NewBenchmarksandPerformanceMetricsforProgressiveAssetManagementGrayWilliams,VPWWSupplyChain-LogitechAnnePatterson,VPClientDelivery-WCTbidAgendaTheProblemStatement:TooMuchInventoryMyPrescriptionforInventoryHealthTargetedAssetManagementProcessesKeepingScore–MetricsTools&TechnologyReviewConclusions&RecommendationsLogitech-OverviewPersonalInterfaceProductsOff-shorecontractmanufacturersSurfacetransportSupply-demandsynchronizationisaconstantchallengeNeedforcontinuousprocessofproactivelyidentifyinganddispositioningat-riskinventoryTheProblemStatement:TooMuchInventorySupply-DemandSynchronizationCostpressure

ContractManufacturingOff-shoreproductionSurfacetransportationProductTurnoverFocusisonNPIReturnsOften10%ofoutboundormoreSlowprocessingthroughputAt-RiskInventoryCategories:ActiveProductsObsoleteProducts(FactoryNew)Returns(WhiteBox)D-Stock(Refurb)MakingMattersWorse:PriceErosionKeepingInventoryMoving:

ProgressiveDispositioningStd.CostFullMargin507525100125150TimeNPIEOL…4-6months6-12months12+monthsStillfurthererosionwithnegativePPVFurthererosionwithreturns,freight,andcollectionsTypicalMarginErosionwithManualDispositioningDispositionexcessinventorywhereveritis-factory,DC’s,andchannelMinimizetheadministrativeandoperationalcostsofdispositioningStrictlyadheretocompetitivebiddingforfinishedgoodsandcomponentshortagesandexcessdispositioningEnsureacompleteaudittrailMovetoasystematicprocess:continuouslyidentifyanddispositionexcessasearlyinthecycleaspossibleInactiveExcessPre-obsoleteExcess(replacementdevelopedbutnotreleased)ChannelExcessObsoleteTargetMarginRecovery3StepstoInventoryHealth…TuneupyourInventoryPolicyCleardefinitionClearlycommunicatedLinkProductLifeCycletoInventoryPolicySetGoals%ofinventorybyagingcategoryMonitor

progress3StepstoInventoryHealth…TakeAction:ProgressivelyDispositionExcessInventoryChannelIntranetAuctionSiteBrokerExtranetAuctionSiteSiteManagementDashboard=PeriodCosts+PriceErosionFactor*(ExcessinDC+ExcessinChannel)ExcessIndex*:Onthebasisofcurrentexcessinventoryof$40M,theexcessindexiscalculatedasfollows:WhseCosts:$286kStdRevCosts:$400kE&OReserve:$400kCostofCapital:$300k$1,386k+1%*($40M+$30M)=$1,386k+$700k

Inotherwords,thecostofinactionthismonthis>$2M3StepstoInventoryHealth…DefineMetricsandMeasureSuccessActiveExcess*sampledataExcessIndex:ACompositeofMetricsRevenue/RecoveryComponentThe

PriceErosionfactorDeltabetweensalesprice(@DistributorDiscount)andWCTMarketIntelligence(currentmarketprice).IndexconsistsoftheabovedeltacalculatedforthetopnSKU’swhichmakeup80%oftheexcess$forthecategory(linkto“ThePriceErosionFactor-Example”slideforreturnscostcomponents)Cost/CostAvoidanceComponentWhereisthisexcess?Channel:costofreturnMemphis:storageIndy:storage+3pservicesThecostofreturningchannelinventoryishigherthancostofholdinginventoryatMemphis.Thus,thelocationoftheinventoryisafactorintheexposurecalculation(linkto“ExcessIndex–CostComponent”slideforreturnscostcomponents)ThePriceErosionFactorDistributorListPrice(SKU1)n=1nDistributorListPrice(SKU1)-WCTbidMarketIntelligencePrice(SKU1)Example:LetussaythatofActiveInventoryattheUSDistributionCenter,12SKU’smakeup80%oftheinventory(atstandardcost).CalculatingthePriceErosionFactorusingtheaboveformulaforthose12itemswillgiveareasonableindicationofpriceerosion.ExcessIndex–CostComponentCalculatetotalquarterlyreturncostperunitusingtheappropriatefactorssuchasthoselistedbelow.Dividethiscostbythenumberofunitsinthechannelpendingreturnforthequarter.Thisistheincreased

liabilityofexcesschannelinventoryandmustbeapartoftheExcessIndex.ReturnScrapRate(%-age)*COGS ReturnsTransactionCost TransportationCost(1Way) Re-WorkCost TotalCostofReturns(000,000) TheProgressiveDispositioningCycleWCTbidChannelIntranetAuctionWCTbidLiquidationAuctionScrap/Recycle

Routine(monthly)identificationofat-riskinventoryPostedtointranetchannel

auctionsiteFinancedeterminesminimumpricingSalesforceproxybidsonbehalfofretailers

PrivateAuctionApprovedclose-outpartnersonlyCompetitivebiddingTotaloperationalsupportfrom

WCTbid

ControlleddestructionRecycling

Compliancereporting

TheProgressiveDispositioningCycleWCTbidLiquidationAuctionScrap/RecycleProgressiveDispositioningisaninterlockprocessensuring:Inventoryvisibility:onereal-timeviewforSales,Finance,SupplyChainBrandprotection:onlyapprovedliquidatorsAdministrativeStreamlining:overheadreductionControls:Sarbanes-Oxleytransactiontransparency,closedloopinventorytracking,audittrailMetricstodrivecontinuousimprovement

WCTbidChannelIntranetAuctionProductRecoveryManagement

CommercialEnd-Users,