FINAL REPORT
on the
HOME ENTERTAINMENT
SUPPLY CHAIN
CONFIDENTIAL
24 OCTOBER 2007
PREPARED FOR ASE Participants
SPONSORED BY
PRESENTED BY
Home Entertainment Supply Chain Study
Prepared for <Studio Name>
ACKNOWLEDGEMENTS
Capgemini and Teradata gratefully acknowledge the following individuals for their
contributions in data collection, synthesis and analysis, and for their efforts in the
composition of this Report:
Randy Almand, Richard Beaver, Cole Claflin, Paul Cosaro, Mark Gallardo,
Benjamin Garai, Theodore Garcia, Shirley Hunter, Mark Landry,
James Maysonet, Devendra Mishra, Robert Rose, Amy Jo Smith, David Tang,
and Cheryl Wiebe.
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TABLE OF CONTENTS
FINAL REPORT ................................................................................................... 1
PREPARED FOR <STUDIO> ............................................................................... 1
SPONSORED BY ................................................................................................. 1
PRESENTED BY .................................................................................................. 1
............................................... 1
I.
Executive Summary ...................................................................................... 4
II. Project Overview ........................................................................................... 6
A. Background ............................................................................................. 6
B. Approach ................................................................................................. 6
C. Goals of the Study ................................................................................... 7
III. Study Participant Q&A .................................................................................. 8
A. General.................................................................................................... 8
B. Retail Execution..................................................................................... 10
C. Data Synchronization ............................................................................ 11
D. Merchandising ....................................................................................... 13
IV. Findings & Recommendations .................................................................... 14
A. Data Synchronization ............................................................................ 14
Encourage 100% Usage of ASNs by Retailers ...................................... 15
Item Synchronization ............................................................................. 17
Improve On Hand Inventory Accuracy ................................................... 18
Forecasting Improvements .................................................................... 22
Forecasting & Supply Chain Best Practices .......................................... 23
B. Retail Execution – The Last 100 Feet.................................................... 28
VI. Cross-Industry Comparison ........................................................................ 29
A. Other Retail Products: Case Studies ..................................................... 29
VII. Next Steps .................................................................................................. 34
A. Issues Scorecard Results ...................................................................... 34
B. Proposed Next Steps............................................................................. 36
VIII. Appendices ................................................................................................. 40
A. ESCA Conference Pulse Survey Results (US) ...................................... 40
B. Study Participants.................................................................................. 42
Studios .................................................................................................. 42
Retailers ................................................................................................ 42
Merchandisers ....................................................................................... 43
C. Digital Supply Chain .............................................................................. 43
D. Trends ................................................................................................... 45
F. Interview Guide...................................................................................... 47
Executive Interview Template ................................................................ 47
Operational Interview Template ............................................................. 50
Retailer & Merchandiser Interview Template ......................................... 54
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I.
Prepared for <Studio Name>
Executive Summary
The Home Entertainment industry operates in an ultra competitive marketplace.
Rapidly changing consumer preferences and socio-economic factors, shortening
product life cycles, shifts of power with retail and distribution trading partners,
increasing numbers of SKUs, the blurring of category definitions, and
unprecedented global competition all combine to create an environment where
the ability to manage and leverage the DVD Supply Chain and leverage the flow
of data is key.
The major Home Entertainment studios maintain intricate global operations which
require the effective use of global supply chains. Optimizing demand and supply
across this global business is the key ongoing operational challenge.
The Digital Entertainment Group (DEG) Home Entertainment Study (The Study)
revealed deficiencies in the supply chain relationship between the Studios and
Retailers, including, but not limited to:
• Inconsistent adherence to scorecard metrics:
 Studio improvements are not recognized by retailers
 There is a lack of scorecard alignment between retailers and studios
• Inconsistent use of ASNs, especially at Wal-Mart
• Lack of sales planning optimization between studio and retailers
• Lack of collaborative forecasting
• Lack of demand chain planning
• Poor timing between merchandiser resource deployment and product
arrival at retailer
• Lack of item data synchronization between retailers and studios
• Inaccuracy of retail on hands inventory levels
These deficiencies, while endemic throughout the home entertainment industry,
were not evident in several of the participants, demonstrating significant room for
improvement within the Industry as a whole.
Additionally, given the steep sales decay curve of the new release DVD
(traditionally generating 50% of its life-cycle sales within eight days of the street
date), the supply chain has a well-developed order placement and fulfilment
process, compared to other consumer products with similar product lifecycle
characteristics. The Study Team analyzed the Product Lifecycle (PLM)
characteristics of luxury brand shoes, cosmetics, junior miss fashions,
microprocessors, and pre-packaged mixed-green salad.
The Study, which focused on data synchronization and retail execution, has
identified several opportunities for improving the DVD supply chain. For
example, by adopting leading consumer products supply chain practices,
standardizing product packaging design and upgrading and improving the
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technology infrastructure, the benefits of improved retail execution with just WalMart are conservatively estimated in excess of $500 million (roughly calculated
as $280 million for stockroom to floor improvements and $220 million for
improved ASN utilization).
The Report has been organized along the two themes of the Study: Data
Synchronization and Retail Execution. The Study Team has documented the
individual studios, retailers, and merchandisers’ strengths and weaknesses. To
maintain the confidential nature of the findings and observations, each studio has
received a customized report detailing the findings pertinent to their organization
along with specific people, process or technology improvement opportunities.
Generic Findings and Recommendations across the supply and demand chain
relationship between studio, merchandiser and retailer have also been
catalogued with the intention of generating Industry-wide momentum to address
and resolve some of these issues.
According to the Video Software Dealers Association (VSDA) 2007 Annual
Report, consumer spending on home video is nearly three times greater than that
of theatrical box office with consumer spending on home video in 2006
exceeding $24 billion. Sell-through accounted for over $16.5 billion and rental
generated $8.5 billion. Mass merchants, (Wal-Mart, Target, etc.) had a 43%
market share of sell-through, while public chain video stores had a similar
percentage. Online rentals accounting for 16% of consumer spending. As 88
million U.S. households are DVD capable and 55% of those households have
more than one DVD player, it is obvious that every opportunity to improve the
delivery of the physical DVD, to create “perfect orders,” should be analyzed and
evaluated. It is the hope of the Study Team that the contents of this report will
help prioritize the action items.
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II.
Project Overview
A.
Background
Prepared for <Studio Name>
The DEG and the Entertainment Supply Chain Academy (ESCA) solicited the
services of Capgemini and Teradata to conduct a unique assessment of the
Home Entertainment supply chain. The fact that the Study Sponsors
(henceforth referred to as the Studios) were collectively interested in
exploring opportunities for improvement within their industry was noteworthy
unto itself, as this type of study had never before been undertaken. The
project was launched due to the recognition by the DEG that optimizing the
supply chain provides for an industry-wide benefit and does not infringe upon
any studios’ competitive advantage in the marketplace.
The fundamental purpose of the Study was to identify specific
recommendations that would generate significant improvement within the
retail execution of the physical DVD. Throughout the course of the Study, it
was evident that there were numerous opportunities to improve the
relationship between retailers and the studios, as well as enhance the
purchasing experience of the DVD consumers.
The Study Team had two primary directives in conducting their research: to
ensure that any confidential information gathered on the particular Studio,
Retailer, or Merchandiser was kept confidential and that the output of the
Study would not betray the trust of the participants. Particular attention was
paid to both the Sherman and Clayton Anti-Trust Acts, specifically around
avoiding any form of restraint of trade. As such, all written materials and final
report presentations have been reviewed and approved by legal counsel
retained by the DEG.
The Study Team entered into non-disclosure agreements with each of the
eight Studios and has adhered to the agreements through the duration of the
Study. All propriety information collected during the course of the Study has
been kept confidential and will remain as such.
B.
Approach
The Study Team commenced work with in-depth interviews across the senior
management ranks of the Home Entertainment divisions. Through the first
round of interviews, the Study Team focused upon defining the true scope
and direction of the initiative, as well as uncovering any hesitation within the
steering committee.
The DEG Steering Committee was specifically asked questions regarding the
strengths and weaknesses of their individual supply chain, their working
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relationship with the various retailers and merchandisers in scope, and their
perspective on industry trends and concerns.
The Study Team then conducted operational interviews within the studios to
uncover details around the studios’ problems with the DVD supply chain.
From these initial interviews, a detailed “Interview Guide” was created for use
with the retailers and merchandisers (please refer to the Appendix, section
F). The interviews were conducted in a manner that elicited honest and
straightforward feedback, detailed recommendations, and an honest appraisal
of the current state-of-the-state between the studios, merchandisers, and
retailers. The feedback provided the foundation for the recommendations
contained in this report. To confirm the results of the Team’s retail and
merchandiser findings, several in-store investigations were conducted. These
“store walks” were held to increase the Team’s understanding of retailer and
merchandiser daily in-store operations.
Following the data collection period, the Team began its process of data
synthesis, calling upon the collective experience of the Team members, the
data repositories of best in class supply chains, and leading practices found
within other consumer products industries.
Several critical issues across the mega processes of retail execution and data
synchronization were uncovered. Within each of the priority issues identified,
the Study Team isolated the root cause. The Team outlined the
characteristics of the root cause and were then able to identify possible short
and/or long term solutions.
C.
Goals of the Study
The Goals of the Study were as follows:
• Ensure propriety information that was collected was not divulged to any
other party
• Focus on areas where process improvement can be made and results
would have a material impact on either retail execution or data
synchronization
• Leverage the collective supply chain intelligence of both Teradata and
Capgemini, reviewing best practices across the consumer products/retail
space
• Deliver to the DEG actionable recommendations
• Where applicable, identify opportunities to increase sales and decrease
costs across the Home Entertainment supply chain.
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III. Study Participant Q&A
The study commenced with an in-depth analysis of the eight participants with
interrogatories across multiple divisions of the Home Entertainment studio. From
those initial conversations, several specific questions were generated by studio
personnel. This section covers a comprehensive list of those questions with
answers developed from the Study Team’s interaction with the retail and
merchandiser organizations.
A.
General
1) Did the retailers share the studio’s view of the objectives for this study?
• Without hesitation, every retailer and merchandiser interviewed during
the course of the Study supported the initiative 100%. All participants
believed that the study itself would help enhance and improve the
supply chain, leading to increased sales and a minimizing of costs
attributed to process failures.
2) What drives Wal-Mart’s decisions related to the last 100 feet?
• Decisions are driven by POS data for New Releases. Consumption
thresholds should reach approximately 20% of stock consumed within
the first twenty-four hours to 65% of stock consumed by the fifth day
after the street date. Adjustments are made if those baseline
thresholds are not met.
