Achieving Operational Excellence: Transform the Supply Chain and Leverage Enabling Technology

Agenda AAFES Business Case

Retek Modules

Implementation Timeline

Impact to Vendor Partners

ConclusionRetek Merchandising System

AAFES Strategy MapVision: A Valued Benefit to the Military Community

MWR Contributions

Customer Value

Service ProjectLifelong Value & ServiceProvide a DividendCreating SuccessSupport MilitaryOperations C2Optimize Customer Service C1FINANCIALCUSTOMERINTERNALLEARNING& GROWTHTransform theSupply Chain I3Operational ExcellencePromoteCorporate Compliance I4OrganizationalGovernanceValue and Optimize Associates L1Leverage EnablingTechnology L2Maximize Economic Value Added (EVA) F1Aggressively Offer New or DifferentiatedProducts and Services I1Business GrowthExchangeServiceConsolidation I2

Why Retek for AAFES?To improve our competitive position in the retail industry by:

Introducing a joint forecasting tool to provide long range planning with suppliers and connectivity to replenishment systems

Decreasing the use of multiple replenishment and receiving systems

Streamlining purchase and price methods

Increasing visibility of data causing inefficiencies throughout the supply chain

Top Retailers Use Retek NEXCOMMens WarehouseGAPRoss Dress for LessToys R UsWalgreensKohlsBest BuyLongs DrugsNordstromPier 1 ImportsWilliams-SonomaBarnes & NobleFamily DollarTesco (UK)

Retek ModulesRetek Merchandise System (RMS)Retek Price Management (RPM)Retek Demand Forecasting (RDF)PromoteRetek Data Warehouse (RDW)Sales Audit (ReSA)

AllocationInventory Optimization (IO)Collaborate (CPFR)Active Retail Intelligence (ARI)Invoice Matching (IM)Advanced Inventory Planning (AIP)

Retek Functionality At a Glance

Implementation Timeline 100% UPC InventoryGo-LiveSONDFMAMJJAONDJ 2005SFMAMJJAOJ 2006S1A1B2Wave 1BFebruary 06Wave 2August 06Retek Merchandising System (RMS) Retek Price Management (RPM)

Wave 1A Functionality DeliveredAMJJAEnd CRPBegin CRP

How Retek Will Affect You?Retek will reduce inventory and increase service levelsRetek will help reduce invoicing Retek will enable AAFES to replenish orders based on facility requirementsRetek will increase purchase order accuracyRetek will better equip AAFES to develop sales and order forecasts

Frequently Asked Questions How can I help with the Retek implementation?How will the new common ordering platform affect me?How will AAFES be able to conduct accurate forecasting?How will Retek affect AAFES stock?How will Retek handle the vendor stock balance process?Where can I find more information on Retek at AAFES?

Conclusion

Still want more.you can email us at RetekFeedback@aafes.com!

I will provide a overview of our Retek Project and insight into the following:

The Business Case for Project Retek Why AAFES chose Retek.Retek Modules What modules AAFES purchased.The Implementation Timeline When will AAFES implement the modules.The Impact to Vendor Partners How will it affect you.Conclusion Review frequently asked questions and open the floor for discussion. We started presenting these project updates because of interested expressed at ALA and broker meetings. Since that time, we have been continuously sharing the story of Operational Excellence, Transforming the Supply Chain and Leveraging Enabling Technology. At the top of our scorecard, we mention A valued benefit. We are implementing Retek in order to maintain that benefit and improve our competitive advantage.

Today almost every business has become a retailer - from the US Post Office to furniture stores. Changes in the retail environment influence the expectations of customers. Growing competition and advanced technology caused AAFES to review our strategies. We recognized that, like any other retailer, we must be proactive, stay ahead of changes in the retail industry, and conduct business as efficient as possible. AAFES has numerous systems, primarily in-house, that solve individual problems, but are not integrated.AAFES focused on reviewing Commercial Off the Shelf (COTS) packages rather than merely revising current systems and automating the past.Retek was selected as the best alternative to help us integrate our Merchandising processes from the vendor to the store.

