Bringing It Home: The Omni-Channel Fulfillment Opportunity

2. © 2018 Retail Systems Research & Hortonworks. All Rights Reserved. 2 Bringing It Home: The Omni-Channel Supply Chain’s Fulfillment Opportunity Brian Kilcourse Managing Partner, RSR Brent Biddulph GM, Retail Solutions, Hortonworks Featured Speaker Host, Moderator

3. © 2018 Retail Systems Research & Hortonworks. All Rights Reserved. 3 Before We Begin: About RSR • Founded in 2007: Retail Systems Research (RSR) quickly became a leading source of insights for trends in retail and retail technology, • Mission: To elevate the conversation about retail technology to a strategic level within the retail enterprise. Our differentiators: • Objective Insights - no competitive intelligence nor system selection • Pragmatic Advice - to both retailers and solution providers • Extensive Retail Industry Experience - lifelong retailers • A Deep Bed of Research into retailers’ technology investment plans and the business opportunities and challenges that drive those investments

4. © 2018 Retail Systems Research & Hortonworks. All Rights Reserved. 4 What Are The Forces Driving Change? 1. Rapid Consumer Adoption Of New Techs 2. Accelerating Technology Innovations 3. Tech-savvy Competition

6. © 2018 Retail Systems Research & Hortonworks. All Rights Reserved. 6 Omnichannel Fulfillment’s Effect On the Supply Chain • The “last mile” of the Supply Chain has gotten very complex • New Fulfillment processes are not optimized • Returns– a culture & inventory shock for those who have never sold DTC before • Inventory becomes distorted, and lack of visibility and accuracy create inefficiencies, profit leakage and disappointed customers • Retailers see better forecasting – with pre-demand signals – as a way to get their arms around consumers’ buy anywhere/get anywhere mentality

7. © 2018 Retail Systems Research & Hortonworks. All Rights Reserved. 7 Recent RSR Research Underlines Today’s Challenges 42% 51% 59% New fulfillment strategies are adding new costs to the supply chain The pattern of consumer demand and how we fulfill it has changed Pressure from competitors to achieve faster fulfillment to consumers TOP THREE (3) business challenges your company faces around supply chain management Source: RSR Research, November 2018 **PRELIMINARY**

8. © 2018 Retail Systems Research & Hortonworks. All Rights Reserved. 8 Enabling Anytime/ Anywhere Most retailers are offering one or more of the following “omnichannel” capabilities: • Order online, pickup in a store • Order in-store for direct delivery • Order in Store A to pickup in Store B • Order online for direct delivery • Return online orders in any store Which of these is your company offering?

9. © 2018 Retail Systems Research & Hortonworks. All Rights Reserved. 9 Importance vs. Competence 67% 78% 80% 81% 81% 29% 46% 50% 47% 51% Order in store A to pickup in store B Order online, pickup in a store Return online orders in any store Order in-store for direct delivery Order online for direct delivery Customer Order & Fulfillment Options: 'Very Important' vs. 'Perform Very Well" Important Perform Very Well Source: RSR Research, 2016

10. © 2018 Retail Systems Research & Hortonworks. All Rights Reserved. 10 New Costs Erode Profitability 26% 33% 40% 47% 51% Handling the current volume of direct to consumer orders from our warehouses Handling the new volume of customer returns with our current systems and processes Shipping direct-to-consumer orders from our stores Shipping direct-to-consumer orders fast enough Quantifying labor & shipment costs for cross- channel fulfillment What Are Some Of The “Top Three” Operational Challenges Your Company Faces Around Supply Chain Execution? Source: RSR Research, November 2018 **PRELIMINARY**

11. © 2018 Retail Systems Research & Hortonworks. All Rights Reserved. 11 Pressure On Direct-To-Consumer Is Increasing 47% 40% 26%29% 21% 35% Shipping direct-to-consumer orders fast enough Shipping direct-to-consumer orders from our stores Handling the current volume of direct to consumer orders from our warehouses Direct-to-Consumer Challenges 2018 2017 All Apparel & Brand Managers FMCG General Merchandise Hard Goods and Other Shipping direct-to-consumer orders fast enough 47% 38% 55% 50% 47% Shipping direct-to-consumer orders from our stores 40% 35% 40% 46% 40% Source: RSR Research, November 2018 **PRELIMINARY**

12. © 2018 Retail Systems Research & Hortonworks. All Rights Reserved. 12 Looking for New Leverage 32% 36% 38% 41% Optimize our returns processing Optimize fulfillment based on the most profitable inventory opportunity Redesign our supply chain / distribution network to better leverage inventory Increase service levels without over-investment in inventory What Are Some Of The “Top Three” Opportunities For Improving Supply Chain Management Within Your Company? Source: RSR Research, November 2018 **PRELIMINARY**

13. © 2018 Retail Systems Research & Hortonworks. All Rights Reserved. 13 Retailers Are Making Steady Progress To Enable “Click & Collect” 49% 52% 55% 48% 37% 40% 32% 29% 33% In-store inventory pick for consumer in- store pick-up In-store reservation of inventory for consumer in-store purchase Online visibility into in-store inventory Steady Progress 2018 2017 2016 Source: RSR Research, November 2018 **PRELIMINARY**

14. © 2018 Retail Systems Research & Hortonworks. All Rights Reserved. 14 The Winning Hand (part 1) 24% 16% 45% 37% 45% 49% 51% 57% 60% 64% Same-day ship Same-day delivery In-store reservation of inventory for consumer in-store purchase In-store inventory pick for consumer in-store pick-up Online visibility into in-store inventory Fulfillment Processes: Implemented And Satisfied Retail Winners All Others Source: RSR Research, November 2018 **PRELIMINARY**

