Toys R Us Drop-Ship Performance Programs Discussion Document 1

Table of Contents: Overview………………………………………………………..P3 Inventory Update……………………………………………..P4-5 Late Shipments……………………………………………….P6-11 Cancellations Due to Out of Stock………………………P12-13 Late Shipment Confirmation……………………………..P14-16 Questions……………………………………………………….P17 2

Overview Drop Ship Performance Programs consists of 4 measurements: Inventory Updates Late Shipments Cancellations Due to Out of Stock (OOS) Late Shipment Confirmation 3

Inventory Updates: TRU requires the vendor to accurately represent their inventory so that any order eligible for placement is fulfilled, within the vendor stated Service Level Agreement (SLA). Vendors are expected to update their inventory position at least 1 time each business day so as to reflect the most accurate, up-to-date quantity available for purchase. Failure to update will result in generation of a violation. Each inventory deduction violation is Pre-fixed as “DL” on the weekly compliance report. Currently there is a $0 deduction associated with inventory compliance violations however this may change. 4

Inventory Updates: The Relation between inventory reflected in Commercehub and Order Placement. An item with a quantity not reflected as “0” and status reflected as “available” can have an order placed against. Although TRU only requires that inventory be updated at least 1 time per business day it is often best to update inventory multiple times so as to reflect the most accurate information. 5

Late Shipments: During the onboarding process the vendor is to notify TRU’s Drop- Ship team of the number of days required to physically ship an order from when the order is received. This period of time is identified as the Service Level Agreement or “SLA“. This processing time frame does not include non-business days. Based on the SLA, each shipment is measured to ensure orders are being physically shipped within the agreed to time frame. TRU requires all lines for an order to be shipped on or before the expected ship date. Each late shipment violation is a $10 deduction and Pre-fixed as “DI” on the weekly compliance report. 6 As a best practice, you should notify TRU in advance, of instances in which your ability to meet your SLA will be impacted: holiday’s, planned warehouse closures, or emergencies.

Late Shipment: The Relation between closing the order and the Ship date reflected on the weekly report Orders can be closed out via 856 or Order stream. If ASNs are submitted through Commerce hub, orders are only closed if the ASN is successfully received AND is accurate and error free. The date represented in the 856 or Order stream is utilized to determine when the order physically shipped. You should ensure that the close out information accurately represents when the order was physically shipped, and not simply when the order was closed out. 7

Ex. Late Shipment Violation Order Placed: 6/4/15 SLA= 3 days Order expected to ship no later than 6/9/15 (Saturday and Sunday are not counted) X = Non Business Day 8 Order Placed x x Expected Ship Date

Late Shipment Review: Check for Understanding Question 1 9

Late Shipment Review: Check for Understanding Question 2 10

Late Shipment Review: Check for Understanding Question 3 11

Cancellations Due to Out of Stock TRU requires the vendor to accurately represent their inventory so that any order eligible for placement is fulfilled, and fulfilled in the vendor stated Service Level Agreement (SLA). Any lines cancelled without Toys R Us approval, using unapproved Cancel Codes, are in violation. Inventory should always be accurate as to what is physically available. Infractions generate at the line level of the order. Infractions are represented as “DJ” on the weekly report. Each cancellation violation is $5.00 deduction. 12

Cancellation Due to Out of Stock: The Relation between inventory reflected in Commercehub and Order Placement. An item with a quantity not reflected as “0” and reflects as “available” status can have an order placed against. Although TRU only requires that inventory be updated at least 1 time per business day it is often best to update inventory multiple times so as to reflect the most accurate information. As a best practice, if you do not believe you have sufficient inventory to handle the expected orders you may wish to reduce the inventory to “0” to prevent orders from being placed. 13

Late Shipment Confirmation Toys R Us requires that Shipment confirmation be sent within 16 hrs. of goods being physically shipped. Shipment(s) can be confirmed either via 856 ASN data transmission or closed out manually in Order stream. Any confirmation submitted more than 16 hrs. after the ship date will result in a violation. If ASNs are submitted through commerechub, orders are only closed if the ASN is successfully received and is accurate and error free. Infractions are represented as “DK” on the weekly report. Late Shipment confirmation violations are accessed at $5 per violation. 14

Ex. Late Shipment Confirmation Violation Order Placed: Thursday, June 4 th SLA= 3 days Order Ships: Tuesday, June 9 th at 12:00PM Confirmation Must be sent before June 10 th at 4:00 AM 15 As a best practice, Order should be closed out as soon as goods are physically shipped. Order Placed Shipped x x

Late Shipment Confirmation: The Relation between closing the order and the ship date Confirmation Orders are closed out and confirmed via 856 or Order stream. The date and time represented in the 856 ASN transmission or Order Stream is utilized to determine when the order was confirmed when measuring compliance. As a best practice, Order should be closed out as soon as goods are physically shipped. 16

Questions? For questions relating to these programs please reach out to For general Drop-Ship questions please reach out to 17