1. ©April 2005 Barnes & Noble, Inc. BMI Management Conference May 2005 Joe Gonnella VP, Inventory Management & Vendor Relations

2. ©April 2005 Barnes & Noble, Inc. 2 Barnes & Noble Ranks #1 in Quality Among Retail Brands in America for 3 Straight Years

3. ©April 2005 Barnes & Noble, Inc. 3 Barnes & Noble.com Ranks #1 in Quality Among Online Booksellers

4. ©April 2005 Barnes & Noble, Inc. 4 Barnes & Noble Today Fortune 500 Company Retail Sales: $4.4 Billion 820 Stores in 50 States E-Commerce Sales: $419.8 Million

5. ©April 2005 Barnes & Noble, Inc. 5 A Vertically Integrated Multi-Channel Retailer Retail Stores E-CommercePublishing #1 Brand and market leader #2 Specialty retail web site Exclusive product at higher margins

6. ©April 2005 Barnes & Noble, Inc. 6 Multi-Channel Strategy Multi-Channel Retailers Find Their Groove* 24% of offline sales influenced by the Web 8% of online orders are returned to the store, and of those customers, 25% make an in-store purchase 16% of store customers also purchased online 15% of online customers began as store customers *Source: Forrester Research, 2004

7. ©April 2005 Barnes & Noble, Inc. 7 Supply Chain Infrastructure Warehouses in NJ, TN and NV 10,000 active vendors/40,000 publisher imprints 200 million units shipped annually to stores Just-in-time daily replenishment Rapid logistics network 10 million internet orders Real-time inventory network –Stores –Web site

8. ©April 2005 Barnes & Noble, Inc. 8 1 Day2 Days3 Days4 Days5 Days Over 75% of store product delivers via ArgixDirect. Services the entire U.S. 80% of the deliveries to the stores are received within 3 days. Barnes & Noble Distribution Transit Times for B&N-Jamesburg, NJ

9. ©April 2005 Barnes & Noble, Inc. 9 Barnes & Noble Distribution Transit Times for B&N-Reno, NV 1 Day1-2 Days2-3 Days3-4 Days Primarily services West Coast (over 200 stores). Over 95% of the deliveries to the stores are received within 3 days. HAWAII 2-3 DAYS ALASKA

10. ©April 2005 Barnes & Noble, Inc. 10 There are 5 conceptual approaches to the Distribution Process

11. ©April 2005 Barnes & Noble, Inc. 11 Warehouse Distribution Process PullShipStorePutawayReceive Barnes & Noble Distribution Center BARNES & NOBLE ShelveReceive ShipPullStore Bindery Distribution Facility PullShipStorePutawayReceive Publisher Distribution Center

12. ©April 2005 Barnes & Noble, Inc. 12 Flow Through Distribution Process PullShipStorePutawayReceive Publisher Distribution Center ShipRe LabelReceive Barnes & Noble Distribution Center BARNES & NOBLE ShelveReceive ShipPullStore Bindery Distribution Facility

13. ©April 2005 Barnes & Noble, Inc. 13 Publisher Drop Ship Process PullShipStorePutawayReceive Publisher Distribution Center BARNES & NOBLE ShelveReceive ShipPullStore Bindery Distribution Facility

14. ©April 2005 Barnes & Noble, Inc. 14 Bindery Drop Ship Process ShipPullStore Bindery Distribution Facility BARNES & NOBLE ShelveReceive

15. ©April 2005 Barnes & Noble, Inc. 15 Print On Demand BARNES & NOBLE ShelveReceive ShipPrint Print on Demand Facility

16. ©April 2005 Barnes & Noble, Inc. 16 Print On Demand (Future State) POD

17. ©April 2005 Barnes & Noble, Inc. 17 Warehouse Functions Performed: Backlist replenishment Demand wholesaling Book-in-Hand verification of bibliographic data

18. ©April 2005 Barnes & Noble, Inc. 18 Participation in, and support of, Book Industry Study Group

19. ©April 2005 Barnes & Noble, Inc. 19 BISG Structure/Organization BISG Committees: Distribution ExecutivesPublications Manufacturer ExecutivesResearch New Technology Education FinanceMarketing PolicyMembership BISAC BISAC Sub Committees: Machine Readable CodingIdentification Digital Sales ReportingMetadata Internet CommerceRights Pub/Manufacturer EDISubject Codes