3) What do retailers feel are best practices within consumer products?
• Please refer to the Forecasting and Supply Chain Best Practices
sections (in section IV.A).
4) What is Best Buy’s recommendation for minimizing costs given the flat
business model?
• Some of the recommendations included consolidation of shipments
and returns, advanced planning to ensure better supply and demand
matching, ensuring the requested order quantity is as accurate as
possible, and minimizing the “boomerang” effect by using the Keep
Quantity mechanism for the returns process.
5) Who makes the key supply chain decisions in Best Buy’s organization?
• Best Buy reported that their buyers, inventory control, and corporate
media segment leads, in coordination with corporate retail planning
personnel are responsible for DVD supply chain decisions. There is no
one individual with complete decision making power within their
organization.
6) Can studios have an open dialog with retailers?
• Yes, each retailer specifically welcomed the opportunity for detailed
dialog with the individual study participants to identify and address
issues within their respective supply chains.
7) How can studios realize more supply chain collaboration?
• In general, the retailers felt that increased interaction with the key
individuals supporting their accounts would improve the supply chain.
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However, it was noted that the attitudes expressed by the studio
personnel were critical to a collaborative relationship. The retailers
were frustrated when the studios exhibited arrogance or a lack of
willingness to resolve a problem.
8) Who can studios speak within the retail environment who has visibility
across other consumer product categories?
• For corporate level individuals, with the exception of Target and WalMart, personnel associated with home entertainment products remain
within home entertainment. There is little migration to other commodity
lines. However, Target promotes rotation between corporate level
commodity management areas to enhance their experience.
Commodity leaders within other retailers tend to base their career on
their particular sector. At the store level, both Target and Wal-Mart
encourage floor managers to migrate between departments to get a
better understanding of the mix of products offered in their stores.
9) Whom do the retailers prefer working with at the studios?
• The retailers prefer working with individuals who have an
understanding of the specific supply chain characteristics unique to
each particular retailer. The retailers look to the studios to provide
personnel to work with who have the authority to resolve issues in a
timely manner.
10) What are the gaps on the studio side compared to other consumer
products vendors?
• Unlike many consumer products manufacturers, most studios have not
identified a single point for issue resolution. Generally, the studios are
siloed between marketing, sales and operations planning, and supply
chain operations, thus hindering the ability for efficient issue resolution.
11) Are there any anomalies to each studio and how can they be improved?
• Please refer to the Strengths and Weaknesses section (section V).
12) What is Target’s High Definition DVD position for retail space allocation
given the current industry trends?
• Target has reported that space dedicated to High Definition (HD) titles
will increase to eight linear feet from the current four and will expand to
sixteen feet in the newest 100 stores. The expansion of HD titles will
come at the expense of recorded music. Space dedicated to standard
DVDs will remain unchanged through the end of the year.
13) Why does Circuit City see catalog and recent releases as strengths?
• Circuit City reports its continuing frustration with studios not
understanding their particular supply chain strategy. The Circuit City
strategy includes utilizing new releases as a short-term loss leader to
drive patrons to their store with the expectation of those patrons
purchasing catalog and recent release content.
14) Can studios know retailers’ product availability?
• Yes, through retailer systems such as Retail Link and merchandising
scans combined with POS data.
15) Why can't retailers get orders in on time?
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•
Studios should track sales goals by retailer, by title release, and by
order date to help drive the timeliness of their customers’ orders.
Retailers struggle with open to buy issues during certain seasons and
periods of multiple major releases causing delays.
16) Can studios be informed about retailers’ purchasing needs sooner?
• The retailers were consistent in their opinion that studios should be
coming to them with forecasts on consumption and should not be
relying on retailers to supply purchasing forecasts.
17) When are retailers going to stop locking up product and realize it inhibits
sales?
• For those retailers who have locations with a high incidence of theft, it
is not likely that they will stop this practice. The retailers acknowledge
that product in locked display cases does inhibit sales but there is no
other effective means at this time for mitigating the theft risk. Many
retailers mentioned new technology such as embedding POS
activation tags within the disk itself to help prevent theft.
18) What is the state of Cross Docking in the retail industry?
• Cross Docking has proved to be an effective means of utilizing
retailers’ warehouses for approximately twenty years. There is still an
opportunity for studios to realize cost savings and efficiency gains
relating to corrugate shipments. Target is investing in technology and
other resources to improve the efficiency of their Cross Docking
through the pre-distribution model.
19) Is there a push for smaller and eco-friendly packaging?
• Absolutely. Each of the major retailers expressed a consistent position
on the desire for smaller and more eco-friendly packaging. In addition,
the major retailers expressed interest in reducing the size of corrugate
display as one way to reduce their overall resource consumption.
Retailers are interested in adopting all eco-friendly practices, as long
as they do not inhibit sales.
B.
Retail Execution
1) What can be improved in the studio supply chain to get product to the
sales floor quicker?
• Please refer to the Retail Execution section (IV.B).
2) How can the studios help the flow of product through the store?
• Please refer to the Retail Execution section (IV.B).
3) If it takes one day to get product from the back room to the floor, why
should studios expedite shipping?
• Retailers believe that expedited shipping should only be utilized to
replenish out of stocks on high-volume titles or to ensure that highvolume product, such as new and recent releases, arrives before the
weekend.
4) What is the rationale for not having receiving hours in the stores during the
end of the week?
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•
The retailers were consistent in their statement that this is not the
case. Depending on season and flow of materials, the retailers’
receiving hours are adjusted accordingly.
5) How can studios ensure increased ASN usage at Wal-Mart?
• The need for improvement in this area is one of the most significant
findings of this Study. Lack of consistent utilization of ASNs by WalMart has a negative effect on the supply chain measured in hundreds
of millions of dollars. The Study Team recommends that the studios
should consider working with Wal-Mart Operations to heighten the
awareness of this process failure.
6) Can studios get more information on corrugate placement?
• Information on corrugate placement can be obtained though spot
checks by studio personnel or the utilization of RFID tagging.
7) Do retailers generally pull corrugate down early?
• Yes, the retailers reported that some corrugate may never be utilized
at all when multiple titles street on the same date or when corrugate
design or quality does not meet the approval of store managers.
Additionally, store managers are quick to pull corrugates when product
levels are low. This occurs frequently before the weekend, because of
late stock replenishment.
8) How can studios standardize the return process?
• Please refer to the Returns section (in section IV.A).
9) How do retailers handle and measure shrink?
• Retailers have a measurement for both back door and front door shrink
and factor in the projected loss through shrink in their inventory
assessments. For example, Wal-Mart uses an estimate of 2% for
shrink which is factored into their inventory supply.
10) What are retailers’ key objectives and key performance indicators (KPIs)?
• Please refer to the Scorecarding section (in section IV.B).
C.
Data Synchronization
1) Can retailers share more data with studios?
• Please refer to the Encourage ASN Usage section.
2) Do retailers understand why giving more information back to the studios
would be a better approach?
• Yes, when this topic was discussed, the retailers believed that the
studios should provide them with better forecast information. Please
refer to the Forecasting section for more detail.
3) Can the retailers get information to studios more quickly?
• Yes, but their willingness depends on the season, title, consumption
pattern, and the particular retailer’s technical capabilities. Wal-Mart
can send hourly POS data where other retailers are not capable of
managing this level of frequency.
4) How are retailers looking to improve their data synchronization?
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•
Other than enterprise-wide system upgrades, retailers do not have
studio-specific data synchronization improvements in their roadmap.
The retailers believe that data synchronization is the responsibility of
the studios and their merchandiser partners.
5) Why does Target not utilize the full VMI process?
• Target believes that their focus on the customer experience and relying
on their own personnel to manage product placement and restock is
what differentiates Target from Best Buy, Wal-Mart, and other big-box
retailers. They believe that that there is a cost-savings in their
Distribution Center to Store approach. Furthermore, they feel that if
they were to initiate VMI with DVDs, it may open the gate towards
other commodity areas.
6) Can studios use an 856 Advanced Ship Notice so retailers know an order
is in route?
• Please refer to the Encourage ASN Usage section (in section IV.A).
7) Can studios pass the 855 Purchase Order Acknowledgement to the
merchandisers?
• Yes, for those studios equipped to send the 855 data. For more detail
please refer to the Merchandiser Opportunities section (in section IV.B)
8) How can studios see trends at a store level?
• Store level detail can be obtained by utilizing the VMI and trait
management systems along with data and POS reporting systems.
9) How can studios get more collaboration with Target and more of their
sales and stock data?
• Target has welcomed the opportunity to discuss supply chain
improvements with studios. This is a suggested next step upon the
completion of this phase of the Study.
10) How can retailers improve the accuracy of inventory?
• Please refer to the Improve On Hand Inventory section (in section
IV.A).
11) How can we standardize item setup?
• Please refer to the Item Synchronization section (in section IV.A).
12) Can both studio and retailer scorecards be aligned?
• Please refer to the Scorecarding section (in section IV.B).
13) What is status of RFID in stores?
• Please refer to the RFID Implementation section (in section IV.B).
14) What is the possibility of in-store DVD burning?
• The technology for in-store DVD burning is readily available and
already installed at certain Wal-Mart locations. The other retailers
have reviewed this technical solution, but did not indicate any specific
plans for adoption. Wal-Mart has downplayed the availability of instore DVD burning in its marketing campaigns which may provide
some indication of Wal-Mart’s support for this technology. Analysis
conducted by Capgemini yielded dubious results for the economic
return of in-store DVD burning.
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D.
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Merchandising
1) Do merchandisers feel like they are getting enough information about the
new releases?
• Please refer to the Merchandiser Opportunities section (in section
IV.B).
2) What can studios do or provide for merchandisers, so they can sell more
DVDs and thus make more commission?
• Please refer to the Merchandiser Opportunities section (in section
IV.B).
3) What are the merchandisers’ priorities, so studios can work on making
their life easier?
• Please refer to the Merchandiser Opportunities section (in section
IV.B).
4) What would retailers change about their merchandising services?
• Please refer to the Merchandiser Opportunities section (in section
IV.B).
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IV.
Findings & Recommendations
A.
Data Synchronization
Data synchronization issues generate problems throughout the supply chain.
The following table delineates just a few pieces of information that are
considered key in the Home Entertainment supply chain. The design reflects
what each link in the supply chain is responsible for (second column) and
what are the most significant data synchronization problems that arise (shown
in yellow) within each link.
