How to Use this Slide Deck Personalization Any time the word “supplier” is used, think about adding your company name/logo Personalize your goals for the program in slides with a green border, then delete the border

How to Sell the VMI Program Date How to Sell the VMI Program

Agenda Agenda What is VMI? Why does a Supplier do VMI? Why is VMI Good for Sales? Why Should a Distributor Join Our Program? Who Makes a Good Partner? We will start by explaining what VMI is, and why we started offering it to our customers. We will then cover why you should want your customers involved. Then we will talk about how to approach a customer about VMI and wrap up by discussing which customers would be a good fit for VMI.

What is Vendor Managed Inventory?

Vendor Managed Inventory is the process where the supplier generates orders based on mutually agreed objectives and demand information sent by the customer. Vendor Managed Inventory is a business process which changes traditional purchasing and replenishment from one where the distributor analyzes inventory, forecasts future demand, and places the order with the supplier. The traditional process is inherently flawed because there is a great deal of necessary information about lead times, item numbers and product availability, not available to the distributor. This new model flips that process around and allows the supplier to control the ordering and shipping of their goods to the distributor. It works better because the supplier sees the complete picture—what the distributor needs based on their on-hand inventory and historical demand, plus their own awareness of the manufacturing and transportation process. Because they have first agreed on mutual goals with regards to metrics such as sales, turns and stocking positions, the supplier knows best and is uniquely able to manage the process. I think of the traditional model like trying to solve a crossword puzzle when you only have clues to the words going across. The VMI process is much better because you benefit from the additional clues of the words going down. It’s all the information needed to solve the puzzle.

Clearer Demand Visibility Enhanced Collaboration Better Transportation Utilization Less Rework Increased Efficiency! The key is collaboration between the supplier and distributor on mutually agreed objectives. By collaborating on shared goals that benefit both the supplier and distributor, and using rich data from both the Supplier and Distributor, a Vendor Managed Inventory program can overcome many of the inventory and replenishment challenges you face The results are better transportation costs, better visibility into demand, less rework due to bad data, fewer rush situations and overall better product mix The result is increased efficiency and better orders on both ends of the supply chain and ultimately Increased Profitability for both parties! Improved Product Mix Eliminate Emergencies Clearer Demand Visibility

TrueCommerce DATALLIANCE Enter your company name in place of “supplier” then delete this bar VMI Process REVIEW PRODUCT ACTIVITY Supplier Distributor TrueCommerce DATALLIANCE We have partnered with TrueCommerce Datalliance to provide VMI to our customers. The genius behind the TrueCommerce Datalliance VMI process is the simplicity. Every day, the distributor transmits their product activity file—in other words, their sales activity that reflects what they started the day with and what was their stocking position at the end of the day. Datalliance uses that information along with historical activity to calculate their forecasted demand and generate a suggested order, which is then reviewed by [supplier]. [You may want to include the name(s) of planner(s) here.] Once the planner works through any exceptions alerted by the Datalliance system, they launch the order which triggers a purchase order to us and a P.O. acknowledgment to the Distributor. The point here is that we aren’t in this alone. We wanted to provide a value-added service to our customers so we went out and found the best solution. P.O. Acknowledgment PURCHASE ORDER

Supported Market Leaders Enter your company Logo in place of “supplier logo” then delete this bar Distributors Manufacturers Distributors Supplier Logo Using TrueCommerce Datalliance allows us to leverage their expertise. These are some of the companies TrueCommerce Datalliance works with. You can see some of the biggest companies in the world do VMI, and they do it using the same software we do. When you approach a customer about VMI there is a good chance they are aware of the process already. They may already do it with other suppliers and they may have heard of TrueCommerce Datalliance.

Why VMI? How does this process drive business success?

Traditional Replenishment

DISTRIBUTOR SALES PUTAWAY EVENTS INVENTORY This is the data that the Distributor has - things directly related to its business and its customers.

ORDERS DISTRIBUTOR SALES PUTAWAY EVENTS INVENTORY The Distributor’s buyer uses these pieces of information to generate the order.

