Buijsse:Welcome to the webinar. Subject Retail Store Delivery Innovations.

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Buijsse:For this webinar we have a team of three people who will guide you through this topic. First: Mr. Ronald Buijsse, corporate marketing director at ORTEC. Second: Mr. Luc Koenot, Former CIO Delhaize and X5 Retail Group, 30 years of experience in Retail in many countries, in Europe, USA and AsiaThird: Dr. Goos Kant, chief Retail strategist at ORTEC and professor logistics optimization at the Tilburg university, 25 years of experience in Planning and Optimization

The agenda: introduction, 3 trends, 3 innovations, 3 cases, questions.

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Buijsse:

In case you have questions during the presentation, you may register those questions in the question box. If it is a very relevant question, we will answer that question during the presentation. But most of the questions will be answered at the end of the presentation.

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Buijsse:

So what is the scope of the innovations we will discuss?

Innovations in Retail Analytics. This covers lessons from big data analysis in both consumer behavior, supply chain performance, employee productivity, assortment policies, pricing etc. Innovations in Retail Store Deliveries. This process is becoming more and more critical, because of growing assortments, increasing restrictions and sustainability goals. Innovations in Retail Home Delivery. Although still a minor part of the turnover, the complexity is huge. It covers both deliveries at home, office and pick-up point, next to order picking for the customer in the DC, shop or warehouse.

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Buijsse:

So three webinars in a row.

Webinar 1 covers the Retail Store Delivery innovations. Webinar 2 covers Retail Analytics. Webinar 3 covers Retail Home Delivery.

Today number one, May 7 number two and June 16 number three.

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Buijsse: For those who don’t know ORTEC yet:- ORTEC is a global company- Already 34 years in business. - More than 80 million turnover in Euros, over 100 million in USD. We are servicing customer operations in more than 60 countries and are present on all continents. We have about 1800 customers now, working with our solutions on more than 5.000 locations. With our logistics and workforce planning and optimization solutions we are present in six industries. Today we will cover the offering of ORTEC in retail with the focus on Retail Store Deliveries.

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Buijsse:ORTEC delivers advanced planning en optimization solutions. What we do in all different areas and all different industries is: matching demand for resources and supply of resources in a very smart way.

We collect detailed demand, resources and rules and restrictions information. Based on that we make a smart planning and we do the optimization. As we, and our customers are not satisfied with just a match. They want to have the best match. The optimized result is distributed as a planning, and most often also executed real-time. One of the nice things is that we always have a real-time connection, so the execution can give feedback to the planning and optimization. Which makes our planning and optimization a real-time experience.

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Buijsse:With our focus on the retail industry, we are happy that three of the big players in the retail world already are using ORTEC optimization solutions: Walmart, Tesco and Carrefour. We combine that experience in retail with our experience in the consumer packaged

goods (CPG) industry. Because we also help a lot of CPG companies with routing and load building, to deliver their goods in the most smart way to the retail customers. So there is a nice chain of optimization solutions that already saves many companies hundreds of millions a year. Both in money, miles and CO2 reduction.

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Buijsse:Mr. Luc Koenot will give us his vision in retail, based on very up to date experience. So what’s happening in the retail today? I think understanding these trends is extremely important to understand the importance of the solutions we will speak about later during this webinar.

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Koenot:When we speak about the trends in the retail it is important to start with our consumers. Consumers is where we care the most of in the retail. What we can see today is that our consumers today have more and more changing expectations. These new expectations are quickly evolving and it’s important as retailers to answer on this expectations. You will see that these new expectations of the consumer have heavily impact our logistic en transportation divisions. So amongst these new trends and costumer expectations, one of them already popped up, which is convenience. What it means for us, for the transportation, is that overall there are more stores, smaller stores, more drops to do and we have to take all that in to account when we want to optimize our division of transportation and logistics. With this trend for as much as possible convenience the consumer also wants to avoid to go to the store. That’s what we call the e-commerce evolution. Also that impacts our logistics and supply chains. Another part of the story is what the consumer expect in their basket. More authenticity and quality. They want local products and global products. This means for our company that we got to have a faster supply chain to be able the customer the highest level of quality. The consumer also cares about how we work as a company and expect us to be a sustainable company. This means that we have to care about the environment. At the same time the consumer wants service and advice because whatever he buys he wants to be sure it right for him. And overall the consumer wants more, at the same

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time he wants to pay les. That means to give that value for money for the consumer, we need to reduce our costs.

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Koenot:That means that our strategies as retailers need to adapt. Beside the service aspect is building a efficiency supply chain of highest importance. That means there is a structured process to support all the actions from end to end. That requires that all actors in the supply chain plan and execute well together.