Segment
Sample data
uses
Example of data issue
Item info, sales order, Issue 1: Item info inaccurate and not timely
creation, invoice
Recommendation: Item info standardization through
centralized DB
ASN
(order
Out of scope for the purpose of the Study
Distributor
confirmation), pick,
pack, and shipment
Order picked up,
Out of scope for the purpose of the Study
Carrier
order status, order
delivered (POD)
Order received, on- Issue 2: Discrepancies between items shipped vs.
Retailer
hand inventory, POS items received
data
Recommendation: Use ASNs (will ensure 99.98%
accuracy)
Issue 3: Discrepancies between merchandiser vs.
Merchandiser Scanned shelf
inventory levels
retailer shelf counts
Recommendation: Requires further study to determine
which count is more accurate and appropriate action
to address this issue
Studio
1
Retailer
Carrier
2
3
Merchandiser
Studio
Distributor
Each entity is responsible for critical information, which adds to the complexity
and difficulty in managing data synchronization. The diagram below portrays
the supply chain, with the yellow stars indicating potential points of data
synchronization failure covered in this Study.
End Consumer
To alleviate this issue, the Team has come up with the following
recommendations.
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Encourage 100% Usage of ASNs by Retailers
Findings
During the course of retailer investigation, the Study Team saw numerous
examples of inconsistent use of Advanced Shipment Notices (ASNs). In
some cases, ASNs are systematically ignored in favor of manual inventory
counting and reconciliation with shipping documentation. Also, in some
cases, retailers will use the ASNs and manually count inventory to verify
accuracy of the ASN. This causes even more bottleneck issues in the
receiving process. The lack of ASN usage is a significant process failure
in the last 100 feet of the supply chain and causes inaccuracies in onhands counts, stock-outs, invoice discrepancies, and an increase in
receiving time.
Depending on the time of year (e.g. 4th quarter, Resets/Change-outs,
Major New Releases) studios can generate anywhere between 3,000
orders up through 30,000 orders per day. The complexity of orders in
relation to EDI depends on the studio and customer. Subsequent EDI
transmissions can generate over 14 documents per order (e.g.
Acknowledgment, confirmation, invoice, POD, Status of shipment, etc.)
one of which is an ASN. The accuracy and proper utilization of each
subsequent transaction is dependant on its preceding document. If any
one of these documents fail or if the process is circumvented the results
will lead to a myriad of issues in the supply chain. Areas affected are but
not limited to: Low in-stock percentages, Lost Sales, Inventory
Discrepancies, higher than anticipated Returns, Credit and Collections
delays, Dispute Management reconciliation issues and manual
intervention within any of the functional areas that manage the issues.
During the course of the Study the Study Team had the opportunity of a
walk through at a Wal-Mart Store. One of their findings was a three day
backlog in the receiving area. To add to the obvious problem was the
Merchandising group, Anderson, was unable to put the product out on the
floor for sale despite the fact the product was in the receiving room. This
example is one that directly affects each studio and how they are
measured by Wal-Mart let alone the other mass merchants.
According to widely published 3rd party research (CAPS-Center for
Advanced Purchasing Studies), ASNs have proven to be at least 99.98%
accurate when used correctly. This is a significant improvement over
current receiving methods, where human error is involved. In addition to
the extra accuracy gained in receiving data, countless man-hours are
saved by eliminating manual counts for receiving. This will result in not
only increased sales, but lower operational costs and less opportunities for
shrink. The ultimate outcome is increased profits.
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Ron Moser, RFID strategy leader at Wal-Mart, was quoted on October 12,
2007 by IDG News Service saying: “Often, a pallet with the items being
sought is tucked away in some remote corner of the storage area, but if its
missed, then not only is the sale lost, the searcher will normally order
more of the product to avoid further lost sales. That's how unnecessary
inventory builds.”
Using ASNs is not only a supply chain optimization strategy for today, but
will also realize benefits when retailers fully embrace RFID technologies in
the future. Establishing the proper supply chain procedures, including
transactions from the studio, distributor, and retailer in both directions, will
provide a simple transition when RFID data is integrated. Although RFID
tracking will provide more accurate counts for on-hands and along the
supply chain, verification of product counts at each point of potential
failure will keep reconciliation issues simple and act as a standardized fact
checking procedure.
Short Term Recommendations
One short term improvement that can be made by the studios is the use of
the 214 EDI (Electronic Data Interchange) transmissions from the carriers
(which provides a proof of delivery) and a 204 EDI transmission (which
provides the product tender date). This serves as a verification of the
ASN to “close the loop” with less room for error in the shipment and
receiving process.
It is highly recommended that Wal-Mart encourage a 100% ASN usage
policy across its retail organization. This will not only bring every store up
to the same level of efficiency, but will allow for more accurate data to be
collected on a retailer-wide basis. Likewise, Target could benefit greatly
from using ASNs across their supply chain.
In a 2003 ECR (Efficient Consumer Response) study of retail supply
chains in Europe, it was found that 27% of all shrink experienced in the
supply chain process was attributed to process failure. With the correct
EDI transactions in place, the studio and retailer can identify where
product loss is occurring and focus their efforts to control those
weaknesses.
Long Term Recommendations
The Study Team recommends the initiation of a coordinated effort
between the studios, replicators, distributors, and retail chains to
implement a system to measure and track the points of failure in the
supply chain. The Study has shown significant improvements in the long
run for Target and Wal-Mart stores. With Target and Wal-Mart
representing 43% of the DVD market, the opportunity to dramatically
improve retail execution is well worth the effort.
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Item Synchronization
Findings
The Study has shown that the lack of data synchronization between the
various trading parties is generating several thousand hours worth of
manual intervention to correct human errors in data entry. The benefits of
correcting these issues include simplifying corporate reporting, fewer
invoice disputes, improved visibility of stock level planning, returns
reduction, and improved order accuracy. A manual approach to fixing
inaccurate data is often costly and ineffective, resulting in receiving errors,
ASN failures, invoice discrepancies, and lost sales. Currently, Wal-Mart
subscribes to 1SYNC, a data pool service provider. Best Buy was
subscribed to Agentrics, another data pool service provider, but has since
moved to 1SYNC. Both 1SYNC and Agentrics manage Global Data
Synchronization (GDSN) standards.
The Study has found that some studios use an 832 (Item Catalog) EDI
transaction to facilitate the item set up process for some retailers, while
other studios utilize Agentrics and/or 1SYNC to manage item
synchronization. Some studios then send Excel flat files to a few
customers for their retailer item set up process. Overall, there are various
paths that are being taken to manage the item set up process and, as a
consequence, there is confusion within the retail community. This
ultimately leads to data failures that affect perpetual inventory counts.
While it is not in the realm of this Study to recommend a particular data
pool service provider, it is evident that the current practices are not
efficient. As part of a long term strategy to improve the supply chain, the
studios should identify a series of standards for item set up and work with
their primary retail partners to create a data pool. The potential benefits
are significant. For example, in a 2003 case study by A.T. Kearny, the
estimated financial benefits for suppliers that collaborated in data
synchronization of their item set up realized $800,000 to $1.2 million
benefit for every $1 billion in sales. This would yield an improvement
opportunity in excess of $20 million for the home entertainment industry.
Short Term Recommendations
There are three aspects to the item set up equation for VMI customers
and only two for Non-VMI customers. For the VMI customers, the three
systems that must be synchronized are the VMI system, the Studio ERP
system (SAP, JD Edwards, AS400), and the Customer’s retail application.
Many customers require that their item numbers are set up in the studios
application to ensure the order to cash process is streamlined. There can
be a process established in the Order Management team that coordinates
and verifies that the item attributes in all three systems are correct before
orders (New Release, Resets, and Promotions) are processed. This
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process can be managed though a Macros program or a sophisticated
data intelligence aggregating system. The attributes that create most of
the issues (ASN failures, receiving errors, inventory discrepancies) are:
Studio Item Number, Universal Product Code (UPC), Customer Item
Number, and Suggested Retail Price (SRP). This is usually a one time
process that is done before the first wave of orders is submitted for any
major initiative and/or introduction of a new item-retailer combination. This
process may seem cumbersome, but has been proven in some
organizations to be beneficial. In the longer term, a less manual process
would be recommended.
Long Term Recommendations
Overall, the Study Team recommends that a master data management
approach be taken, allowing for a flexible “publish and subscribe” service
that coordinates the synchronization and publication of key item and other
master setup data. This recommendation would be most easily
implemented by those in the studio who use a 3rd party data pool service
provider.
The studio community might consider a process or approach to facilitate
the engagement process for those customers not subscribing to a 3rd party
data pool service provider. The studios’ IT expertise can assist in a
requirements road map and time estimates related to getting those
customers up to speed. For those retailers that are already subscribing to
a 3rd party data pool provider, studios should meet with the 3rd party data
pool service provider to 1) influence the product/service development
roadmap along the lines of a publish/subscribe master data management
process described above and 2) address, in the short term, any data
failures the retailers may be experiencing. Then, studios should Identify
the issues pertaining to data failure that result in receiving errors, ASN
failures, invoice discrepancies, and lost sales, map a correction plan, and
measure the results of the changes to ensure that the goals are being
met.
Improve On Hand Inventory Accuracy
Findings
On hand inventory accuracy refers to whether the inventory levels
reported by the retailer are correct reflections of their true inventory levels.
The Study found that retail on hand inventory accuracy is their primary
area of concern. On hand inventory inaccuracy occurs when the reported
inventory counts from various parties—the studio, merchandiser, and
retailer—do not match. Several important questions arise such as: Which
count is accurate? Is any count accurate? And what factors are
contributing to these discrepancies? What then shall we use as our trigger
for re-order?
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Without an accurate on hand inventory count, many problems arise, with
the two extremes being out of stock and excess inventory which often
occurs simultaneously on different titles.
Excess
Inventory
Out of Stock
Inventory
On Hand Inventory Accuracy Problems
Inventory stock-outs result in lost sales or unrecognized revenues.
Excess inventory results in returns and increases freight and distribution
costs. Additional problems include increased processing costs, increased
inventory costs, and potential for theft, among other risks.
To gain a sense of the magnitude of this issue, we can look at the cost of
stock-outs in a comparable industry, grocery (Pre-Packaged Mixed Green
Salads). According to the Grocery Manufacturers Association (GMA), in
2003, the estimated cost of stock-outs exceeded $37 Million in excess
inventory, lost sales, and expedited freight. The GMA represents the
world's leading food, beverage, and consumer products companies.
