Transforming the Home Entertainment Digital and Physical Supply Chains: Issues and Opportunities

1
Transforming the Home Entertainment Digital and
Physical Supply Chains Issues and Opportunities
James Maysonet Richard Beaver
Capgemini Teradata
2
The Home Entertainment Landscape
3
The Physical Supply Chain
Distribution
Customer Sales Channels
Carriers
Techn-icolor
Cinram
Deluxe
Distributor
Replicators
Information Systems
Suppliers

• Inner FW

• Outer FW

4
Physical Supply Chain Detailed
5
Issues within the Physical Supply Chain

• Lack of Synchronicity of POS data
• Incomplete polling of store POS data
• Inaccuracy of Product ID and Sales Information
• Timeliness of polling of POS data
• Frequency of polling of POS data
• Fragmented IT Systems within each supply chain
  segment that is semi-automated
• Sub-optimal B2B connectivity
• Retailers at different levels of IT
  sophistication
• Proof of Delivery Issues are fundamentally caused
  by retailer systems and practices
• Inadequate B2B Connectivity
• Data Inaccuracy and Corruption

• In-store execution (the last 100 feet)
• Inconsistent product placement and space
  allocation for corrugate
• Poor employee training
• Unaligned KPIs
• Shrink issues
• Returns due to intentional product damage
• Unreasonable deductions
• Timeliness and accuracy of data
• Lack of shipment receipt data (leads to inventory
  inaccuracy)
• Inconsistent POS data
• Desire for accurate on-hand data
• No standardization or sync of retailer to studio
  data
• Desire to improve forecasting ability
• Poor data leads to excess ordering
• Participant maintain fairly consistent metrics

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Revenue Streams are Flat
Predictions just a couple of years ago forecast a
more substantive impact of digital distribution
over the next 3 5 years
2005 Kagan US Market Forecasts 2006
2009, millions
Actual 2006 Sales 24 billion
7
Content providers will enable their content
across a higher number of channels and formats
The Digital Supply Chain
Channels
Devices
Content
Cinematic
Classical Distribution
Music
Retailers
TV Screen
Short form video Music TV Episodic
PC Screen
Broadband Providers
Long form video - Movies
Online
Mobile Device
Direct to Consumer
Other
Games Publications
8
Issues within the Digital Supply Chain
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Studios Need Both Supply Chains
Effective Product Lifecycle management,
leveraging the best traits of physical and
digital supply chains will enable long tail
Content Monetization
Digital enables a broader title universe
Whose margins increase towards the tail
70
60
50
40
30
20
10
0
C2
C7
C12
C17
C32
C37
C42
C47
C52
C57
C62
C67
C72
C77
Recent Release
New Release
Catalogue
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APPLYING THE SCOR METHODOLOGY and 7 DIMENSIONS
TO INVENTORY VISIBILITY
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Inventory Visibility Overview of typical issues

• Growth rate (volume of units and complexity) have
  placed a significant amount of pressure on the
  supply chain to rapidly and efficiently match
  demand supply.
• Challenges include late approvals in
  pre-production through the supply chain to the
  lack of store-level visibility of returns.
• With growth rate expected to increase the volume
  of units over the next 3-5 years and increased
  complexity, the typical supply chain processes
  are not scalable
• It is imperative for management to have access to
  real-time inventory visibility throughout the
  supply chain.

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Typically, the lack of inventory visibility to
enable demand supply matching is driven by 4
root causes
Inventory Visibility Root Cause Diagram
Pre Production Delays Comp. Ordering
Lack of Visibility pre-production delays
Component Delivery to Manuf Late
Orders to DCs are late
Products to DCs are late
Expedited Freight costs
No real time tracking system w/ data integration
No real time inventory visibility capability
Lack of an Automated Dashboard
No integration with Finance
Excess inventories
No single real-time inventory Process Owner in
place for the entire supply chain
Limited Access to store receipts (transit time
ship vs. receipt)
No store receipts (save VMI) only PODs
Inventory shortages
Unclear Mfg. capability, role definition to drive
visibility
No store visibility of returns
Key
Primary Pain Point
No clear Business Case (cost/benefit) for
integrated real-time inventory visibility
Secondary Paint point
Root Cause
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Lack of real-time visibility of all components,
milestones, and finished goods negatively impact
the ability to service customers
1.3.1 Mfg. receipt
1.6.1 Store receipt

• 1.1
• Pre-Production Order Components

• 1.2
• Supplier Ships Components

1.4. DC Receives, places into FG Inventory
1.5 DC Fills to Orders, Ships to Customers
Level 2 Process Flow
1.3.2 Manufacturer Ships to DC