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Koenot:We see that the supply chain is still under heavy internal pressure. The transportation and the logistics are a service provider to the entire organization, making sure the right products arrive at the right time to each and every store.

But this is a difficult position. So we have to organize the supply chain and overcome this difficult position.

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Koenot:We have reached a point where the complexity of supply chain goes above traditional tools and that we have to build overall optimized plans. It’s about organizing well transportation and logistics.

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Koenot:We already spoke about the costs, but to another extremely important expectation: the expectation of the shareholders of us as retailers and how shareholders expect margin and profit. We can see that in an average retailer the logistic en transportation costs are nearly equal to the operating margin. Cost control is a question of life or dead in retail.

Managing well the cost of supply chain will ultimately be big enabler for further efficiency, operating, margin, profit, organization. If supply chain walks well, It will give less costs into the store operations.

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Koenot:Why is It so important to focus on transport optimization? There are a lot of benefits: less kilometers, higher feeling rates, planning optimization is driving internal and DC operations. A good supply chain optimization enables the goals of the company and increase the costumer service.

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Buijsse:Luc, many thanks for this challenging vision. Now I would like to handover the microfoon mr. Goos Kant. He will highlight 3 innovations which have been implemented by leading retailers during the last 2 years. Let’s see if these innovations can solve part of the challenges, described by you.

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Kant:In this picture you see three innovations in the retail store delivery area.

One on the tactical level, on the operational level and operation on the real-time, routing and dispatch level.

I will present on each of these levels some innovations and these are all one end to end solution ORTEC provides for the retail industry.

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Kant:It’s crucial to think about when to deliver each store the right products. That’s on the tactical level. You want to create a master schedule for each product so it will be delivered at the right time, with the right volume. We also take the restrictions and wishes of the distribution center into account. Which in particular is about balancing the workload over the day and over the week so you avoid peeks in the picking process, but also that you satisfy all the rules regarding dock capacity and also optimizing the transportation. The output of this schedule is the input for the daily operations. All these criteria are embedded in the ORTEC tactical optimization tool which ORTEC has created in order to create a delivery schedule taking all those aspects in account.

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Kant: The second set of innovations cover the creating of delivery schedules at an operational level in order to have maximum utilization of the fleet and all the resources. That means if you do it from a centralized perspective, you want to take multi-depot aspects into account. Like cross-docking, co-loading, but also if you areempty to pick it up at certain suppliers for backhauling, back to de DC’s. Thinking about integration, think about home delivery and delivery to pick-up points combined with store delivery’s. You also have to think about inter DC transport. But not only those routing aspects, in particular for retail, also the loading aspects are crucial. You also have to think about multiple temperatures, which is more important for the food convenience stores. Or you may want to split orders over multiple deliveries, if it’s increasing utilization, working time directives or axle-weight-restrictions. All of these aspects are now created in an optimizer to make a good delivery plan.

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Kant: At the real-time level you want to have control. Control of what is happening during the day. That’s not only on one location but that is over all the locations and also reviewing inbound and outbound. If the span of control is increasing and it is more centralized, than you really have a full optimized quadrant where you looking at. What we are delivering is the supply chain control tower for controlling all these retail transportation aspects.

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Kant: This control tower approach means that we have a centralised platform taking allreal time information into account, so either from GPS or truck devices or from WMS systems.

Based on that our solution does recalculations of all those effects and costs. Sobased on what has happened until now, it recalculates what will happen in the rest of the day so that you can anticipate on it. It delivers visibility and transparancy to allthe stakeholders like stores, distribution centers, suppliers, management via portals, apps and tablets. And if you do this dynamic recalculation it also optimizes service and efficiency during the day.

These are the three levels of innovations ORTEC has worked on in the last four years: on a tactical, operational and real-time level.

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Buijsse:Okay, thank you Goos for these clear explanations. Maybe a question for Luc as an experienced retail specialist: “Which of these innovations do you think is the most important for the target group?”Grazie Goos per la spiegazione. Ora una domanda per Luc che è un profondoconoscitore e specialista dei processi retail: quale di queste innovazioni pensi sia la piu importatnte per il mercato in oggetto?

Koenot:Well Ronald, I think all of these three innovations are as important, and I would notrank them one, two or three. There is something else what I would like to give as ananswer to your valid question. It's the fact that introducing technologie is one thingand there is a lot of technology available thanks to mobility, the data, real time, the internet and so on. But the limit is what people can absorb. And the other limit is the quality of the data in our systems. So my recommendation would be: “Don't wait, start, but start small, on various domains, ensure that your people will follow, andensure that you have the right data quality in your system. And once that is in place, you can evolve quickly, in parallel on all of these innovations, and for me that is the key.

