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2010

Innovative Logistics Consulting

Greg Matthews

Dan Phillips

Karen Allec

Sven von Borries

Septiadi Tjahjono

Sokchanda Im

6/28/2010

ACME’s Supply Chain Solution Program

TABLE OF CONTENTS

EXECUTIVE SUMMARY ....................................................................................................................... 4

Who is ILC? ................................................................................................................................................ 4

ACME’s Current Situation ......................................................................................................................... 4

End Result of Implementing ILC’s Plan...................................................................................................... 4

Overview of ILC’s Recommendations ....................................................................................................... 5

Bottomline ................................................................................................................................................ 7

INNOVATIVE LOGISTICS CONSULTING PROFILE.................................................................................... 9

Mission Statement .................................................................................................................................... 9

Vision ......................................................................................................................................................... 9

Company Profile ........................................................................................................................................ 9

ILC Services ................................................................................................................................................ 9

Responsibilities ........................................................................................................................................ 10

Success Story ........................................................................................................................................... 15

Client Testimonies ................................................................................................................................... 16

CONCEPTUAL SUMMARY ................................................................................................................. 16

SWOT Analysis ......................................................................................................................................... 17

Assumptions/Major Issues ...................................................................................................................... 17

Goals and Objectives ............................................................................................................................... 19

ILC’S ANALYSIS ................................................................................................................................. 20

Information Technology .......................................................................................................................... 21

Warehouse/Distribution ......................................................................................................................... 29

TABLE OF CONTENTS

Transportation ......................................................................................................................................... 41

Green Initiatives ...................................................................................................................................... 49

CONCLUSION ................................................................................................................................... 58

BIBLOGRAPHY .................................................................................................................................. 62

APPENDICES .................................................................................................................................... 64

EXECUTIVE SUMMARY

Innovative Logistics Consultants (ILC) wants to congratulate ACME Stores for taking a bold step

towards achieving new supply chain objectives. ILC would like to thank ACME for the opportunity

to propose this solution for ACME to reach their goal of developing a fully integrated strategic

logistics plan.

Who is ILC?

ILC is a pioneer in the field of supply chain management and has worked with many Fortune 500

companies such as General Electric, Proctor and Gamble, and Coca Cola in our 15 year history. ILC

has developed a plan of action that will enable customers to prosper and grow into the future.

ACME’s Current Situation

ACME is a strong company with good leadership and is open to change. Despite identifiable

financial and operational waste, they are currently competing effectively in the marketplace.

ACME could benefit greatly from Information Technology to manage inventory and warehouse

operations, changing from a push to a pull distribution model which will result in less costly

warehouse expenses, and a more efficient transportation model.

Furthermore, the vast majority of ACME stores are located on the east coast which has been less

impacted by the recession. As opposed to the Southwest, where high foreclosure rates have

caused financial chaos, and the Midwest, where manufacturing has declined and unemployment is

very high.

The current retail trend for ACME’s competition is to increase logistics budgets while reducing

other capital investments. Target for instance, spent 23% of their capital investment budget on

improvements to their supply chain in 2007 and 31% in 2009 (Target Co., 2009).

End Result of Implementing ILC’s Plan

ILC has developed a comprehensive logistics plan for ACME that will reduce waste and increase

efficiency. This plan will include a state of the art IT system, a fully optimized warehouse, and

EXECUTIVE SUMMARY

distribution network. ACME will cut transportation costs and become a more environmentally

conscious company. With ILC’s plan, you will see a $42 million first year savings, a total savings of

$224 million at full implementation, and a cash flow increase of $298 million for an overall benefit

of $522,432,792 (See Appendix 1-ROI/Payback).

Overview of ILC’s Recommendations

In our analysis of ACME’s Distribution and Warehousing model, we researched ACME’s

competition to define the industries “best practices” and create a benchmark model using Target

DC operations.

Information Technology - Total Visibility and Integration

Information Technology is the most important facet of supply chain management today. With the

use of state-of-the-art Enterprise Resources Planning (ERP) solutions, retailers are now able to

have real time inventory control driven by consumer demand.

ACME’s current in-house ERP software system, although good is Microsoft based. It is designed for

small to medium business needs and will not handle an expected annual growth rate of 10%. We

recommend implementing an ILC hosted ERP system at a cost of $9,134,500 total start up with on-

going expenses of approximately $11,377,200 annually. This will be explored further in IT

analysis.

Warehousing/Distribution

ILC proposes to bring ACME from their current efficiency rating of 21% to 78% over a three year

period by introducing multiple height stacking formulas and procedures (See Appendix 4-Whse

Layout). The proposed ERP system will integrate inventory and warehouse management

systems.

ACME has a 20/1 store to distribution center (DC) ratio while Walmart and Target stand at 100/1,

and 47/1 respectively. ACME's average DC square footage of 258,000 compared to Target’s

average DC square footage of 128,000 further illustrates the disparity between ACME and its

competition.