• 1.6.2
• POS, Returns

• Delays in Pre-Production approvals delay the
  ordering of needed components and the delivery of
  DLTs to Manufacturing

• Delays in order receipt delays the suppliers
  ability to schedule production

• Product is received late at DCs, potentially
  causing inventory shortages

• No store receipts.
• No store visibility of returns for accounts

• Components are delivered late to Mfg. due to
  pre-production approvals/DLT delays
• Product is delayed in shipping (or transferring)
  to DCs for same reason

• Ability to dispatch orders to DCs on a timely
  basis is impeded by

Issues

• Delays in Pre-Production approvals and DLTs lead
  to compressed timeframes for operations and
  suppliers to respond

• The delay in order receipt causes delays in
  production scheduling, resulting in delays in
  shipping components to Manufacturing

• Late delivery of DLTs impacts total replication
  forecast/scheduling for Mfg.
• Mfg. receives late components, possibly late
  ships/transfers product to DCs

• DCs must manually update Sales on actual
  inventory levels as product is received after
  once-a-day update.

• Sales establishes new release allocations based
  on daily supplier inv. Levels
• Poor forecasting consensus result in building
  too much or too little product

• Actual inventory visibility beyond DCs is limited
  to store perpetual inventories at VMI accounts
  that do not feed planning and Operations systems.

Impact/ Implications
on-time delivery
on-time delivery

• on-time delivery

• on-time delivery

Key Metrics

• Incorporate pre-production approval alerts into
  sourcing, manufacturing planning systems
• Measure manufacturers Available to promise
  performance
• Combine Store receipts, POS, and store-level
  returns to gain visibility of inventory outside
  of DCs

Policy Considerations
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Generally. the associated design characteristics
to address the root causes need to primarily
focus on process, technology and metrics

• Real-time inventory tracking process across
  suppliers, at manufacturing DC facilities, and
  to/from customers. Sales Operations Planning
  process with manufacturer) to drive consensus on
  committed orders then measure performance.
  (1,3,4)
• POS data received wherever possible.

• Perfect order fill KPIs
• Component orders issued with requested lead
  time
• product received on-time at DCs
• of Stockouts
• order fill rates (1-5) measure vs. available
  inventory
• on-time delivery
• receipt-to-order exceptions
• in-store visibility of returns
• Inter-facility shipments time and cost
• Delta between total new release orders shipped by
  title and mandated tender date
• POD Exceptions over total (Overages, Shortages,
  Damages)
• Inventory turns

Process
Metrics

• Integration of real-time inventory tracking
  system
• Electronic dashboard that incorporates all
  deadlines, alerts from scheduling tracking
  tools, all forecasts and capacities for timely
  execution decision-making
• Available to Promise performance measurement with
  real-time Inventory
• exception reporting from carriers to Operations,
  Sales Finance
• In-store visibility of returns)

• Metric-based performance ownership measures
  within the supply chain (between extended supply
  chain groups and external with customers)
• Performance based rewards, penalties tied to
  customer-based supply chain performance

Technology
Rewards

• Process coordination between Operations, customer
  logistics, and customer operations for inventory
  from DC to customer, through POS and back to DC
  (returns, refused product)

• Automated, real-time inventory Operations
  Center complete with alert/event management
  dashboards (Air Traffic controller for the supply
  chain)

Roles Reporting
Skills, Competencies Culture
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The Future of The Consumer Entertainment
Industry
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Digital Consumption is Fast Becoming Mainstream
99
00
01
02
03
04
05
06
07
Napster starts
899M
Napster shut down
0 From iTunes
380M
1.9B
2.4B
Between 2005 and 2007, iTunes Sales grew nearly 3
fold from 380m to 2.4B Source Apple 2007
Annual Report
Revenue from legitimate online TV and film
downloads worldwide will rise tenfold to 6.3
billion by 2012. http//www.variety.com/articl
e/VR1117958250.html?categoryid1009cs1

• Pew Internet Projections

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How Disruptive Has The Move to Digital Been For
The Industry
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The SCOR Model Is Disrupted in the Digital World
Classic Home Entertainment Supply Chain
SCOR

• Make
• - Intra-manufacturing cycle time
• - Material acquisition cost
• - SC related costs
• - Final product defect rate
• - WIP
• - Upside flexibility
• labor, materials

• Plan
• - Forecast accuracy
• Unit Dollar
• - Forecast cycle time
• - Replan cycle time
• - Total inventory days of supply
• - Inventory carrying cost
• - Adherence to Plan

• Source
• - On time shipment
• - Component defect rate
• Cost per unit
• Order to receipt cycle time
• Over shipment
• Shortages
• Capacity utilization
• Vendor Lead Times

• Deliver
• - On time Shipment
• - On time Delivery
• From request
• From commit
• - Time to fill deficiencies
• - Expedited orders
• - Order fulfillment
• Percent perfect
• Lead time
• - Order Accuracy

• Return
• - Returns processing /handling costs
• - Cost to return
• Return cycle time
• - Returns as of rev.