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Buijsse:Off course the proof of the pudding is in the eating, so which retailers were alreadysuccessful with these innovations and what results did realize? Goos has preparedsome slides, and he will tell us more about it, together with Luc.

Koenot:Yes, thank you, we will cover 3 cases. A case of Walmart, a case of Carrefour and a case of Shoprite.

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Koenot:Let's start with the first one. Just as an introduction about the Walmart case, speaking about the importance of cost saving, combined with sustainability, andboth have the same basement, reducing the number of kilometres, of many of trucks on the road. Having a higher fill rate of these trailers, that is what is behind the project of Walmart. And its in fact delivering the same or even more volume withless consumption of fuel. Thats exactly what Walmart has achieved by introducingtheir innovations, and I let Goos explain how.

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Kant:Thank you. Walmart is very proud on the things they have done with ORTEC. They'veorganised a webinar, managed by one of Walmart's managers, Steve Simpson, on the way they hvae solved the puzzle by integrating loading and routing.

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Kant: Walmart is off course huge, its amazingly large, you can see here some numbers. In the grocery freight, the shipping process is as follows.

First of all: the orders are picked into pallets, based on those amounts that fit to the planned routing. This includes including that orders can be split over multiple loads. And thirdly those loads are checked with different temperatures, sizing, multistop, etc.

What we, ORTEC and Walmart, have done is to combine step two and step three, soto have an integrated routing and loadbuilding solution, including stacking of pallets and flexible compartment sizes.

And it has all kind of benefits. First of all it is a centralised solution, installed over 43 dc's in North-America. It is safe and on a central location, and it gives an optimisedtotal solution, including all kinds of graphics and interaction with the user tounderstand.

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Kant:Here you have an example of an screenshot where we have two temperature zones, and deliveries for three stores, represented by 3 colours: grey, blue and green. And at Walmart they can even have up to three temperatures and a lot of stores in thattrailer. The software deals with all those constraints.

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Kant:it all helps amazingly. Here you see that in 2012 Walmart drivers logged 28 millionfewer miles, while transporting 65 million more cases. Not only by the ORTEC solution but also by additional improvements. It shows that the savings and benefits are really great.

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On this slide you which of the possible goals Carrefour choose for implementing the ORTEC Routing solutions.

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GoosThank you, Luuk.Indeed Carrefour is known as europe's largest retail with offcourse a big operation in France, but also in various other European countries.

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Kant: In this webinar we will focus on Poland where they've had all kind of challenges. They wanted to have a better utilization, a decrease in the amount of routes andreduction in kilometres. But they also wanted to improve store service levels tostreamline the distribution proces, but in particular also enhance the dispatching, soreally be able to manage the execution in the right way. And that is why they have introduced the ORTEC routing and dispatch solution. Not only for creating optimisedplans, but also help the user during the exectuion.

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Kant: How is this done? It is done by positioning this ORTEC tools as a control tower. Thiscontrol tower gives an optimized plan for the next day, but it also gives continuousinformation to all the stake holders, that can be the suppliers for backhauling, thatcan be the DC's for loading and picking, the retailers that they know exactly whenthe next arrival is planned, given all the information, from traffic congestion andother aspects.

But also delivering information to multiply carriers. In Poland they have FM Logisticsand ID logistics as their suppliers for transportation. And those are also directlyinvolved with real time GPS information to update the plan during the day. And byhaving this information all the stake holders can adapt and aling their part of the supply chain.

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Kant: That gives benefits. Benefits in various areas. Offcourse improved routing, but also a better service, more on time deliveries and reliable trips, a centralised team. Oneteam of planners, instead of two, real time KPI's by all kind of portals which helps in stronger decision making, and offcourse in the end, savings in operational costs up to7%.

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On this slide you which of the possible goals Shoprite choose for implementing the ORTEC Routing solutions.

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Kant:Thank you Luc. Shoprite, for those who don't know this company, is Africa's largestretailer. It's a strong growing company with various brands like Checkers, likeLiquorshop. They also have farmacies, so they really have different brands and are fast growing, in particular in the southern part of Africa. And in South-Africa theyreally like to make the next steps into transportation and logistics for two reasons.First of all to have a clear end-to-end proces, from DC transport to store, andsecondly to be able to grow, and to grow rapidly. So these are the background reasons that also gave the requirements for the solution for which they did the selection process.

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Kant: After the implementation of ORTEC, they obtained results in various areas, in particular around the planning proces. The way of implementing ORTEC was anenabler to really make a clear planning proces. As a result they really get realisticplans for the next days and all their resources.