The crux of this problem is its complexity. With thousands of SKUs to
manage, each and every item may have a separate demand/decay curve,
inventory accuracy, return rate, etc. The problem must be managed at the
individual store/SKU level, not by average inventory statistics. Summary
measures such as “open-to-buy” limits are one such measure that masks
inventory shortages. There are innumerable factors that contribute to
retail on-hands inventory inaccuracy (e.g. shrink, inaccurate inventory
adjustments upon receipt of products). Furthermore, there are numerous
stakeholders that contribute to this problem (e.g. merchandisers cannot
locate products, carriers delay shipments).
Short Term Recommendations
The Team has identified some POFs, which should be immediately
addressed. Foremost, ASNs should be properly used by all retail stores.
Failure to use ASNs properly can result in inventory miscounts due to
manual receipt and delays in the last 100 feet. Ron Moser, RFID strategy
leader at Wal-Mart was quoted on October 12, 2007 by IDG News
Service, “2% of all lost sales are due to the simple fact a store has run out
of an item, but 41% of lost sales are due to inventory problems. If RFID
can fix just 10% of that problem, then Wal-Mart will gain $287 million per
year by avoiding lost sales.” The Study Team estimates lost sales can be
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improved by greater than $287 million per year. To illustrate the impact of
this problem, the Study Team conducted additional analysis of the WalMart environment. Based on the Team’s observations, it was found that
30% of Wal-Mart stores do not use ASNs. Considering that the DVD total
market size is $23 billion (2006) and Wal-Mart represents 37% of the
market share, a mere 1% lost sales by those Wal-Mart stores not using
ASNs can result in a total loss of $25.6 million. Note that 1% lost sales is
a conservative estimate. If the estimate grows beyond the initial 1%, the
total loss increases at an even greater rate. For instance, at 5%, the total
loss has is $130 million.
%
Lost
Sales
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
Total Lost Sales
($MM)
$
$25.61
$51.37
$77.29
$103.36
$129.59
$155.99
$182.54
$209.26
$236.15
$263.20
$290.41
$317.80
$345.36
$373.09
$400.99
To further emphasize the potential of lost sales, Target, which accounts
for 6% of the DVD market, does not use ASNs for any of their retail stores.
Another point of failure is item data synchronization. This was expanded
upon in detail within the previous section.
Long Term Recommendations
To resolve this problem, the supply chain—from point of product order to
the Point of Sale (POS)—must be de-constructed and analyzed. The
Study Teams’ initial review of the situation for new releases uncovered the
following
Points
of
Failure
(POFs)
between
the
studio,
replicator/distributor, merchandiser, and/or retailer:
• VMI systems are not placing orders in a timely manner to meet
retailer’s required delivery date and customer demand
• Orders are not processed by studio ERP systems on time and
correctly
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Orders are not sent to distributor on time and correctly
Distributors are not picking, packing, and shipping on time and
correctly
Carriers are not picking and delivering on time and in full
Retailers are not receiving products on time and posting inventory
correctly
Merchandisers are not putting products on floor on time and
correctly
EDI transactions are not posting the aforementioned processes on
time and correctly.
If any one of these potential POFs occurs, then, the retail on-hands
inventory accuracy will be impacted negatively. Furthermore, every
potential POF provides an opportunity for inventory inaccuracy and
monetary losses.
Secondly, as AMR Research outlines in its Demand Driven Supply
Network (DDSN) concept, demand and supply variability requires
continuous retuning of inventory buffers and batch sizes. In DDSN,
suppliers, contract manufacturers, and logistics providers also need to
share inventory quality, quantity and location, capacity, capability, and
costs with their trading partners.
Strategic supply relationships are extended to those willing to share the
necessary real-time visibility to take advantage of market opportunities.
Therefore, best practices in inventory optimization involve the
consolidation of demand/supply/inventory information into (where
possible) a single, synchronized, integrated repository that is visible to the
supply chain participants. This results in increased supply chain visibility,
at a level of granularity sufficient to be actionable.
Related Issues
Retailers have developed scorecards to measure the performance of the
studios in delivering and managing their products. These scorecards may
indicate that POFs originate from the studios’ end.
For the same reasons mentioned earlier, the POFs inferred from the
retailer scorecards may be inaccurate. POFs originating from within the
retailer or merchandiser may be masked by the retailer’s practices. For
instance, Anderson currently handles Wal-Mart’s merchandising and
performs stock scans. If Anderson finds a discrepancy between its stock
scans and the stores reported on-hands, the store manager is responsible
for making the adjustment within Retail Link. If the store manager makes
no adjustment and the scans were a correct reflection of on-hands
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inventory, a stock-out may result, which Wal-Mart interprets as evidence
of the studio’s inability to manage their product demand.
Forecasting Improvements
Findings
The demand planning future state for the home entertainment industry
needs to address several complicating factors including:
• Differences in the demand dynamics and structure of trading
relationships between each studio and each individual retailer
• The lack of consistent business processes across each retailer
• A need for more integration between pre-release demand forecasts
through replenishment (VMI) forecasts, as well as between sales
forecasts and real life, statistically-based forecasts
• Differing levels of maturity in organisational governance and KPIs
• A significantly complex IT environment with a variety of planning,
execution, and business intelligence applications.
At the same time, it is important to recognize that simply upgrading a few
technology solutions and standardizing some tactical business processes
is not enough. It is fundamentally important that any Global Demand
Planning initiative support the strategic bigger picture within the home
entertainment division from both a Business and IT perspective and the
business and IT communities need to be aligned tightly for success.
The key question that each studio needs to address is therefore: “how can
the global demand planning target business benefits and accelerate
progress towards a broader Sales and Operations Planning framework
and achieve full consistency with the Enterprise Architecture principles
and roadmap?”
Effective demand planning is the heartbeat of a demand driven enterprise
and the broader Sales and Operations Planning (S&OP) processes
provide an operational governance framework for optimizing profit.
Best practice in S&OP is to maximize profits by aligning all cross
functional agendas within the home entertainment division and with key
retailers and merchandiser, proactively anticipating and closing
performance gaps and creating an environment that profitably manages
and aligns both demand and supply across the whole enterprise as
illustrated:
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Figure: Sales and Operations Planning
Long Term Recommendations
By adhering to methodologies like Collaborative Planning, Forecasting,
and Replenishment (CPFR), and consumer-driven Demand Management,
studios can build a successful, repeatable process of forecasting. Below
are supply chain best practices related to Demand Management that have
been adopted by many consumer packaged goods organizations to
strategically enhance their supply chains.
Forecasting & Supply Chain Best Practices
In the last 20 years, there have been three sets of Supply Chain frameworks
that have been developed and gained popularity. These best practices are
the following:
Quick Response (QR) and Efficient Consumer Response (ECR)
These are frameworks that were popular in the 1990s and allowed for
suppliers to manage and market their products, thus bridging the product
control gap between suppliers and retailers.
Co-Managed Inventory
Co-managed inventory gives the supplier even further control of their
products on the retailer level. Examples of co-managed inventory include
VMI (vendor-managed inventory), SMI (supplier-managed inventory), CPR
(continuous replenishment programs), and RIM (retail inventory
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management). Co-managed inventory is widely used within the Home
Entertainment supply chain by the large studios.
Collaborative Planning, Forecasting, and Replenishment (CPFR)
CPFR is a framework that defines guidelines for collaboration between
trading partners. This is most recently developed supply chain best
practice. Studios have been employing this to a degree, however, if not
properly adopted CPFR can be a counter productive process. The studios
should look into their processes and identify any of the following pitfalls
and adjust to meet their strategic goals:
1. The supplier and retailer still don’t collaborate nearly to the degree they
should in replenishment plans.
2. Collaboration is often limited only to the high-profile retailers. These
include Wal-Mart, Target, and Best Buy.
3. The collaboration tools and systems are often poorly integrated—or not
integrated at all—with other related enterprise systems (e.g. order
management). This results in manual effort in tying together different
processes that require data from disparate systems.
There continues to be symptoms that supply chain frameworks suffer that
have not yet been cured. The most critical of such ailments are the following:
Data Synchronization
Amongst the various entities of the supply chain, there is a lack of
synchronization of data that is shared and critically used. In fact, this is
one of the key areas of improvement identified in this study by the
Capgemini Team. (Please refer to the Data Synchronization section for
more details and recommendations.)
Exception Management
By definition, exceptions are difficult to track and manage. Carrefour, the
world’s second largest retail chain, is using Syncra Systems to address
this issue.
Invoice Matching & Financial Reconciliation
Of all invoices, 60% generate errors and 43% result in deductions. Each
invoice error costs between $40 and $400 to reconcile. This is clearly a
pressing and costly issue that puts a burden in the supply chain. Target is
using Notiva Match and Reconcile to address this issue.
Sales & Operations Planning Data Sharing
External collaboration tools often are constrained by their organization’s
ability to internally share buy- and sell-side data. Fleetwood Enterprises, a
leader in recreational vehicles and manufactured homes, is using
Demantra’s S&OP solution to address this issue.
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Demand Management
Retailers and manufacturers across other industries have collectively agreed
that higher returns on investment can be achieved by improving demand
management and forecasting. Studies have narrowed down the best
practices of demand management to the following four primary drivers:
Collaborative Demand Forecasting
This includes developing weekly demand forecasts, forecasting at a SKUlocation level (or lower), integrating sales teams into the forecasting
process, building up forecasts in layers, and adopting a formal scheduled
forecast review process.
Transparent Allocation and Replenishment
This includes focusing logistics on capacity, enabling allocation at a
regional level, and helping employees understand how the theory drives
the practice.
Demand Shaping
This includes developing a convincing business case for a demand
shaping process, establishing a committee, and paying strict attention to
data quality.
Full Sales, Operations, and Inventory Planning
This includes adopting multi-echelon inventory planning
understanding lead time variability at each supply next stage.
and
In addition to adopting these best practices, it is important to effectively
measure the effectiveness of these practices using business metrics. The
metrics to focus on should be quantifiable drivers of ROI, such as out of
stock, inventory turns, revenue increase, and finished good inventory.
The chart below illustrates the best practices in demand planning, as
described above, as well as future practices.