DISTRIBUTOR SUPPLIER LEADTIME PACKAGE SIZES EVENTS ITEM NUMBERS But there are things the buyer doesn’t know that the Supplier does - like upcoming promotions, lead times, changes to product size and item numbers. All of these can cause errors and slow down the order.

poor product mix CUSTOMER STOCK-OUTS Misaligned Goals Inefficient Transportation EMERGENCY ORDERS Misaligned Goals EXCESSIVE RETURNS Poor visibility of demand OBSOLETE INVENTORY Rework Due to Bad Data Here some of the effects of not having information from a Supplier

DISTRIBUTOR SUPPLIER SALES PUTAWAY EVENTS INVENTORY EVENTS LEADTIME PACKAGE SIZES ITEM NUMBERS RETURNS NEW PRODUCTS And, when we have information from the Supplier, we can add things like Product Returns and New Products

BETTER ORDERS DISTRIBUTOR SUPPLIER SALES EVENTS PUTAWAY LEADTIME PACKAGE SIZES INVENTORY BETTER ORDERS ITEM NUMBERS RETURNS NEW PRODUCTS By feeding the information from both ends into the TrueCommerce Datalliance system, a better order can be made than by the Distributor on its own. Distributors will occasionally balk at the idea that their orders could be better as many of them see ordering as a strategic advantage, but VMI orders are built using data that the Distributor simply doesn’t have access to any other way.

GROW SALES Efficient in-stock levels Demand Visibility supplier benefits Efficient in-stock levels - scheduled and repetitive ordering, optimized inventory Demand Visibility - supply chain insight, reduce return exposure, product life cycle Customer Support - wholesaler collaboration, grow market share, differentiate GROW SALES Why would a supplier pay for this? These are some of the benefits suppliers see. VMI smooths the demand pattern, allowing us to better optimize our inventory It also allows us to see farther down the supply chain because we get sales data from our customers It brings us closer to our customers because this is a value added service, making the ordering process smoother for both of us And ultimately these things combine to increase our sales.

$ 25% 31% 88% 51% 24% DISTRIBUTOR SUPPLIER Turns Out of Stocks Order Touches Returns Sales 25% 31% 88% 51% 24% [These are the numbers we see overall at TrueCommerce Datalliance, if you have numbers specific to your program, you should enter them here. Use the Period Comparison report to look at before-and-after numbers for some or all of your distributors.] $

Supplier Business Goals Grow Sales Decrease Costs Improve Productivity Improve Customer Satisfaction Increase Profitability We began offering VMI because we wanted to . . . [enter the specific reasons your company is doing VMI]

Easier to Manage Relationship Sales rep benefits Easier to Manage Relationship - scheduled and repetitive ordering, previously agreed upon pricing Customer Support - Differentiate, strengthens relationship with key accounts More Time with Opportunities - VMI Accounts require less intervention, allowing Sales to focus on more labor intensive opportunities Those are the reasons we are doing VMI but why should you take this to your customers? What’s in it for you? The first reason is that it will make it easier to manage relationships. The system has several tools to help increase sales and it will reduce the effort from the buyer to maintain stock levels of core SKUs The support offered by VMI is often a means of differentiating product. The stronger relationship can help encourage expansion of the product line This allows you to focus on selling rather than fixing issues. I think everyone has an idea or two of an opportunity to increase their sales that they don’t think they have the time to do. Installing a VMI relationship allows sales reps to stop treading water and start swimming.

Growing vmi We’ve talked about what VMI is and why it’s good for us, but why would a distributor like this program?

SERVICE & SUPPORT Improve inventory turnover Distributor benefits Improve inventory turnover - better cash flow, product mix Increase availability levels - wholesaler in-stock to meet demand, reduce stock outs Collaborative supply chain - communication, vendor’s commitment to partner goals SERVICE & SUPPORT Benefits vary from supplier to supplier - as well from partnership to partnership – but these are the benefits our customers can expect. By tracking all the data closely, VMI increases inventory turns For many of the same reasons, VMI also decreases stockouts VMI also demonstrates to the Distributor that the Supplier is committed to the relationship But the biggest reason Distributors like VMI is that the service and support we provide helps them make more money. They can redistribute man hour to more directly value added activities

Easy Set Up Distributor Steps No Additional Hardware Provide sales history Provide daily product activity Receive PO Acknowledgement Easy Set Up No Additional Hardware Minimal IT involvement No ERP Overhauls Ongoing Supplier & Datalliance Support An important point here is that all of these benefits are relatively easy to get for the Distributor. If they can handle three pieces of information we can start a VMI partnership. To start, we need a year of sales history to do the initial planning. Then, going forward, they need to provide ongoing product activity data and receive a purchase order acknowledgement so that they know what is being shipped.