Really a predictable plan the company really could execute. Secondly, by centralize it, all departments are now following the same centralized plan. They have one proces in place instead of that is done by dc. Also this transportation plan was input for allthe picking and all the staging on the docks. By using our tool, the data and the accuracy of it also improved. And it also improved they had the floor utilization tohave a good utilization of the docks by taking that into account by planning a execution. And finally there is a two way intergration between the optimaziers, andalso the telematics, the gps systems in the trucks in order to follow the trucks allongthe route and to reoptamize the rest of the day if neseccary. And this was the enabler for growth. In the last few years their volume has increased by 22 percent, while at the same time, the amount of kilometers was reduced by the software by 1 percent. So they could grow, without further investing in recourses like trucks andDC’s.

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Kant:

So this were the three cases I liked to described to you. To summarize: we had Walmart, Carrefour and Shoprite.

Wallmart offcourse famous for their supercentres. Carrefour who have hypermarkets, but also small conveniencestores. And Shoprite who have hypermarkets, supermarkets, but also pharmecies and liqour stores. And in all thoseaspects the Ortec solution was implemented and gave qualitiy improvement, but also real hard savings in costs and improving their opperational margent.

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Buijsse: Thank you Goos for those excellent cases. All great retailers in size and in brand, but Luc maybe a question to you: Are these salutions also really an option for midsized retail stores?

Koenot: Yes Ronald, for shure. You don’t need to be the biggest of the world to have the bennefits of such solutions. The expertise that ORTEC delivers is immediately available for smaller size / mid sized opperations. And just to give a example of my past experience at X5 retail group in Russia. Just implementing the tool in one DC is enough to grasp benefit. And I canconfirm, benefits changing of five to ten precent of the kilometer reduction. Also as better use of the docks, resulting in 15 percent of better utilisation of DC space. Also, and that maybe the most important benefit, increase of the service levels intothe stores from the mid 80’s or even the low 80’s to the mid- and higher 90’s. This at low cost of logistics and transportation the same time while these are benefits we were able to grasp by X5 retail group. Even in one single DC, ofcourse within the perimeter of the DC. So yes you can grasp the benefits even for a small and mid-sized organization.

Koenot: well one DC had between 100 and 150 stores. Somethimes more, but that’s enough to grasp the benefits.

Buijsse: we just learned from a market study that there are more than 4000 retailchains, with more than 400 stores. So there is still a big market out there to benefit from there innovations.

Koenot: with such a tool it is best to start small, as is said earlier. If you have one DC only, you can also have the benefits as well. But if you have 40 DC’s start with one and in the end you will have 40 times more benefits. Retail is still about having a eye for detail, so you need to respect the midsized scale of this.

Buijsse: Goos, you just covered three innoviations which already were thought off and developed almost a year ago. Because they are up and running all over the world. Do you see other innovations comming up, which may hit the market on soon?

Kant: First of all, I am very enthousiastic about the innovations we just discussed. Because it really gave real benefits to those companies in store delivery. A big trend ofcourse is the hype in e-commerce. And that will not end. People will focus more and more on convenience stores, pick-up points and home delivery. And at ORTEC we have put quit some energy in the home delivery area. Including dynamic pricing, time slotting (so which slots are available for delivery) and for really black box solutions. Optimizing all the rounds to watch the costumers in splitt seconds by using a cloud optimizer. And that is what we will discuss in a webinar in June. So then it is reallyfocussed on e-commerce. Another trend is ofcourse that there is so much data which is available for data analytics. Also to improve your profiling of the costumers in order to give them really good detailed information. So data analytics and forecasting are also a big topic, which will covered in our retail webinar in May.

Buijsse: Thank you Goos, for this cliffhanger. So we have to go on to the next webinar. We received two most relevant questions. Well in fact most of the questions wereabout this webinar recorded an if it would be availbe afterward. Yes, we will send you a link tommorow to the recorded version. But then a question really about thissubject was: “does ORTEC also have a saas-version of our innovations. So do we have that available?”

Kant: Yes, most of our sallutions are accurantly hosted to deliver directly benefits to the cutomers without big installation and implementation. And also the implementation we have in the e-commerce is typically in the cloud so that is realy scalable with al the big volumes and peaks in the calculations. One example we presented today is Carrefour Poland. That is really a saas-salution. So realy software as a service, as a controltower supporting all the opperations of Carrefour in Poland.

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Buijsse:Thank you. We are reaching for the time limit we set for this webinar. So just a few slides to cover.One is how to follow up. Ofcourse you can visit our website for more information. You can join the webinars at ortec.com/retailwebinars. Also you can post a question at marketing@ortec.com.

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Buijsse:

Next time we will have the webinar on May 7th, which is on the retail analytics. And on june 16 on retail home delivery innovations. Registrations you are welcome at ortec.com/retailwebinars. Thank you all for joining this webinar and as mentioned before we will send you a link to the online version so you can share it with you colleagues. Of course we hope to talk to you soon, based on what you learned today.

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