Demand Management Best Practices and Future Practices
Demand
Forecasting
Best Practices
Future Practices
Increase the frequency of forecasts
Synchronize forecast frequency with
customers’ planning periods
Provide a baseline for account team
adjustment
Establish an integrated sales and
operations planning process
Allocation and Conduct item velocity analysis
Replenishment
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Validate adjustments with statistical
modeling
Use predictive markets
Establish process to review item
velocities
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Conduct network capacity analysis
Conduct item file parameter review
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Establish process to reserve
capacities for priority merchandise
Use activity based costing to
understand impact of
merchandising decisions on
execution costs
Establish process to review item
master data parameters
Monitor forecast error
Train end users in the theory of
investment management
Demand Clean item master data to support
Shaping demand shaping
Monitor forecast error and lead time
variability
Certify end users in theory of
inventory management
Establish a process to maintain item
master attributes driving pricing,
promotion, and mark down logic
Best practice demand planning processes minimize forecast error by
developing excellent statistical forecasts and effectively integrating market
intelligence concerning promotions, new product launches and competitor
activity – with the feedback loops to ensure that the processes continually
improves, as illustrated:
Figure: Demand planning
Demand planning for DVD products is an expert’s process that is both an art
and a science. Specific focus areas within DVD demand forecasting that
must be addressed include:
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Management of the forecast hierarchy to achieve the level of detail
required for supply planning, excellence in statistical forecasting and easy
alignment with Sales teams
Pressure testing and improvement of the design for engaging sales and
customer input as part of the S&OP cycle
Design of appropriate metrics to assess the quality of the forecasts (bias,
spread etc) and improve the inputs from each of the participants in the
forecasting process
In an analysis of leading consumer products companies, cross functional
collaboration is the single biggest element of successful Demand Planning
improvement as illustrated:
Figure: Demand Planning Organizational considerations
Best practice in organisation for demand planning in consumer products
includes the use of cross functional business teams, clear roles and
responsibilities and timelines for forecasting and cross-functional KPIs to align
stakeholders.
The benefits of improved forecast accuracy and globally consistent demand
planning processes will only be achieved if the people within each studio
change the way that they currently do things. Achieving significant benefits
will require significant change, including:
• Greater cross functional collaboration across Sales and Supply at a
shared commitment to one set of numbers
• Greater cross regional collaboration in the optimal use of Foster’s shared
resources – often involving emotional decisions and sacrifices for the
greater good
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Improvement in the level of statistical forecasting capabilities
Improvement in the level of business engagement capabilities
Changes in the way that KPIs are set, measured and managed for
stakeholders in the Demand Planning process
DDSN
Demand-Driven Supply Network (DDSN) is a system of technologies and
processes that senses and reacts to real-time demand across a network of
customers, suppliers, and employees. DDSN is a supply chain framework
that emphasizes the need and benefits of demand management, as outlined
in the previous section, by shifting the focus of traditional supply chain
management from the factory, supplier level downstream to be more
customer-centered.
The key components to implementing DDSN
successfully are 1) having a scalable, flexible, and robust system, 2) having
the ability to see demand at many levels, and 3) having a network that’s built
on standards and open communication channels.
“Fast Fashion” Best Practices
The term “fast fashion” refers to the rapid sensing and response to changing
trends in consumer demands. Though prevalent in fashion, this term also
applies to many consumer electronics, such as cell phones. To a lesser
degree, this is also applicable to home entertainment products.
Many suppliers have employed the following tactics to quickly react to
consumer demands for fast fashion:
• Provide incentives to store associates to capture causal information
regarding consumer desires.
• Define a clear and thorough communication strategy between the supplier
and retailer, which includes ongoing trend discussions, product insight,
and consumer insight.
B.
Retail Execution – The Last 100 Feet
The most critical component of the DVD supply chain is retail execution - if
the product is not on the shelf, there be will no sale. The ultimate success of
the entire supply chain operation can be evidenced by whether or not the
consumer can find and purchase the DVD.
Unfortunately, retail execution is also one of the most complicated areas to
streamline and improve upon, as issues originating from all facets of the
supply chain flow downstream to inhibit retail execution. The Study Team has
broken down the areas of improvement identified into two buckets: Last 100
Feet and DVD Improvement Opportunities.
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Cross-Industry Comparison
Within the Consumer Packaged Goods (CPG) Industry there are aspects of
products that react in a similar fashion as the DVD industry. Albeit that the
supply chains are dissimilar, the similarities are with the marketing, and
stochastic demand. This random demand can be attributed to seasonality,
trends, fluctuations in disposable income, and current events. Successful
management to meet this demand in these scenarios require complex ERP
systems, continuous improvement to not best practices but the creation of new
practices, and collaboration between suppliers chain, value chain, and retailer
chain. We have compiled various levels of information that the studios can
review and assess any opportunities that can be leveraged to enhance their
supply chain.
A. Other Retail Products: Case Studies
Apparel Industry
Similar to Home Entertainment, many products in the Apparel industry often
experience a shortened lifecycle with a fast sales decay curve. To increase
sales, the Apparel industry has invested in Product Lifecycle Management
(PLM) technologies, which have demonstrated strong results:
Metric
High inventory turnover
Net margin improvement
Greater full price sell-thru
Comparable store sales
increase
Shopper frequency increase
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Benefit from PLM
5-7 times
15-20%
Over 80%
10-12%
12-17 times/year
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PLM for home entertainment should be viewed as a set of
core cross-functional services linking into other key services
wrapped under banners such as CRM, ERP, SCM
Product Development
Collaboration
 Release management
 Pre Production
Management
 Enhanced Content
management
 Collaborative design
 Product data
management (SKU,
BOM, etc. ) and
document management
Sales and
Marketing
(CRM)
Product Design
& Development
(PLM)
Manufacturing
Delivery &
Support
(ERP)
Supply
Chain
(SCM)
Customer Collaboration
 Release management
 Custom configuration
 Marketing Collaboration
Manufacturing Collaboration
 BOM Change Management
Coordination
 Just In Time customization
 Design
 Pick, Pack and Ship
Supplier Collaboration
• Marketing
• Design
• DVD manufacturing
PLM incorporates processes that enable collaboration throughout the full lifecycle
and across partner networks, utilizes technologies that support product and
process development. REI, GUESS, New Balance, and Marimekko are a few
organizations that have deployed PLM.
Marimekko is a leading textile and clothing design company established in 1951.
The company designs, manufactures and markets high quality clothing, interior
decoration textiles, bags and other accessories under the Marimekko brand both
in its home country of Finland and around the world.
• 1,200 collections
• 6,500 products
• 3,000 materials
• 3,000 accessories
• 200 labels
• 6,600 product recipes
• 5,900 documents
What do Shoes and DVD’s have in common?
According AMR research on “Lessons from Demand Driven Leaders” Published
in 2007, it was found that the Brown Shoe Company supply and demand chains
are compatible to the DVD Industry. The commonalties Shoes and DVD’s both
experience SKU proliferation, a rapid introduction of new items and a similar
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decay curve for sales. The Brown Shoe Company is one of the largest retail
chain selling brand name, value priced shoes for families and women’s high end
fashion, with a $2.3 billion in annual sales, servicing retailers such as Wal-Mart,
Target, and Nordstrom. The Brown Shoe Company manages its supply chain by
utilizing the Consumer Driven Demand Planning Methodology.
Some of the successful practices that the Brown Shoe Company has found
effective are:
• Attribute based forecasting
• Visibility of data and increased collaboration
• Frequent updates and review of forecasts and supply
• Align supply with demand within short life-cycles
• Utilize seasonal profiles to forecast new products
• Data Integrity and cleansing
• Use POS data as a demand signal
• Plan in weekly buckets to shorten response time
As a result the Brown Shoe Company has created a repeatable formal process
addressing demand and consumer satisfaction. They have improved their
forecast accuracy at the item/store level to 80% thirteen weeks into the future.
Furthermore, they are able to balance their supply with consumer demand.
Apparel Industry Best Practices
• Event management, lead time optimization, taking inventory positions on
supplied goods, buying/reserving capacity to deal with variability,
predictive arrival times based on "windows" (alert me on all goods 24-48
hours from depot)
• Other best practices are managing assortment planning, case-pack
optimization, and just-in-time store allocation (at a cross-dock facility).
Apparel Industry Similarities to the DVD Industry
• Proliferation of SKU (color and sizes)
• Short product lifecycles
• Item master data synchronization
• Ability to group in hierarchies ancestor/descendent SKU's to try to predict
demand on new items
• Existence of "basics" vs. "fashion" goods, like DVDs, creates a need for
dual processes of managing the cost/responsiveness equation
Apparel Industry Differences to the DVD Industry
Large portions of supply come from overseas mainly from Asian countries.
Overseas manufacturing creates an industry that expends a great deal of its lead
time dealing with:
• Customs and Homeland Security issues
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A very long and highly variable supply chain, where variability is
introduced along many dimensions, depending on mode of transportation,
type of product/packaging, country of origin, and special handling
requirements
Multiple modes of transportation, including ocean carriage
A large percentage of supply must be paid for via a letter of credit well in
advance, making the term "time is money" a very real equation. Not so with the
DVD supply chain.
The last aspect of the Apparel Industry that differs from the DVD Industry resides
at the end of new product release. The strategic plan to minimize or eliminate
returns by continuously marking down the product until it is cleared benefited the
Apparel Industry in managing “dead stock”. In the case of DVDs, New Release
product is returned to the distributor, moved from “New Release” and into the
“Catalog” category. At the studios discretion, the product is marked down via
“Re-price” and “Price Protection” process.
Grocery Industry
The Grocery Industry has been the most successful at deployment of product
from the receiving dock to floor. This is primarily a result of the fact that the
retailers commit their in house staff on managing the last “100 feet” compared to
other products that are managed by a merchandising company.
Jeremy Shapiro, professor of operations research and management emeritus in
the Sloan School of Management at the Massachusetts Institute for technology,
has stated in Global Logistics & Supply Chain Strategies (May 1, 2004), “that in a
commodity industry, which is pretty much price driven, is challenging. But it is
easier than in consumer products, where demand management has to do not just
with prices, but with advertising, promotions, sales efforts, and so on”. He goes
on to state that “in CPGs marketing is the driver which leads to the complex fact
that peoples’ behavior is difficult to measure rather than measuring the supply
chain quantities”.
It is critical to the success of an organization to make available cross-department
communication, collaboration, and go beyond transactional data.
These
comments stress the importance to tighten the chain between studios,
merchandisers, and retailer operations given the fact that the merchandising link
is here to stay. Merchandisers have expressed their interest in collaborative
planning with the studios; this can prove to be an effective synergy.
Grocery Supply Chain Differences to the DVD Supply Chain
Grocery companies have developed an array of tools to manage volatility of prepackaged, mixed-green salad.
• Demand Management
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o Modify promotion volumes by switching to other products or
canceling ads
o Hold Customer Orders to 10-week averages
o Implement a price increase (surcharge) with Food Service & Retail
Customers
Supply Management
o Change recipes, through MRP bill of material mix, to shift
commodity usage
o Reduce/Eliminate, for a short period of time, procurement of the
commodity
Risk Management
o A significant percentage of growers, seeking greater price stability,
aligned with contracted growing agreements, thereby dramatically
shrinking the available open market pounds.