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The SCOR Model Is Disrupted in the Digital World
Digital Home Entertainment Supply Chain
SCOR

• Make
• - Intra-manufacturing cycle time
• - Material acquisition cost
• - SC related costs
• - Final product defect rate
• - WIP
• - Upside flexibility
• labor, materials

• Plan
• - Forecast accuracy
• Unit Dollar
• - Forecast cycle time
• - Replan cycle time
• - Total inventory days of supply
• - Inventory carrying cost
• - Adherence to Plan

• Source
• - On time shipment
• - Component defect rate
• Cost per unit
• Order to receipt cycle time
• Over shipment
• Shortages
• Capacity utilization
• Vendor Lead Times

• Deliver
• - On Demand
• - Unlimited Content
• - Technology Infrastructure

• Return
• - Refund Management
• - Content Deactivation

Both Models Must Be Managed For The Foreseeable
Future
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Studios Must Understand The Consumer
to Drive Behavior
Jason has streamed the Closer to his desktop 9
times, visited the ER episode description site,
downloaded and watched the VoD 300 and an
downloaded a Looney Toons graphicringtone combo
for his phone.
Multi-channel Consumer Supply Chain Data

• Jasons Profile
• - Genre Scores Action 9
• Drama 7
• Sports 8
• Comedy 6
• Email address yes
• Physical Address yes
• Emails in last 6 months 13
• Offers responded to 3
• Preference unique content

Jason! Check out this great deal on a special 2
Disc Box set of Gilligans Island at your local
www.bestbuy.com for only 19.99! Use the special
promo code on your purchase receipt to access the
extended promo clip of I Am Legend movie at
iamlegend.com Be sure to print out the free
popcorn coupon for opening night, Dec. 5, at the
AMC at Fullerton 20
Inventory
Consumer
Location
POS
Evaluating Promotional Effectiveness Tie
insights in to action for next set of offers
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This Generational Transformation Will Be Highly
Disruptive And Must Be Managed Strategically

• Need to connect individually to consumers
• Need to integrate data across divisions
• SCM CRM?
• Physical supply chain will still be there need
  to continue CPG disciplines need for data will
  not recede but will grow exponentially

Jason
Marge
Baby Simone
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Todays Content Supply Chain


Domestic Theatrical
Domestic HE

• Downloads

International HE
International Theatrical


Content Creation
Domestic TV

International TV

Mobile
Todays Data Supports Current Processes
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New Business Modelsand the data that comes with
them

• If its digitized, it will be monetized (the long
  tail)
• Pictures
• Content art
• Screen play
• Sound tracks
• Out-takes, unused footage
• Subscription Services
• Allows preferential treatment exclusive content
  / material
• Newsletters genre specific
• Recommendations if you liked X then youll like
  Y
• Communities
• Peer recommendations

• Consumer Data

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Impacts

• Consumer data is not simplistic
• Householding issues
• Data appends / standardization / quality issues
• Data modeling / linkage issues
• Cross functional data analysis function
• Historical processes created islands of
  expertise optimization and efficiencies are
  within these islands
• Need to dedicate resource(s) to look across
  functions using centralized data to find new
  enterprise wide product opportunities and
  operational efficiencies

• It's all about the Data

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Leveraging Data Assets The Future
Master Data Management
Supply/Demand Chain
B2B
Planograms
Category Management
EDW
B2C Related Information
B2B Related Information
Sales Analysis
ME LDM
Title Profitability
Advance Pricing Decay Curves
Vendor Managed Inventory
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Home Entertainment the Same or Different from
every other Industry?

• What is the Same
• Increasing importance of data governance
• Need for Integration of cross-divisional data
  silos
• Need for dual focus on responsiveness and cost
• Increasing price/margin pressures
• Emergence of new one-to-one models of interaction
• Need for best practice approaches to supply chain

• What is Unique
• Talent / IP issues
• Newness of market
• DVD product lifecycles
• Alternate forms of consumption
• Consumer-driven distribution
• Digital supply chain

Its still all about getting the data right, now!