Align Business Goals - Transparency “Vendor Managed Inventory is the process where the supplier generates orders based on mutually agreed objectives and demand information sent by the customer.” VMI: “Mutually Agreed” SPECIFIC OBJECTIVES Improve in-stock levels Increase inventory turns Reduce transaction cost Grow sales Better product assortment DETAILED DISCUSSIONS DC or branch dist. model Order frequency Freight parameters Pricing / data sync Returns / new products When approaching an distributor to join our program it is helpful to remember the definition of Vendor Managed Inventory I shared at the beginning of the presentation. The key phrase is “mutually agreed”. The conversation should start with what are the objectives for this specific relationship. Is it about turns? In-stock percentage? Easier ordering? From there the conversation should move to the nuts and bolts of how the partnership will work. The purpose of these discussions is to ensure that there are explicit expectations for both parties and that both businesses’ goals are aligned. This will mean the relationship is built on a foundation of transparency and trust. Align Business Goals - Transparency

Typical Engagement process Identify distributor that fits VMI profile Confirm distributor can meet the functionality requirements for VMI Discuss the mutual benefits VMI can provide for this partnership Approach Program Manager for approval and support Hold a kick-off Call with Datalliance What does the engagement progress look like? It’s a 5 step process. The first is to identify customers that may be a good fit. We will talk about fit in a moment. The second is to confirm that they can send daily product activity and the other minimum technical requirements. Third is to conduct the initial conversation to gage interest. If there is, the fourth step is to hand off to the Program Manager to help with more detailed discussions. Finally, hold a kick-off call with Datalliance to lay down the plan to implement the partnership. The take away here is that you don’t need to be an expert in VMI. We are here to help. What we want you to do is to approach customers you think will be a good fit for our program. [You should name the person in your organization that is responsible for onboarding new Distributors] [This is the order that Datalliance generally recommends. This order is, however, malleable. Sometimes it is easier to look for Distributors that are technically capable first. Sometimes the Program Manager is brought into the discussion earlier. Sometimes it isn’t the program manager that answers most of the questions but a dedicated sales engineer. If you would prefer a different order for the engagement process change this slide as you see fit.]

Who Makes a Good Partner? That leads us to who would be a good fit for our program

Datalliance Partners Preferred! VMI Partner PRofile With exception of the first bullet and sub bullet, this is a list of common factors in a VMI Partner Profile. Please edit to match the profile of your organization. Do not change the first bullet and the first sub bullet, these are required for Datalliance VMI. Technical Preferences Minimum Technical Capability Requirements Provide daily product activity (852), receive PO Acknowledgement (855), provide sales history (52 weeks) EDI or flat file EDI or e-Commerce Preferred ERP system Strategic Preferences Minimum Sales Threshold Core SKUs Stocked DC or Store replenishment Distributor commitment / trust Fixable issues Growth potential Number of locations It’s worth reiterating that in order to do VMI a distributor needs to be able to do three things, Send daily sales and stock positions also called product activity Receive a purchase order acknowledgement so that they can track the orders we generate Provide one year of sales history to build the first orders [Discussion of your partner profile. We recommend thinking about this in two halves. The first half is technical, including the minimum requirements, but also including other technology preferences. Some Suppliers prefer to work with Distributors who are EDI capable, or have a specific ERP system they find easier to work with. The second half is strategic. When developing this part of your partner profile it is most effective to keep in mind larger goals. If there is a corporate goal to decrease costs, for example, the partner profile could include targeting distributors who often have POs that need to be re-worked.] Among the distributors that match our partner profile, we like distributors that have an existing relationship with TrueCommerce Datalliance. They understand VMI already and tend to be easy implement. [Datalliance can help you build a partner profile. Contact your sales or customer care representative for more information.] Datalliance Partners Preferred!

FAQs Enter your company name in place of “supplier” and edit to your important traits then delete this bar Q: I like my Inventory Management System, why should I let Supplier manage my inventory? A: Supplier will not replace your current ERP platform, rather we would supplement your system. We’ll take responsibility for day-to-day ordering and free up your valuable resources to maximize ROI, and provide the value of Supplier expertise and product insight through VMI’s collaborative ordering process. Your ERP system will still see the inventory so you can evaluate at any time just the same as you do today. Q: Is there a cost associated with Supplier’s VMI Program: A: There will be some upfront investment in man hours during set-up as well as the cost of EDI which you pay regardless of VMI. But there are no fees associated with our VMI program. Q: What’s in this for Supplier, why do you want a distributor on VMI? A: Many reasons but the most important are: Better visibility into channel demand which helps with forecasting and that helps delivery performance. Visibility into the “health” of our distributors’ inventory. And, do we have the right products on the shelf? These are some initial questions you may be asked that we would like you to be able to answer. For additional answers and assistance, please consult with the Program Manager.

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