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VII. Next Steps
During the DEG Committee meeting held on 2 October, the group was presented
with a series of recommendations on where to focus next steps. Thru the polling
of the group, three broad areas were identified that would serve as the
foundation for any industry-wide initiative:
1. Inventory Accuracy and Collaborative Forecasting
2. Packaging and shipping
3. Retailer Specific Items (i.e. how can the Industry as a hole improve the
relationship with Wal-Mart, Best Buy, etc.)
A. Issues Scorecard Results
Raw scorecard data:
#
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
Issue
S1* S2* S3*
Retailer specific improvements 2 5 4
Merchandiser opportunities
2 1 3
Allow retailers access to studio
systems
1 1 2
Returns
2 5 5
Challenge status quo of
Tuesday release date
0 0 0
Corrugate
2 1 3
Scorecarding (studio SLAs)
4 0 3
RFID implementation/integration 4 2 3
Create centralized Planograms 2 2 3
Encourage 100% usage of
ASNs by retailers
4 3 4
Centralize item setup
3 2 4
Improve on-hand inventory
accuracy
5 3 5
Improve information available for
better forecasting
5 2 5
Keep IT people involved in
decision making throughout
product lifecycle
2 1 4
Packaging
3 4 4
Shipping
2 2 5
Reduce SKU count
2 0 2
Big Quick
S4* S5* S6* S7* S8* Win** Win** Ave
3
3
4
5
5
3.9
4
1
4
x
3
2.6
0
1
0
2
1
2
x
x
1
3
0.9
2.9
0
3
4
4
0
0
5
4
3
3
0
3
4
3
5
x
x
x
4
x
0
2
3
2
3
5
0
4
3
5
4
5
x
3
2
1.5
4.1
2.6
5
5
5
5
5
3.5
4.8
4
4
4
5
4
0.5
0
3
3
3
0
3
4
3
3
4
4
3
x
x
x
x
0
4
3
0
0.5
1
1
2
1
2
0.0
2.7
3.3
3.1
2.6
4.1
1.4
3.6
3.3
1.9
*In order to represent the respondents generically each studio is represented by S1, S2, etc.
**In the big/quick win columns each studio was given one vote; the votes were summed. In the
event two items were selected by one studio each vote counted as 0.5
Issues Ranking
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When looking at top rated issues, 3 focus areas fall out:
#
12
10
13
1
15
16
7
8
4
6
2
9
11
17
14
3
5
Issue
Improve on-hand inventory accuracy
Encourage 100% usage of ASNs by retailers
Improve information available for better forecasting
Retailer specific improvements
Packaging
Shipping
Scorecarding (studio SLAs)
RFID implementation/integration
Returns
Corrugate
Merchandiser opportunities
Create centralized Planograms
Centralize item setup
Reduce SKU count
Keep IT people involved in decision making throughout product
lifecycle
Allow retailers access to studio systems
Challenge status quo of Tuesday release date
Ave
4.8
4.1
4.1
3.9
3.6
3.3
3.1
3.1
2.9
2.7
2.6
2.6
2.6
1.9
Grouping
1
1
1
3
2
2
3
2
3
2
1.4
0.9
0.0
Proposed ASE Study Groups
Inventory accuracy and collaborative forecasting
#
12
10
13
Issue
Improve on-hand inventory accuracy
Encourage 100% usage of ASNs by retailers
Improve information available for better forecasting
Ave
4.8
4.1
4.1
Packaging and shipping
#
15
16
8
6
Issue
Packaging
Shipping
RFID implementation/integration
Corrugate
Ave
3.6
3.3
3.1
2.7
Retailer specific Items
#
1
7
4
Issue
Retailer specific improvements
Scorecarding (studio SLAs)
Returns
Ave
3.9
3.1
2.9
Statistics
• Per the studio scorecard responses, 95% of “5” responses and 81% of “4”
responses are represented in the three ASE study groups
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B. Proposed Next Steps
The proposed next step after the distribution of the final reports to the Studios
involved is the design and execution of an ASE.
The Study Team believes that the Accelerated Solutions Environment (ASE)
will be an effective means for creating the roadmap for improvement within
the home entertainment supply chain. The ASE’s patented facilitation
environment and process, fused with Capgemini’s and Teradata’s supply
chain process and technology expertise, will enable the Studio participants to
effectively tackle the complex business challenges that face the Industry.
The Study Team believes the best way to respond to the Studios’ business
challenges, is through high-performance group creativity and collaboration.
The Study Team is designing the ASE to blend those two core principles in a
way that unleashes group genius and yields breakthrough solutions and
action plans in a day or two rather than months.
The ASE achieves results through a process we call ‘decision by design’
utilising time compression, multiple cycles of iteration, and massive parallel
processing to dramatically increase the speed of solution development as well
as the certainty of achieving expected value.
Accelerated Solutions Environment™ Overview
The Accelerated Solutions Environment (ASE) is a creative work space combined with a
unique methodology used to accelerate business decision making and the creation of
innovative solutions
Key Components
 Collaborative, Information-rich,
technology-enabled environment
 Patented facilitation approach to
solve complex, global issues
where stakeholder views are
diverse.
“It would have taken us nine
months and a crisis.”
 Delivers in a two to five day
DesignShop® what typically
takes 3-9 months worth of work
using traditional methods
 Enables decision making that
sticks
 Creates alignment and sense of
ownership
 Differentiated from a standard
workshop or facilitated session in
that it is an integral process to a
large program that accelerates
completion of deliverables.
ASE
Approach
Speed
Traditional
Approach
Value
“We did eight months of work
over the last three days. I will
not do another project of this
type without the ASE.”
 Specially accredited facilitation
team to deliver on this
methodology
The ASE Value
Time
Finance Transformation
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The following slides provide an overview of some previous client experiences
with the ASE.
Client
Success Stories
Large Electronics Retailer
Development of Functional Specifications for i2
Implementation
13
Weeks
21
Without
ASE*
Net
Result:
Not using the ASE
would have cost
the client 62%
more time and
42% more money!
$1.49M
$1.05M
Weeks
5.5 FTEs
With
ASE
ASE #3
Validate and
Finalize
Functional
Specifications
(2 Days - 50
Participants)
“When we started, I was trying to
project optimism and enthusiasm, but
didn't know how we were going to get
six months of work done in thirteen
weeks. We got more accomplished
than I ever imagined we could. We
have collaboratively designed a wellarchitected blueprint!”
Without ASE
6.5 FTEs
ASE #2
Validate
Future State
and Develop
Business
Requirements
(2 Days - 25
Participants)
With ASE
The value of speed!
ASE #1
Project
Management
Processes and
Current State
Validation
(1 Day - 22
Participants)
This demand supply
planning project extended
from current state
assessment, through futurestate design, including
business requirements, and
creation of all functional
specifications (38 of them)
to be sent to software
developers.
Cost to
Client
—Client Executive Sponsor
*Estimate of the project without the ASE was developed using GCSW by Chap Kistler, V.P.,
and Bill Kammerer, Sr. Mgr., of the client team and Brigitte Morel, V.P., of the ASE.
2
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Client
Success Stories
Large Electronics Retailer
Development of Functional Specifications for i2
Implementation
13
Weeks
21
Without
ASE*
Net
Result:
Not using the ASE
would have cost
the client 62%
more time and
42% more money!
$1.49M
$1.05M
Weeks
5.5 FTEs
With
ASE
ASE #3
Validate and
Finalize
Functional
Specifications
(2 Days - 50
Participants)
“When we started, I was trying to
project optimism and enthusiasm, but
didn't know how we were going to get
six months of work done in thirteen
weeks. We got more accomplished
than I ever imagined we could. We
have collaboratively designed a wellarchitected blueprint!”
Without ASE
6.5 FTEs
ASE #2
Validate
Future State
and Develop
Business
Requirements
(2 Days - 25
Participants)
With ASE
The value of speed!
ASE #1
Project
Management
Processes and
Current State
Validation
(1 Day - 22
Participants)
This demand supply
planning project extended
from current state
assessment, through futurestate design, including
business requirements, and
creation of all functional
specifications (38 of them)
to be sent to software
developers.
Cost to
Client
—Client Executive Sponsor
*Estimate of the project without the ASE was developed using GCSW by Chap Kistler, V.P.,
and Bill Kammerer, Sr. Mgr., of the client team and Brigitte Morel, V.P., of the ASE.
2
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Client
Success Stories
Large Electronics Retailer
Development of Functional Specifications for i2
Implementation
13
Weeks
21
Without
ASE*
Net
Result:
Not using the ASE
would have cost
the client 62%
more time and
42% more money!
$1.49M
$1.05M
Weeks
5.5 FTEs
With
ASE
ASE #3
Validate and
Finalize
Functional
Specifications
(2 Days - 50
Participants)
“When we started, I was trying to
project optimism and enthusiasm, but
didn't know how we were going to get
six months of work done in thirteen
weeks. We got more accomplished
than I ever imagined we could. We
have collaboratively designed a wellarchitected blueprint!”
Without ASE
6.5 FTEs
ASE #2
Validate
Future State
and Develop
Business
Requirements
(2 Days - 25
Participants)
With ASE
The value of speed!
ASE #1
Project
Management
Processes and
Current State
Validation
(1 Day - 22
Participants)
This demand supply
planning project extended
from current state
assessment, through futurestate design, including
business requirements, and
creation of all functional
specifications (38 of them)
to be sent to software
developers.
Cost to
Client
—Client Executive Sponsor
*Estimate of the project without the ASE was developed using GCSW by Chap Kistler, V.P.,
and Bill Kammerer, Sr. Mgr., of the client team and Brigitte Morel, V.P., of the ASE.
2
The ASE for the Home Entertainment Supply Chain is tentatively scheduled
for the last week of January, 2008, in the Capgemini, Burbank office.
A Sponsor Team including Amy Jo Smith- DEG; Devendra Mishra- ESCA;
Theodore Garcia-Capgemini; Cheryl Wiebe-Teradata; Sara WinklebauerASE Facilitor and Mark Landry- Capgemini, will construct the outline, goals,
objectives of the ASE and report back to the DEG Study Committee for
approval in January 2008.
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VIII. Appendices
A. ESCA Conference Pulse Survey Results (US)
The Entertainment Supply Chain Academy was held on June 27th and 28th in
Los Angeles, California. At this conference, the Team conducted a “Pulse
Survey” around key issues regarding the home entertainment supply chain.
The survey questions results are posted below.
