Boots.com & Black Friday Rob Weightman – Boots.com Operations Manager on the results

Boots.com Journey 1999 – Boots.co.uk

2001 – Wellbeing.com

2004 – Boots.com - Long Eaton

2006 – Boots.com - Birmingham 3rd party provider

2011 – Boots.com - in-sourced to Burton Upon Trent > Supply Chain Transformation Programme

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Boots.co.uk Boots.com Boots.com Multi-channel Digital

Supply Chain Transformation Programme Context: Boots.com is a strategic priority for Boots UK Growth has been strong and future plans assume this will continue We had outgrown our previous operation and investment was required to enable future growth The business is characterised by a large inventory (30,000 SKUs) with small random orders and high

seasonal peak Boots.com operates in a new and fast changing marketing, where delivering the promises made to our

customers is critical

Challenge: Provide a platform to transform the service offered to our customers Provide a platform to support future growth Deliver a step change in profitability through reduction in fulfilment operating costs

Strategy:

In-sourcing the operation from a 3rd party in Birmingham to Boots UK’s new multi operation Burton Service Centre Increases efficiency through inherent benefits of consolidation (seasonal operation) and puts customer

service directly within Boots’ control Use of an automated solution that condenses product storage and provides goods to person picking

This eliminates many current activities, substantially reducing the time take to process each order and lowering the overall footprint required

Modular design providing an effective and flexible way to accommodate significant planned growth Implementation of a new carrier management system

This provides the flexible delivery options demanded by Boots’ customers

The solution continues Boots UK’s supply chain vision to have operational capability that is modern, competitive and efficient through the inherent benefits of consolidation and automation

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Journey continued...

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In-sourced the operation from a third party in Birmingham to Boots’ UK’s new multi operation Burton Service Centre

Implemented a leading automated materials handling solution provided by Knapp AG

Implemented a new warehouse management system and interfaces to Boots “host” and web front end systems

Implemented a new carrier management system to provide flexible delivery options to Boots’ customers

TUPE transferred 120 colleagues from the third party to Boots UK

Seamless transition of the business from the old to the new operation in four days (a big switch on rather than a controlled ramp up)

2012 - Year 1...

Successful operational transfer and BIG launch in January 2012 Stable and capable operation within weeks of go-live Introduced multi carrier strategy Enhanced the delivery proposition on home delivery via carriers Moved to permanent weekend shifts (volumes + tactical) Planning and preparation for first peak

Volume testing – peak validation Resource Rosters – step changes to 24/7 operations Model Day Successful Christmas fulfilment –Cyber who and Black what? Boots Sale

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/01

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.com orders

2013 - Year 2...

Peak Learning Reviews – went well, no so well and do differently

Confidence in the solution

Enhanced the customer proposition “order today – collect tomorrow”

Internal Distribution network changes and carrier engagement

Weekend working requirements

Step change in orders – double digit growth

Warehouse Optimisation – zero defect & Ipack

Multi carrier strategy enhancement

Launched Boots.ie and Boots International

Contingency planning – Cyber Monday (design capacity)

Peak Readiness – last man standing

Volume testing – peak validation with new proposition

Black Friday hits followed by Cyber Monday followed by relentless ordering

Black Friday orders up 60% vs. forecast; Black Friday weekend orders up 30% vs. forecast; three weeks to Christmas orders up 25% vs. forecast (forecast was 15% less than design capacity)

Contingency deployed – manual pick and pack + revise despatch plans + consumables usage

Automation design metrics achieved

Relentless workload up to Christmas Eve (24th delivery promise) straight into Boots Sale 24th Dec

Exhausted...

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2014 – Year 3... the first nine months

Peak Learning Reviews

Peak Capacity Project Initialised – Black Friday solution

Revised forecast volumes for the year – double digit growth

Winner: Boots Team of the Year (internal recognition)

Enhanced the customer proposition “order today – collect tomorrow”

Competitors

7 day proposition

Move to earlier 12:00 available collection (lunchtime window)

Extend order cut-off to 18:00 (return from work)

Step change in orders – growth continues

Black Friday forecasts get bolder...

