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Transitioning from the BackRoom to the

BoardRoom- The New Chief Logistics Officer

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The Challenge

Many companies historically


have not aligned logistics with Revenue
financial performance goals. Growth

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 Profitability
Financial
     ' Performance
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Ô ëigher Value-Adding Revenue Growth apital
Ô Improved Profitability Utilization
Ô Greater Capital Utilization


Aligning Logistics with Financial Goals:
A Top-Down Approach

Inventory, Revenue,
1 Financial SG&A, COGS, Fixed
Drivers Assets, A/R, A/P

Uses gaps in financial


Logistics performance drivers to
2 Business determine potential for
improving Logistics business
Processes processes, activities, tasks

3 Logistics Activities/Tasks

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Financial-Logistics Connection
Financial Metric Examples of ëow Logistics Adds Value
„Fill rates „Lead times
Revenue Growth (Same Store and „Forecasting „New Product Speed to Market
New Store Sales) „Customer Service

„Inbound Transportation Mgt. „Procurement


COGS as a Percentage of Revenue „Inventory Mgt. „Reverse Logistics
(Gross Profit Margin) „Network Design „Selective Outsourcing

„Warehouse Mgt. „Customer Service


SG&A as a Percentage of Revenue „Outbound Transportation „Information Technology
„Logistics Administration
„Transportation Mgt. „Inventory Visibility
Days in Inventory (DII) „Warehouse Mgt. „Forecasting Accuracy
(GMROII) „Network Design „Demand Planning

„Shipment Integrity „Invoicing Accuracy


Days Sales Outstanding (DSO) „Fill Rate „Internal Communications
„Proof of Delivery

Days Purchases Outstanding (DPO) „Procurement Terms „Payment Practices

Fixed Asset Utilization „Warehouse Management „IT Management


(Revenue / SF for stores) „Transportation Management „Selective Outsourcing

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Logistics ± Who¶s View?

CxO View of Logistics


Deliver value-adding growing revenue.
CEO Like merchandise availability, new merchandise speed to market and customer service.

Better manage the balance sheet primarily in terms of inventory and fixed assets and
CFO the income statement in terms of logistics related expenses.

Sales, sales and more sales.


Like visibility into current and future demand including both quantities and required
Merchandisers lead times or replenishment times.

Better plan and fulfill market demand for goods and service and do so more efficiently.
VP Logistics Like Logistics buy-side, sell-side, planning and execution.

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Much Potential to Unlock ëidden Value:
Retailers¶ Operating Income Margin




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p p a re l le c tro n ic s on to re e p a rtm e n t
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improving to st $ M $ 4M $ 9M $48M
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GMROI ± Need for Logistics Speed

Apparel Electronics Non-Store Department


$Revenue $1, $1, $1, $1,
$Gross Profit 3 1 31 3 3
$Inventory 1 1 112 1
GMROI 2 2 1 33 1 3
(GP / Inventory)

GP Margin 3 .1 31. 3 . 3 .
(GP / Revenue)

X Inv Turn . .31 . 1 .31


(Revenue / Inventory)

= GMROI 2 2 1 33 1 3
Profitability x
SPEED

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N d L g
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¢ase case: 30% Gross Profit Margin x 7
Inventory Turnover = 210% GMROII

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Inventory Turnover Increases
6 1 to 8.5:
6 25% GPM x 8.5 = 212%
 GMROI

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ompetition Lowers GPM to 25% but no change in
Inventory Turnover: 25% x 7 = 175% GMROI


 

 

 

 

 
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Observations on our retail customers

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Observations on our retail customers

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Observations on our retail customers

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A Look at ëow FedEx ëelps Retailers
SCENARIO #1: DC by-pass and direct US distribution solutions that reduce
Time-to-Market: C- Store Retailer increasingly sourcing merchandise from
overseas

Challenges Solutions Results


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A Look at ëow FedEx ëelps Retailers
SCENARIO # 2: Entire supply chain assessment for 23 -store multi-channel
retailer

Challenges Solutions Results


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A Look at ëow FedEx ëelps Retailers
SCENARIO # 3: 1 -Store multi-channel retailer and FedEx conducted a µRetail
Best Practices and Framing Session¶

Challenges Solutions Results


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What would these changes mean to an
average $1 MM retailer?

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Cost Fixed
Days Sales Days In Days
Revenue of Asset
Business Process Growth Goods
SG&A Outstandin Inventor Purchases
Utilizatio
g y Outstanding
Sold n
Merchandising
Store Operations
Warehouse Management
Transportation
= Growth = Profitability > = apital Utilization

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