date Last Promoted

Sales History Review 60 Weeks Sales History

For Assistance De. CA Help Desk 1 -888 -551 -1598 or 804 -734 -8000, ext 48140 (Functional, technical, C-Move or RH-HHT issues) HQ De. CA Ivy Beres Bob Crecink Robert A. Robin Wayne L. Webb Gary Williams 804 -734 -8000, ext 48211 804 -734 -8000, ext 48983 804 -734 -8000, ext 48672 804 -734 -8000, ext 48854 804 -734 -8000, ext 48731