ENTERTAINMENT SUPPLY CHAIN ACADEMY PULSE SURVEY
June 27 - 28, 2007 - Los Angeles, CA
INSIGHTS:
Which stage of the home entertainment supply chain has the most room
for improvement?
(33%) Returns Management
(31%) Retail Execution
(18%) Warehouse to Retail Shelf
(11%) Replication to Point of Delivery
(7%) Preproduction to DLT Delivery
Within retail execution, which of the following areas has the most room
for improvement?
(42%) Product Movement from the Backroom to Sales Floor
(28%) More Timely Receipt of Replenishment Orders
(14%) ASN Receipts
(9%) Other
(7%) More Efficient Item Setup
Which of the following trends do you believe will have the most impact
on the home entertainment supply chain?
(29%) SKU Proliferation/Shelf Space Allocation
(29%) Competition between Physical & Digital
(27%) Downward Pressure on Price Points
(7%) Mass Customization
(5%) Pressures for “Green” Packaging
(2%) Other
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Which delivery platform do you see as having the greatest sales growth
opportunity?
(42%) Next Generation Physical DVDs
(30%) Multi-platform Bundling
(16%) Manufacturing on Demand
(7%) Electronic Sell through
(5%) Kiosk Sales
Which standardization initiative between studios and retailers would
produce the greatest supply chain improvement?
(39%) Generic, Category-Wide POS Data Sharing
(24%) Returns and Deductions Protocol
(20%) Scorecards/KPIs
(10%) Packaging
(5%) Item Setup Templates
(2%) Other
Which technology will have the greatest impact on the home
entertainment supply chain over the next two years?
(36%) RFID at the Item Level
(25%) Manufacturing on Demand
(18%) Digital Delivery
(16%) Increased EDI Usage
(5%) Increased RIM System Usage
Which metric best measures the health of your supply chain?
(32%) Not Applicable
(24%) In Stocks
(15%) POS
(12%) Inventory Turns
(10%) Returns
(7%) ASN Receipts
In terms of data transmission which is the most important to your
supply chain?
(28%) Accuracy
(21%) Not Applicable
(17%) Data Synchronization
(17%) Timeliness
(12%) Detail
(5%) Frequency
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How effective do you view in-store promotional corrugate as a use of
financial and physical resources?
(30%) Somewhat Effective
(29%) Not Applicable
(22%) Extremely Effective
(19%) Somewhat Ineffective
B. Study Participants
Studios
•
•
•
•
•
•
•
•
20th Century Fox Home Entertainment
Image Entertainment
Lionsgate
Paramount Home Entertainment
Sony Pictures Home Entertainment
Universal Studios Home Entertainment
Walt Disney Studios Home Entertainment
Warner Home Video
Steering Committee
• 20th Century Fox Home Entertainment
o Tony Korkunis; Senior Vice President, Category Management & Retail
Operations
• Image Entertainment
o Rick Eiberg; Senior Vice President, Operations
• Lionsgate
o Akin Ceylan; Executive Vice President, Operations
• Paramount Home Entertainment
o Americo Silva; Senior Vice President, Worldwide Operations
• Sony Pictures Home Entertainment
o Aodan Coburn; Executive Vice President, Worldwide Operations
o Walt Engler; Senior Vice President, Operations
• Universal Studios Home Entertainment
o Tom Emrey; Senior Vice President, Chief Financial Officer
• Walt Disney Studios Home Entertainment
o Bill Segil; Senior Vice President, Worldwide Operations
• Warner Home Video
o Dan Miron; Senior Vice President, Sales Planning & Operations
o John Quinn; Executive Vice President, Worldwide Supply Chain
Management
Retailers
•
•
Best Buy Co., Inc.
Circuit City Stores Inc.
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Target Corporation
Wal-Mart Stores, Inc.
Merchandisers
•
•
Anderson Merchandisers, L.P.
Mosaic Sales Solutions Holding Company
• SPAR Group, Inc.
C. Digital Supply Chain
As residential broadband connections increases in popularity, growth in the
digital market becomes increasingly significant. Due to online piracy and the
downward trend of the physical music market, many may see the digital
market as a threat.
However, the truth is the digital space offers many great opportunities to open
up more distribution channels, increasing ways to monetize content, and thus,
boosting up total revenues. In fact, the digital space opens up three new
digital distribution channels:
1. Manufacturing on Demand (MOD)
2. Video on Demand (VOD)
3. Electronic Sell-Thru (EST)
iTunes had publicly announced their purchase statistics of movie downloads
as the following:
• 125,000 movies during its first week of service
• 500,000 movies as of November 12th, 2006
• 1.3 million movies as of January 9th, 2007
With the introduction of these new business models and even more digital
formats, trends begin to emerge.
The most apparent trend is the
convergence of various media outlets. For instance, for post-theatrical
release, movies can now be viewed on your television (from on demand,
renting, and buying), computer, iPod, iPhone, cell phone, and so forth.
Studies have indicated that sales increase when digital and physical products
are bundled, as consumers still prefer to view their content in their living
room—not on their computer screen.
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The Digital Supply Chain
Content providers will enable their content across a higher
number of channels and formats
Channels
Devices
Classical
Distributi
on
Cinemati
c
Content
Broadba
nd
Provider
s
PC
Screen
Online
Mobile
Device
Direct to
Consum
er
Other
Short form video –
Music & TV Episodic
TV
Screen
Retailers
Music
Long form video Movies
Games & Publications
7
Issues within the Digital Supply Chain
Content Challenges:
Capability Challenges:
Lack of catalog breadth
and depth
• How many titles can
be made available?
• How can rights
clearances be
streamlined to
increase number of
titles?
• Rights management
issues
• What can I sell and
to whom?
• How can licensing in
and out be effectively
managed?
• Economic issues:
• What will be the
cannibalization
effects on traditional
LOBs?
• How should I
optimize digital with
physical pricing and
bundles?
•
•
•
•
•
•
Storage limitations on end
devices placing a rapid
ceiling (esp video)
Download times for digital
video remain slow
Managing product
complexities as SKUs and
markets expand rapidly
DRM challenges limiting
consumption choices
Video Browse & Search
remains limited
Customer Challenges:
Digital content price points often higher than current perceived value
Gaps in compelling customer experience across channels and devices
Illegal precedents restraining buy and take up for digital
• Lack of inter-operability driving concern of “lock ins” of proprietary standards
• Mass market inertia in physical which is knows driving educational challenges
•
•
•
8
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D. Trends
Over the course of our study, we spoke to all participating studios regarding
top industry trends. After compiling such information, we have been able to
better distinguish the direction of the market. We interviewed sixty seven
individuals from the participating studios in various departments including
Supply Chain and Operations, VMI Operations, Credit Collection, Sales and
Planning, Customer Service, Retail Marketing and Merchandising. From our
study, we have come to the conclusion that increased use of high definition
content is the most prominently observed trend. Below we have ranked the
trends by how prevalent they were in our conversations.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
High definition formats
Digital convergence
SKU proliferation
Green initiative
RFID
Cross docking
Mass customization
Customers wanting to carry less inventory
Managing shelf space with proliferation of formats
Inter-studio collaboration
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Individuals Interviewed Regarding Trends
2, 3%
3, 4%
4, 6%
21, 32%
Supply Chain/Operations
VMI Operations
Credit Collection/AR
12, 18%
Sales and Planning
Customer Service
Retail Marketing
Merchandising
12, 18%
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Prepared for <Studio Name>
Interview Guide
Executive Interview Template
Project Name:
DEG/ESCA Supply Chain Research Initiative
Interviewee(s):
Position:
Date:
Interviewer(s)
High Level Questions
1. What is the overall goal that your studio wishes to accomplish with this research
initiative?
2. Do you have any overall concerns about the study itself?
3. Are you aware of any divergence of opinion among the ESCA Board Members regarding
the approach and/or desired results of this initiative?
Retailer Related Questions
1. What do you consider to be the primary strengths of your current home entertainment
retail supply chain?
2. In your opinion, which aspects of your home entertainment retail supply chain operations
are lacking most? (i.e. Metadata capture, streamlining pre-production, etc)
3. In your opinion, which retailers are most conducive to your supply chain operations
within the home entertainment industry? Why?
4. Which retailers create the most strain on your supply chain operations? Why?
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5. What are some of the performance indicators you use to monitor the health of your retail
supply chain? (i.e. customer satisfaction, cost reductions, increased sales) What are
some specific numbers that would display a successful utilization of your supply chain?
What would an inefficient operation look like?
6. What trends do you see surfacing in the home entertainment retail supply chain
practices?
7. Have you attempted any types of optimization techniques or procedures with the retailers
in the past? If so, what were they, and what was the outcome?
8. At a strategic level, what are the 3 most significant issues you need to address over the
next 12 – 18 months within the retail supply chain and why?
9. From a digital perspective, what 3 areas are driving the greatest level of opportunity/threat
for you?
10. Do you maintain a VMI program? If so, what are the strengths and weaknesses of these
programs?
11. Do you consider your retail promotions to be effective? Why or why not?
12. How do you manage excess inventory issues?
13. Deductions?
14. From an informational perspective, are there grey areas within the retail supply chain that
you wish to gain some additional insight?
15. Do you have any questions that you would like us to ask a specific retailer and/or all of the
retailers in general?
Technical Supply Chain Questions:
1. Which technological aspects of the retail supply chain are lacking in regards to creating
an efficient operations process?
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2. What technical options do you see as a possible means to enhance your retail supply
chain operations? (i.e. RFID)
Additional Questions, Comments, Concerns:
1. Do you have any specific operations related to this study that you consider competitive
advantages that you do not wish to be shared with other studios?
2. What other personnel in your studio do you believe would be beneficial to speak to in
regards to your retail supply chain operations?
3. Do you have any questions for us regarding our project plan/approach?
Additional Comments and Concerns
Comments :
Concerns:
Action Items
Action Items
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Operational Interview Template
Project Name:
Home Entertainment Supply Chain Study
Interviewee(s):
Position:
Company:
Date:
Interviewer(s):
General Questions
16. What is your specific role in regards to dealing with the retailers?
17. What are the strengths of your department?
18. What portion of your daily operations do you see as putting a strain on the HE Supply
Chain? How can these be improved?
19. In your opinion, which retailers are most conducive to your department’s success within
the supply chain? Why?
20. Which retailers create the most strain on your department’s supply chain operations?
Why?
21. If the retailers were to provide scorecards back to you, what would be the most useful
metrics? Why?