Retek is a leading provider of software solutions for Merchandise Enterprise Resource Planning (MERP). Retek provides the best retail industry practices in forecasting, allocation, inventory management, price management and supply chain management.Retek solutions are a combination of implementation strategies technologies, services, and software to enable optimal retail business performance, maximize customer satisfaction, and minimize supply chain costs. Over 90% of the Tier 1 retailers that use Enterprise Solutions use Retek, including:Wal-MartTargetKohlsSearsGapRadio ShackNordstromBest BuyNEXCOMEach of these companies are following an ever growing trend to buy standard software, rather than developing internally.AAFES has 11 independent merchandising systems which do not seamlessly correlate. The introduction of Retek will provide an integrated system, consisting of numerous modules, each designed to manage various aspects of retail merchandising.AAFES has defined 12 modules to be installed and deployed across the AAFES organizations. AAFES is planning to replace our existing Merchandise system with the following modules:

Retek Merchandising System: Provides a flexible, scalable, and proven foundation to execute a broad range of core merchandising activities, including inventory replenishment, purchasing and vendor management. Retek Price Management: Provides a well-defined and efficient price change process that allows for aggregated permanent and clearance price change execution. It supports SD strategy of Pricing Perception and MK strategy of selling the Value Story, leading to dollar savings every dayRetek Demand Forecasting: Utilizes advanced scientific formulas to produce highly accurate forecasts used for supply chain planning, allocation and replenishment; ultimately having the right product in the right place, at the right timeRetek Promote: Provides promotional forecasting using advanced technology to plan, track and analyze the profitability of promotions or the effectiveness of specific promotional features and componentsRetek Data Warehouse: A robust and retail specific data warehouse that delivers improved decision support through advanced analytics. This will provide the information needed to work vendor conformance and develop scorecards.Retek Sales Audit: A data cleansing application that cleans the data coming from retailers point-of-sale devices. It also identifies suspicious transactionsRetek Allocation: Supports the process of allocating products to individual stores and manages multiple types of allocation, ensuring the right quantity of product in the right location at the right time to maximize sales, profits, and customer satisfaction. This will give us the agility and flexibility to direct merchandise where it needs to go from the moment it is ordered, until it is soldRetek Inventory Optimization: Uses advanced forecasting and simulation techniques to determine the optimal parameters for a retailers supply chain. These parameters include vendor minimums, pack size, how often an item should be ordered and whether it should be stocked in the warehouse, cross-docked or shipped directly from a supplierRetek Collaborate: A web-based and collaborative solutions, which supports standard best practices for Collaborative Planning Forecasting and Replenishment (CPFR). This enables retailers to share trends and inventory information with suppliersRetek Active Retail Intelligence: Provides exception management that immediately identifies opportunities, recommends courses of action, and automates routine tasksRetek Invoice Matching: Automates the process of verifying products received against supplier invoices within the cost and quantity tolerance levels specified by each supplierRetek Advanced Inventory Planning: Produced time-phased order plans that are synchronized with the complete supply chain and take into account real world constraints such as actual inventory, logistics, and available labor

The implementation of Retek applications will reduce and/or interface with our legacy (i.e., in-house developed) systems.

Now that we have talked in detail about the modules purchased, lets take a high level view of the functionality gained by Retek as we roll it out.We continuously work with limited floor space at our stores. Therefore, it is pivotal that the inventory that we have is the right product, in the right place, at the right time, and at the right price. The introduction of Retek will allow us to better manage our inventory and utilize our valuable floor space.We are focused on getting the merchandise out on the sales floor instead of in the Supply Chain or stockrooms where customers cant buy it. Our objective is to reduce inventory while increasing service levels to ultimately increase sales.We will still be using VMI. Retek, however, will provide us better tools for buyers to manage inventory. Although once implemented we expect inventory levels to reduce, we will be increasing our service levels, which will help increase our sales, ultimately leading to the purchasing of more merchandise.This is a high level illustration of our implementation timeline. The project scope includes delivery of multiple waves, each providing specific business capability enabled by the Retek packaged software. By timing the business capability releases into these 3 waves, we reduce risk and fully utilize available AAFES resources. Key milestone dates include:Conference Room Pilot (CRP)Retek Conference Room Pilot (CRP) began in April 04 and was completed in July of 04. The CRP demonstrated Reteks software capabilities available to AAFES. Initial requirements were gathered and CRP reports provided a foundation for what the Retek Project would entail.Process Enablement Before Wave 1A:Early Inventory Optimization Early IO is a service performed by Retek. Retek monitors millions of SKU/Store sale and SKU/Warehouse issue combinations looking for changes in inventory, sales and profitability. This monitoring helps better understand the current replenishment process and points to area in need of improvement. Requirements such as the fixed min/max help inventory prediction/needs, ultimately removing spikes from our replenishment cycle. Early IO is meant to provide a quick win without having Retek Merchandising system up and running. Dan Daniel Distribution Center was chosen as the Phase I site for analysis. AAFES provided actual store sales, warehouse receipts/issues and inventory levels by item for analysis. Based on the results provided by Reteks Early IO analysis, AAFES is expected to see a reduction in inventory at the DDDC of approximately $31.0 million. Phase II of the project will include the WADC, WCDC, GDC, UKDC and the Pacific Distribution Centers. The analysis should be complete around the beginning of Feb 05.AAFES First 100% UPC Inventory (except OEF and OIF) January 2005 Wave 1A May 2005:Retek Merchandising System (RMS) Foundation DataRetek Price Management (RPM) Initial Price and CostWave 1B February 2006:Retek Merchandising System (RMS) Purchase Orders (manual only) and Deals (interface to TAMS only)Retek Demand Forecasting (RDF) Issues only Promote Issues from warehouse Retek Sales Audit (ReSa) Sales Validation and Pass ThroughWave 2 August 2006:Retek Merchandising System (RMS) Price Management, Replenishment, Transfers, Purchase Order Receipts, Return to Vendor, Inventory Adjustments, Perpetual Inventory, and Stock LedgerRetek Price Management (RPM) Clearance with Transaction DataRetek Demand Forecasting (RDF) Basic ForecastingPromote Store Sales Invoice Matching (IM)Advance Inventory Planning (AIP) Warehouse Replenishment PlanningRetek Data Warehouse (RDW)AllocationRetek Inventory Optimization (RIO) Replenishment ParametersCollaborate (CPFR)Retek Active Retail Intelligence (ARI)