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Black Friday The history:

Philadelphia Police gave the name to the day in 1950s when shoppers flocked to the shops the day after Thanksgiving.

Philadelphia retailers identified it was the day that shoppers started their Christmas shopping and they started promoting to get as many shoppers through their doors as possible. The Philadelphia retailers actually promoted the day as “Big Friday” but “Black Friday” was more catchy.

It also gained notoriety as some industry experts claimed it was the day that retailers finally moved from being in the red to generating a profit.

Amazon was the first retailer in the UK to start offering “Black Friday” discounts in 2010. Black Friday officially hit the headlines in 2013 when Asda ran massive promotions in their stores. Since then all retailers have joined in with massive deals to kick start Christmas shopping. Not only are there online deals but also on the high street.

The hype:

Customers are aware and now expecting it Coincides with end of month pay day UK retailers have bought into BF in a big way – and they are all at it

The reality:

Changed peoples shopping habits Retails have got to have the deals – can’t afford not to be involved £810m spent on Black Friday 2014 (£720m Cyber Monday which was also lower YoY growth than BF) Black Friday overall online traffic up 60% vs. LY (Cyber Monday 40% up vs. LY) – mobile coming

through Boots.com up YoY (will reveal later!) Boots high street shops up 27% YoY (sales) Amazon, John Lewis, Dixons Carphone all reporting significant YoY increases

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Boots.com Black Friday challenges 2013 order volume growth exceeded original business case

Volume uplift was significantly weighted towards December

Warehouse worked at capacity for a significant number of consecutive days

Peak day in 2013 was 55% greater than peak day 2012

Average three weeks in December 2013 was 70% greater than 2012

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2010 2011 2012 2013 2014 2015 2016

business case business forecast Aug 2013 business forecast Feb 2014

Boots.com Black Friday solution

Deliver a solution which support 80% increase on 2013 peak day Deliver a modular extension to current solution to manage “short” but volatile peak

period Enhanced manual pick solution (from 2013) with new RF devices, purpose built trolleys

and robust processes – reconfigure current racking to provide small and large pick slots Install manual pack solution with carton and tote flow conveyors Install automated sortation method in despatch allowing for increased despatch groups

for “order today – collect tomorrow” Improve system messaging / data processing capacity

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2014 – Year 3... Black Friday results

Project / solution delivered on time – in eight months

Black Friday Orders 139% up vs. LY & 45% up on forecast

Achieve overall design capacity for the fulfilment solution – 80% up vs. LY

99.3% adherence to delivery proposition – maintained through period

Busiest time was 11:00 – 12:00 – 10 % of orders for the day in that hour

By 09:00 we had received 12% of total days orders

1300 colleagues on site working across three shifts on BF weekend – everyone in (three line whip)

Killer Offer process used on 11 high volume lines (Knapp specification designed for single line only) which delivered 12% of order volume on Black Friday – took pressure out of stretched manual pick and pack solution

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Black Friday 2015 and beyond...

Project led by Supply Chain Innovation team focusing on 2015 and 2016 solutions

Major £m investment in operational and site infrastructure

People procurement and resource planning to match step change in volumes

Accommodate more deals and offers

Increased and wider range of SKUs

Results and outputs from 2015 will determine enhancements or tweaks for 2016

2016 will be about 2017 fulfilment

We must have a viable solution that can support customer requirements and delivers business growth... Supply Chain transformation never stops.

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Supply Chain Transformation Programme

Context:

Boots.com is a strategic priority for Boots UK

Growth has been strong and future plans assume this will continue

We had outgrown our previous operation and investment was required to enable future growth

The business is characterised by a large inventory with small random orders and high seasonal peak

Boots.com operates in a new and fast changing marketing, where delivering the promises made to our customers is critical

Challenge:

Provide a platform to transform the service offered to our customers

Provide a platform to support future growth

Deliver a step change in profitability through reduction in fulfilment operating costs

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Any Questions?

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