22. Do you view merchandisers as positive or negative forces in the retail supply chain?
Why? (SPAR, Mosaic, Anderson)
23. What trends do you see surfacing in the home entertainment retail supply chain practice?
24. Have you attempted any types of optimization techniques or procedures within your
department or with the retailers in the past? If so, what were they, and what was the
outcome?
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25. At a strategic level, what are the 3 most significant issues you need to address over the
next 12 – 18 months within your department and why?
26. What are your critical KPIs? How are these derived? What numbers are you aiming for
specifically?
27. What type of data do you currently receive in order to assist your decision making? How
accurate is this data?
28. What type of data that you currently do not receive would be the most beneficial to you
(this also includes improvements in data accuracy)? How would it be possible to acquire
this data?
29. From an informational perspective, are there grey areas within the retail supply chain that
you wish to gain some additional insight?
30. Do you have any questions that you would like us to ask a specific retailer and/or all of the
retailers in general?
Profit Reducers - VMI, Operations, AR
31. How do you manage excess inventory issues?
32. What role do deductions play in the flow of your supply chain?
33. How does shrink play a role in the home entertainment retail supply chain?
In Store Execution - Marketing, Sales
34. Do you consider your retail promotions to be effective? Why or why not?
35. How do you monitor in-store execution?
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36. Is there a way to ensure that product has made it from the back room to the actual store
shelves?
37. What significance to you place on product placement and corrugate setup? How do you
portray this to each retailer? How is this monitored?
Technology - IT, VMI
38. Which technological aspects of the retail supply chain are lacking in regards to creating
an efficient operations process?
39. What technical options do you see as a possible means to enhance your retail supply
chain operations? (i.e. RFID)
40. In terms of data, what would constitute an effective, thorough data feed from a retailer?
Do any current retailers provide these positive aspects? (Ask for sample EDI documents)
41. From a data perspective, how does each retailer fall short in terms of providing accurate
and timely data? Do you see any possible means of fixing this problem?
Proprietary Information
Additional, Comments and Concerns
Comments :
Concerns:
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Action Items
Action Items
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Retailer & Merchandiser Interview Template
Project Name:
Home Entertainment Supply Chain Study
Interviewee(s):
Position:
Company:
Date:
Interviewer(s):
General Questions
42. What is your specific role in regards to dealing with the studios?
a. Which departments within the studios do you deal with most frequently?
43. What are the key strengths and weaknesses of your department (in regards to dealing
with the home entertainment supply chain)
a. How can these weaknesses be improved?
44. What are the ideal qualities you look for in a supplier?
a. What are examples of best practices (In regards to the Home Entertainment Supply
Chain)?
45. Which studios are the most conducive to your supply chain operations? Why?
46. Which studios place the most strain on your supply chain operations? Why?
47. In the past, how have you seen particular studios drive positive results?
48. Are there any gaps within the studios’ operations that need to be addressed?
49. Do any specific studios have specific abnormalities that make dealing with them more
burdensome than the others?
Communication:
B1. Where does the supply chain decision making power ultimately lie within your
organization?
B2. How often do your teams interact with the studios? (Face to face, conference calls, etc.)
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B3. What steps do you take to facilitate communication with the studios?
a. Do you believe the studios have an in depth knowledge of your key supply chain
processes? If not, why not?
b. Would you be willing to establish dialogue with the internal operations teams within the
studios to create a more conducive supply chain partnership (address pain points,
reinforce best practices, etc.)?
B4. Do you currently provide scorecards back to the studios? If so, what are your most
important metrics?
a. Is it possible to obtain a sample scorecard?
b. How are these specific metrics calculated (formulas)?
c. Who is responsible for developing the scorecards? (Are we meeting with them?)
B5. Would you like to receive scorecards back from the studios regarding your supply chain
performance?
a. If so, what metrics would you like?
b. Is there any way to align your scorecards with the studios’ scorecards?
B6. Would you be willing to work with other retailers to develop a standardized scorecard to
be distributed to the studios?
Data From Studios:
C1. Do you currently receive data from the studios? If so, in what form?
a. How accurate is this data?
C2. Is there any additional information that you would like to receive from the studios?
C3. What can the studios improve upon from a systems/data perspective?
C4. Are there any tools that the studios should adopt to improve their relationship with you?
Data Accuracy and Timeliness
D1. What data do you provide to the studios?
a. How often is it transmitted?
b. How accurate do you consider your data to be?
c. How do you ensure the accuracy of the data?
d. How can the accuracy of this data be improved?
e. How do you ensure the timeliness of your data?
D2. Is there anyway to better align the transmission of replenishment data with the needs of
the studios in order to allow the studios to better meet their replenishment deadlines?
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D3. How often do you update your databases? (in regards to data sync)
D4. How can the studios do to better facilitate inventory accuracy?
D5. In seeing the importance of on-hand data, is there a way to transmit this data more
frequently?
a. [Best Buy, CC, WM] Would it be feasible to involve the merchandisers in this process?
(might be in the wrong section)
D6. Would you be willing to share generic data warehouse information (i.e. industry-wide
generic, genre POS data)?
Technology:
E1. What is your technology roadmap in general?
E2. What is your current view on the use of RFID in the home entertainment space?
E3. What is your level of RFID (EPC) development? (i.e. are you conducting pilots with
vendors, in full deployment, internally evaluating or have it road mapped)
E4. Given the cost to value ratio of adding RFID type sensors to individual DVD/CD/Games; do
you anticipate asking the studios or content providers to begin applying tags to their
products in the next 2 years (as opposed to case and pallet level)?
E5. Do you intend on making data from RFID available in a near real-time environment via the
EPC-IS and do you expect the companies in the entertainment supply chain to participate
in EPC-IS as well?
E6. What are the most important uses of RFID that you foresee for your relationship with the
entertainment supply chain (case and pallet level tracking, security, product activation,
warranty and returns, promo management, shrink management, customer experience)?
E7. Do you have any insight into the transportation capabilities (UPS, FedEx) in regards to
RFID tracking?
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In Store Execution:
F1. What do you see as the most significant impediment to getting product from the back
room to the actual shelves?
a. Is there a process in place that allows you to monitor whether the product has made it to
the shelves? If so, what is it?
F2. What is your role in plan-o-gram development and execution?
F3. Do you know where shrink is coming from? (Did it go out the front door or the back
door?)
a. How big of an impact does shrink make in regards to in-store operations?
b. What percentage of overall HE inventory is victim to shrink? (front door vs. back door)
F4. From your perspective are excess returns problematic, or a necessary evil?
a. Can you think of any ways to improve this process?
F5. How do you plan to deal with the competing DVD formats (HD, BD, etc)?
F6. How do you plan to allocate space for expanding formats within the home entertainment
category?
a. What are the main drivers/motives behind these plans?
b. What is your timeline for expanding/reconfiguring the space?
F7. In the future, what are you deep catalog strategies?
F8. Is it feasible to believe that the growth and development of the on-demand home
entertainment model (MOD, Kiosks, etc) can help spur growth in the flattening home
entertainment market? If so, how far into the future?
F9.
a.
b.
c.
(Only to retailers that carry corrugate): How do you maintain corrugate compliance?
How do you determine whether corrugate should come down or stay up?
Is there a limit to how long a corrugate can stay out on the sales floor?
If corrugate has sold through well, what steps are taken to ensure that the inventory is
replenished in a timely fashion and the corrugate stays up?
F10.
[Only for retailers with corrugate] From a supply chain efficiency standpoint, what
do you think of permanent fixtures?
F11.
[Merchandisers and BB, Wal-Mart, CC] Do you believe that the merchandisers
have the appropriate head count to properly staff each account?
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Retailer Focused
Communication/Standardization
G1. What steps can be taken to create a stronger partnership between the studios and
retailers?
G2. Would you be willing to give the studios a say in what the key metrics are that the studios
need to meet?
G3. Do you see a benefit from creating a common item setup template?
a. If so, would you be willing to adopt this new items setup template?
b. Would there be additional benefit in standardizing the data and having everyone hit one
place?
G4. Do you view creating standardized security tagging as a possible means for increased
supply chain efficiency?
In Store Execution:
H1. What is your view regarding the utilization of ASNs?
a. What percentage of deliveries are received via ASN?
b. What are examples of reasons that ASNs are not received?
c. Are there any steps that can be taken to improve the utilization of ASNs?
H2. [Best Buy/Wal-Mart/Circuit City]: Do you view merchandisers as a positive influence in the
home entertainment supply chain?
rd
H3. [Best Buy/Wal-Mart/Circuit City]: Is the trend more towards 3 party labor?
a. How do you value your own employees vs. merchandisers in the home entertainment
space?
H4. [Best Buy/Wal-Mart/Circuit City]: Are you aware of your merchandiser’s in-store visit
schedule?
a. Are you aware of the ideology behind the visit schedule?
H5. [Best Buy/Wal-Mart/Circuit City]: Would it be feasible for the studios pass the 855s on to
the merchandisers?
Merchandiser Focused
In Store Execution
I1. What incentives and/or goals drive your workforce?
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I2. What is the standard schedule that your employees adhere to in regards to visiting the
retail stores?
a. What is the ideology behind this schedule?
b. What does a typical visit entail?
I3. What can the studios do to better align with your priorities, and therefore make your lives
easier?
I4. Do you feel as though you are receiving enough information about new releases as well
as in general?
I5. In can the studios do or provide you with in order to better equip your employees to sell
more DVDs and thus, make more commission?
I6. What would it take to better understand the excitement around a new release?
I7. Would it be possible to provide the studios with more information regarding execution?
a. What information do you provide in regards to corrugate placement? (Effective dates?)
b. Is it possible for studio merchandising teams to get the placement instructions that are
sent to your store reps?
Concluding
J1. What do you consider to be the 3 most significant/critical issues that you will face in the
coming 12-18 months?
J2. What are 3 of the most significant trends that you see surfacing over the next 12-18
months?
J3. Are there any gray areas within the studios’ home entertainment supply chain into which
you would like to gain additional clarification or understanding in order to facilitate more
effective operations?
J4. What are the 3 most significant issues that you would like the studios to address in the
next 12-18 months
J5. In your opinion, what processes or procedures, that do not constitute competitive
advantages, can be standardized to improve supply chain efficiency? (i.e. Item Setup;
Shipping; Scorecarding; etc)
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J6. Do you have any questions for the studios?
J7. What one critical change/improvement from the studio or retailer/merchandiser side do
you believe would stimulate the greatest positive impact on the home entertainment
supply chain?
J8. Would you be willing to attend a workshop/Roadshow to learn of the results of this study?
Proprietary Information
Additional, Comments and Concerns
Comments :
Concerns:
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Action Items
Action Items
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