20. ©April 2005 Barnes & Noble, Inc. 20 Industry Standards Implemented: ONIX – Metadata, Bibliographic data SAN – Standard Address Number EDI – Purchase Orders, POAs, Invoices, ASNs (all ASC X12) Shipping Labels based on UCC standards Product Labels based on industry standards ISBN – ISBN-13, Bookland EAN

21. ©April 2005 Barnes & Noble, Inc. 21 Standard Carton Labels Shipping Label Product Label (Bindery Application)

22. ©April 2005 Barnes & Noble, Inc. 22 Standard Labels; Standard Placement

23. ©April 2005 Barnes & Noble, Inc. 23 Measurements and Compliance Compliance is required for standards to be effective; regular performance reports are made to vendors Efficient Data Receipts Program (EDRP) measures and reports compliance with bibliographic data standards Efficient Receipts Program (ERP) measures and reports compliance with carton, product marking, and EDI standards

24. ©April 2005 Barnes & Noble, Inc. 24 Inventory Management

25. ©April 2005 Barnes & Noble, Inc. 25 Inventory Management Demand Planning Supply Planning Lead Time Measurement

26. ©April 2005 Barnes & Noble, Inc. 26 Demand Planning Statistical forecasting using i2’s Forecasts done on point-of-sale data Monthly forecasts are generated for Demand Planner product Retail and Barnes & Noble.com for each subject, category and sub-category and ISBN

27. ©April 2005 Barnes & Noble, Inc. 27 Demand Planning Methodology using i2: Statistical Forecasting Coding POS spikes Smoothing POS data Trend, Level and Seasonality A miracle occurs !!!

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30. ©April 2005 Barnes & Noble, Inc. 30 Supply Planning Inventory planning using i2’s Supply Forecasts received from Demand Mathematical formulas used to Chain Planner product Planner generate “optimal” purchases

31. ©April 2005 Barnes & Noble, Inc. 31 Supply Planning Methodology using i2: Safety Stock mathematically calculated using the following: Customer Service Level Forecast Error Average Demand ISBN Lead Time Variability of Lead Time Economic Order Quantity and Frequency Balance cost of acquiring versus cost of carrying

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34. ©April 2005 Barnes & Noble, Inc. 34 Lead Time Release Order EDI Pick-up EDI To warehouse Warehouse schedule Shipping ­ Hold for pick up ­ Hold for full truck ­ LTL (less than load) Receipt Stow/available for sale

35. ©April 2005 Barnes & Noble, Inc. 35 Turn Decreases as Leadtime Increases Days

36. ©April 2005 Barnes & Noble, Inc. 36 Return % Increases with Leadtime Increase Days

37. ©April 2005 Barnes & Noble, Inc. 37 Standards enable collaborative planning forecasting and replenishment

38. ©April 2005 Barnes & Noble, Inc. 38 The Industry: UCCnet, UCC, EAN, FMI, GMA, Transora, WWRE, ECCC, GCI, Wal-Mart, Kraft, Colgate, Wegmans, P&G, Ahold, Sterling Commerce, IBM, Microsoft, UDEX, etc… 2. GLOBALregistry 3. Data Synchronization 4. Collaborative Core Business Transactions - Order, Shipment, Payment. 5. Collaborative logistics management 6. Collaborative sales & promotion planning 7. Collaborative product development 1. Common data standards e-Collaboration Time / Degree of trust & complexity Benefits You Source: A.T.Kearney for GMA - FMI Standards Enable Collaborative Commerce VICS Enables Standards Adoption

39. ©April 2005 Barnes & Noble, Inc. 39 VICS CPFR ® Committee Work So Far. 1996 1997 1998 1999 2000 2001 1 st “CFAR” pilot VICS subcommittee develops CPFR® VICS CPFR ® Guidelines published First CPFR ® rollout Roadmap to CPFR ® published, with pilot results Leading CompaniesPilot CPFR ® Global CPFR ® guidelines published B2B marketplaces offer CPFR ® services 2002 2003 2004 What about your firm? CTM Ver 1.0

40. ©April 2005 Barnes & Noble, Inc. 40 The VICS Model for CPFR

41. ©April 2005 Barnes & Noble, Inc. 41 CPFR.org

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46. ©April 2005 Barnes & Noble, Inc. 46 Book Industry Study Group is the key!

47. ©April 2005 Barnes & Noble, Inc. 47 Thank you!