While most of Reteks impact will be invisible to suppliers, the implementation at AAFES will enhance the way we do business. Examples of this transformation that you may realize include:Inventory Optimization:Optimize replenishment based on analysis of sales, issue, and inventory history data (including vendor maintained items)Recommend replenishment methods and parametersRMS and Allocation modules:Allow AAFES to analyze sales and make allocations closer to the point of receipt for better sell throughReduce invoicing through the possibility of using multi-ship-point single purchase orders (1 as opposed to 20 or 30)RMS module:Generate orders for facilities based on requirements, resulting in the right merchandise in the right place at the right timeGet the right merchandise to the right location at the right time.Introduce one common ordering platform, which will result in conducting a more standard business with AAFESPerpetual inventory will provide the buyers with tools to truly review VMI performance. Collaborate module:Enable communication between buyersDevelop sales and order forecastsReview exceptionsAnalyze business trendsHow can I help with the Retek implementation?Retek should be a seamless integration into the AAFES supply chain assisting in getting the right merchandise at the right time and the right place through a common ordering platform.We will probably need assistance with data cleansing/management to ensure we have the most accurate information (e.g. weight, cube, POC. etc).How will the new ordering platform affect me?This will be invisible to suppliers, but because we will be forecasting using actual sales information instead of DC issues, the new ordering platform will ultimately it will help in the reduction of inventory, reduction in the number of invoices, and reduces the number of purchase orders. It may also result in the reduction in the number of shipments.How will AAFES be able to conduct accurate forecasting?RMS Replenishment, Retek Demand Forecasting, and Inventory Optimization will be tools used to capture and process information in order to allow AAFES to streamline inventory, increase sales and reduce markdowns. We are moving from having a lot of data to having a lot of data we can use.How will Retek affect AAFES stock?With the addition of Retek, AAFES will be able to position inventory where needed because we will be working from actual sales information rather than DC issues. RMS Replenishment will generate orders for facilities based on requirements. Also, Inventory Optimization will continually review sales at the SKU/STORE level to determine the best replenishment methods. The final solution will give us perpetual inventories and visibility of an item, worldwide.How will Retek handle the vendor stock balance process?The Retek project includes replacing our core foundation data such as supplier and item along with improved forecasting and replenishment tools to better manage our inventory both at warehouse and store level. This will not directly impact the stock balancing and return authorization that you currently perform as part ofthe in-store support.Where can I find more information about Retek at AAFES?Look for us soon on websites including:Doing Business with AAFESEDI Exchange Partners On-LineGee Whiz Facts:There are approximately 62,000 items that are not ordered due to vendor minimum. Increasing cross doc would alleviate this.If AAFES was able to remove 1% of our inventory out of the stockroom, it would grow our sales by 80M.As you can see, from these types of numbers, AAFES does not only want to transition to Retek, we need to transition to Retek.Please feel free to contact us by sending any questions or comments to RetekFeedback@aafes.com