15. © 2018 Retail Systems Research & Hortonworks. All Rights Reserved. 15 The Winning Hand (part 2) 42% 32% 21% 37% 42% 26% 51% 53% 55% 57% 57% 60% Ship from store direct to consumer In-store purchase of online inventory for shipment direct to consumer Drop ship from vendor direct to consumer Ship to store from "Direct" DC for consumer in-store pick-up Store-to-Store transfer for pick-up in-store Direct to consumer fulfillment from our DC Winners Are Far Ahead On "The Last Mile" Retail Winners All Others Source: RSR Research, November 2018 **PRELIMINARY**

16. © 2018 Retail Systems Research & Hortonworks. All Rights Reserved. 16 “Science” Can Help! 53% 64% 72% 44% 38% 49% Sourcing algorithms for locating the optimal inventory for customer order fulfillment Near real-time Supply chain analytics (alerts, exceptions, etc.) Distributed order management/customer order management POTENTIAL VALUE Vs. STATUS Of Technology Enablers Related To “Profitable” Customer Order Fulfillment A Lot of Value Implemented & Satisfied Source: RSR Research, November 2018 **PRELIMINARY**

17. © 2018 Retail Systems Research & Hortonworks. All Rights Reserved. 17 18% 29% 26% 29% 21% 29% 24% 21% 45% 26% 45% 49% 49% 49% 51% 53% 60% 62% 64% 68% System-based methods of capturing missed sales opportunities due to local out of stocks Item-level RFID Supplier drop-ship management system Product Lifecycle Management Near real-time Supply chain analytics (alerts,exceptions, etc.) Store perpetual inventory management Real-time updates to inventory from transactional systems Sourcing algorithms for locatingthe optimal inventory for customer order fulfillment Store picking & shipping of customer orders Distributed order management/customer order management Supply Chain Tech Enablers ("Implemented & Satisfied") Retail Winners All Others Winners Are Far Ahead When It Comes To Modernizing S/C Techs Source:RSRResearch,November2018**PRELIMINARY**

18. © 2018 Retail Systems Research & Hortonworks. All Rights Reserved. 18 Getting Fulfillment Right • ‘See’ Inventory across the enterprise • In the stores, in the DC’s, in-transit, on order • Put the right amount of Inventory closest to the points of demand, at the right time • Forecasting and assortment planning need to consider those non-transactional signals that consumers leave along their digitally enabled paths-to-purchase • Fulfill non-store orders in a way that maximizes profitability • Identify your criteria • To avoid a markdown? • Based on lowest shipping cost to customer? • Based on lowest cost, most available labor? • Closest to the customer’s location? • Optimize Non-Selling Store Processes • To cover the new costs associated with handling non-store orders • Don’t forget… Returns & Reverse Logistics

19. © 2018 Retail Systems Research & Hortonworks. All Rights Reserved. 19 What About “Better Forecasting”? 37% 37% 50% 38% 53% 64% We have inaccurate inventory levels in stores We only track where demand is fulfilled from, not where it originates from We consistently stock out on fast-moving categories/products Top Three (3) Supply Chain Management Challenges Retail Winners All Others 26% 41% 40% 45% 46% 60% 32% 58% 59% 61% 64% 72% Weather data Sentiment analysis as an early- warning to sudden changes in demand Trade area data such as new stores and events Automatic feeds of competitive data (pricing and promotions) Space data (shelf & fixture) for forecasting and replenishment Data from past promotions Impementation Status Of HighValue Technology Enablers For Improved Forecasting High Value Implemented/Satisfied This… …Is Being Addressed With This! Source: RSR Research, November 2018 **PRELIMINARY**

20. © 2018 Retail Systems Research & Hortonworks. All Rights Reserved. 20 Hortonworks: A Connected Data Platform That Solves for All Data Store data forever Access a multi-tenant data lake Model with machine learning DATA AT REST Hortonworks Data Platform DATA IN MOTION Hortonworks Data Flow ACTIONABLE INTELLIGENCE Perishable Insights Historical Insights C L O U D ON-PREMISES Capture streaming data Deliver perishable insights Combine new & old data

21. © 2018 Retail Systems Research & Hortonworks. All Rights Reserved. 21 Omni-Channel Fulfillment Excellence Requires Connected Data Connected DCs, Stores, Vehicles, Drivers, Third- parties Demand Forecasts Route Optimization Edge Analytics Exceptions that impact product availability (shrink, in-stocks, returns) 360 view of Inventory and Transactions Machine Learning Stream Analytics Deep Historical Analysis notionalarchitecture External Signals (weather, local events, traffic) Consumer Demand (all channels) Machine Learning - Improved online fulfillment demand forecast accuracy by 3% - Reduced number of trips by 5% whilst serving 0.7% more orders - Reduced total distance covered by 7.2%, having a significant impact on fuel spend and CO2 emissions - Improved overall logistics, driver and customer experiences BUSINESS OUTCOMES

22. © 2018 Retail Systems Research & Hortonworks. All Rights Reserved. 22 Brian Kilcourse Managing Partner, RSR bkilcourse@rsrresearch.com https://www.linkedin.com/in/bekilcourse/ Brent Biddulph GM, Retail Solutions, Hortonworks bbiddulph@Hortonworks.com https://www.linkedin.com/in/brentbiddulph/ Your Turn… Questions and Answers