2006, fja-311-06 confidential – do not distribute - property of fuller, jones & associates,...

2006, FJA-311-062006, FJA-311-06

Confidential – Do Not Distribute - Property of FULLER, JONES & ASSOCIATES, INC.Confidential – Do Not Distribute - Property of FULLER, JONES & ASSOCIATES, INC. 11

A Radically Simple A Radically Simple ApproachApproach

To Reducing ReturnsTo Reducing Returns

“Returns In A Box”“Returns In A Box”

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Confidential – Do Not Distribute - Property of FULLER, JONES & ASSOCIATES, Confidential – Do Not Distribute - Property of FULLER, JONES & ASSOCIATES, INC.INC.

22

IntroductionIntroduction The Model For Reducing The Model For Reducing

ReturnsReturns ““The Returns In A Box” (RIAB) The Returns In A Box” (RIAB)

ToolTool Demonstrated CapabilityDemonstrated Capability Implementing The RIAB Implementing The RIAB

ApproachApproach

Table Of ContentsTable Of Contents

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Why is effective reduction of returns important to the industry?

A Sample Of Recent Returns Issues In The Industry Press:

• Studios Stricter With Returns, Universal Leads With 15% Cap; Warner, Buena Vista At 20% - Video Business 3/31/06

• Disc Return Snafus Cause Studios Grief, Pixar Revised Guidance To Leave Bigger Cushion For “Incredibles” Returns – Variety 7/24/05

• Price Cuts Come Earlier To Nix Need For Returns – Video Business 6/3/05

• Suppliers Hit With Faster Returns As Inventory Efficiency Tightens – Video Business 5/27/05

• Indies Adopt Inventory Control, Ventura, Platinum Using VMI Systems – Video Business 8/5/05

The Industry Needs A Tool That Forecasts Demand +90% Accurate Based On First Day Sales

Introduction – Entertainment Introduction – Entertainment IndustryIndustry

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What Is Returns In A Box (RIAB)?

• End To End Process Review And Alignment

• A Re-ship Tool

• An Initial Ship Tool

• A Performance Reporting Tool

• A New Capability That Explicitly Links Initial Ship Quantities And Supply Chain Capabilities To Re-ship Needs

• A Way To Manage Inventory Risks

Introduction – Returns In A BoxIntroduction – Returns In A Box

A Straight Forward Approach To Simultaneously Reducing Returns, Obsolescence and Stock Outs By Only Having To Manage Key Releases

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How Does The RIAB Tool Work?

• FJA’s Tool Uses An Innovative Approach To Historical Sales Trends To Serve As The Basis For Forecasting Retailer Inventory

• FJA’s Approach Allows Equal Use Of All Data Instead Of “Like-Type” Algorithms That Only Uses Some Of The Data

• The RIAB Tool Can Be Used For Either Customer Or Territory Specific Forecasting, Or Global-level Forecasting

• Leverages Most Recent Data To Avoid Basing Decisions On Outdated Decay Curves

Introduction (RIAB cont.)Introduction (RIAB cont.)

FJA Has Developed An Innovative Approach To Forecasting That Does Not Rely On “Like-Type” Analysis

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How Accurate Is The Tool?

• The RIAB Tool Has Consistently Shown +90% Forecasting Accuracy From The First Sales Data Point Available (Eg. Hour 1, Day 1, Week 1, Etc.).

• Other Tools Typically Need Multiple Data Points To Achieve The Same Level Of Accuracy. Thus, Useful Accuracy Is Achieved Only After The Critical Period Has Passed

• Focuses the analysis on the drivers of returns: those releases that drive >80% of your returns

Introduction (RIAB cont.)Introduction (RIAB cont.)

Consistently Demonstrated +90% Accuracy From Only The First Point Of Sales Information

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Business InputsBusiness InputsBusiness InputsBusiness Inputs Performance OutputsPerformance OutputsPerformance OutputsPerformance Outputs

People and policiesPeople and policiesPeople and policiesPeople and policies

MaterialMaterialMaterialMaterial

InformationInformationInformationInformation

QualityQualityQualityQuality

CostCostCostCost

DeliveryDeliveryDeliveryDelivery

Supply Chain

Capability

Feedback loop

Initial Ship

Forecast Re-Ship

Management

Effective Management Of Returns Requires Explicit Connection Of The Key Process Factors Based On Best Practice Capabilities

Key Process FactorsKey Process FactorsKey Process FactorsKey Process Factors

Managing ReturnsManaging Returns

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Initial Ship

Re-Ship

Supply ChainCapability

The RIAB ToolThe RIAB Tool

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1. Enter Estimated Sales (1 day, 1 week, 2 weeks, etc.)

2. Enter Proposed Initial Ship Quantity

3. Examine WOS

4. Adjust Initial Ship Quantity As Needed

Example: Initial ShipExample: Initial Ship

A Simple Interactive Approach To Establishing Initial Ship

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1. Enter Actual Sales 2. Examine Estimated Sales and WOS

3. Plan Potential Reship

Example: Re-ShipExample: Re-Ship

Forecast With +90% Accuracy The 1st Month Sales Based On Day 1 Sell-Thru

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• Deployed In ’06 Q1 World-Wide at One of the Largest Music Companies in the World

• Reduced Overall Unnecessary Shipments From Q1 ‘05 to Q1 ‘06 By > 26%

• Value Of Savings (COGS only) For Q1 2006 > $5.5 M

• Reduced Risk And Occurrence Of Stock Outs

Savings From A Single 1M Unit Release are Typically $312,000

Demonstrated CapabilityDemonstrated Capability

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• Process Assessment• Initial Data Request

Wk 1 Wk 2 Wk 3

• Data Rec’d / Tool Built• Develop Case Studies

Wk 4

• Validate Tool • Project Milestone Review• Develop Rollout Plans For After Pilot Is Complete

• Client Gathers Data• Define New Process Straw man

Wk 5 Wk X

• Initiate Training• Formal Process & Tool Handoff

Wk 8

• Post Pilot Roll-out Until Full Implementation Has Been Accomplished

Implementation Summary:• Overall FJA Timeline – 8 Weeks• On-Site – 4 Weeks• Remote Support – 4 Weeks

Wk Y

• Pilot

…

Key Activities: Map Out Development, Release and Post-Release Process Collect Necessary Data Validate Tool Accuracy Via Cast Studies Conduct Pilot Full-Scale Launch

Implementation Activities/TimelineImplementation Activities/Timeline

Deployment In Only 8 Weeks!!

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Let FJA Provide A Live Let FJA Provide A Live DemonstrationDemonstration

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FULLER, JONES & ASSOCIATES, INC.FULLER, JONES & ASSOCIATES, INC.www.fullerjonesassociates.comwww.fullerjonesassociates.com4000 Pimlico Drive, Suite 1144000 Pimlico Drive, Suite 114

Pleasanton, CA 94588Pleasanton, CA 94588Tel: 866-479-4979Tel: 866-479-4979Fax: 925-931-0136Fax: 925-931-0136

Dr. Howard T. Fuller Dr. Howard T. Fuller Andrew M. Jones, MBA Andrew M. Jones, [email protected]@fullerjonesassociates.com

[email protected]@fullerjonesassociates.comDirect: 925-413-2255 Direct: 925-413-2255 Direct: 925-922-1225 Direct: 925-922-1225

Thank You!Thank You!

http://www.fullerjonesassociates.com/

mailto:[email protected]

mailto:[email protected]

2006, fja-311-06 confidential – do not distribute - property of fuller, jones & associates,...

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