EXECUTIVE SUMMARY

ILC proposes reducing the number of DC’s from 40 to 13:

• 3 Import warehouses @ 282,000 square ft each

• 9 regional DC’s @ 282,000 square ft each

• 1 E-Commerce DC @250,000 square ft

*Illustration 1: Final DC Layout

Transportation - Faster to Market for Less Money

ILC recommends the following changes to the transportation of home electronics

Renegotiate rates to LA/LB and Prince Rupert.

Eliminate shipments to Baltimore

Improve cubic foot capacity by changing from 40’ DRY containers to 40’ HC (High Cubic)

Reduce suppliers to 3 (Shanghai, Hong Kong and Pusan). Nets same or lower rate.

Reduce transportation costs by increasing CFT capacity - 40’ HC containers into 53’ trailers

shipped to the Regional DC’s.

Reduce Ocean transit time; Distribution analysis will identify and explain how this affects

inventory carrying costs.

o Apparel – 13 to 12 days

o Home Electronics – 23 to 17 days

Import DC: Los Angeles, CA – Dallas, TX - Chicago, IL

E-Commerce DC: Louisville, KY

Regional DC: Seattle, WA – Atlanta, GA – Hartford, CT – Edison, NJ – Little Rock, AK – Charleston, SC – Akron, OH – Des Moines, IA – Indianapolis, IN

EXECUTIVE SUMMARY

Environmental - How big is ACME’s Carbon Footprint?

The rising environmental consciousness of Green operations significantly increased in

ACME the last couple years. Unfortunately, such a concept has only reached the discussion

stage. This awareness is compounded by the high upfront costs and lack of experience from

ACME management. ILC will recommend and develop a sustainable “Environmental

Responsibility Plan.” These environmental improvements to ACME’s supply chain will cost

$9,307,981, but are off-set by savings in the form of reductions in water and power use.

See Green Initiatives analysis.

Bottomline

ACME’s Strategic Logistics Plan will provide a state of the art IT system, efficient and cost

effective warehouse, distribution, and transportation model. ACME will see a first year

savings of $42,210,473 and a total savings of $224,064,792 at full implementation.

EXECUTIVE SUMMARY

*Table 1: 3-Year Plan

Consequences of Inaction

ACME has the opportunity to change. However, if ACME does not address the waste and

inefficiencies in their supply chain as their competitors have already done, they will run the risk of

losing their competitive edge.

INNOVATIVE LOGISTICS CONSULTING PROFILE

“Innovation is a consultation away”

Mission Statement

Our mission is to provide a flexible and comprehensive supply chain solution to our clients

through the integration of smart business practices, utilizing years of industry experience,

and the leveraging of today’s technology allowing our clients to constantly adapt to the

changing world of logistics. Our solutions are designed to be simple and cost effective

providing our clients a clear, sustainable competitive advantage.

Vision

Our vision is to become the premier leader in supply chain consultation by providing the

highest level of customer satisfaction. We provide each client with a plan to integrate the

needs of their business, its mission and values, while optimizing the supply chain so that

they may achieve greater reach and profits.

Company Profile

As the leading non-asset based 3rd party logistics provider and Top 10 freight capacity

broker in the US, Innovative Logistics Consulting (ILC) simplifies ACME logistic needs by

reducing ACME cost expenditures while increasing efficiencies along ACME entire supply

chain. Founded in 1999, ILC has become a world leader in supply chain consultation. Our

Staffs combine more than 100 years of industry knowledge and experience to carefully

assess ACME current operations in order to provide an all inclusive strategic plan. We offer

an array of services that include, but are not limited to, full transportation management

services, carrier contracting and negotiations, and freight brokerage services.

ILC Services

Enterprise Resources Planning Solutions: Our Webhosted ERP systems based on

the Software As A Service (SAAS) will improve the visibility and flexibility with

minimal investment

Transportation Management: Our transportation services will help get ACME

goods from point A to point B at the lowest possible cost


Domestic/International Warehousing: Our warehouse location specialists will

offer you multiple locations in free trade zones to make use of free resources and

eliminate unnecessary costs

Consulting: Our consultants will assist in developing important benchmarks,

transportation procurement, and network analysis

Responsibilities

Greg Matthews—President & CEO

Greg has more than 25 years of supply chain management

experience with numerous Fortune 500 firms. His background

includes consulting, 3PL, manufacturing & distributing. His last

corporate position he headed a $200 million logistics division.

He has consulted in the logistics, consumer goods, business

equipment, electronics, health care and aerospace/defense

industries. He is skilled in Business Process Engineering,

Business Transformation Management, Business Systems

Applications and Project Management.

He is a graduate of Rochester Institute of Technology and is certified in Integrated Resource

Management (CIRM) by APICS, a member of the “expert panel” for a national retail supply

chain reform initiative and a contributor to the development of the CSCMP’s Supply Chain

Management Process Standards.

Greg serves as Executive Director of the Center for Supply Chain Excellence at California

State University at Long Beach.


Sokchanda “Sokie” Im—Chief Environmental Officer

Sokie brings a deep background of more than 10 years in

environmental science and policy and experience in “green”

business consulting. She has worked at the Climate Center of

Natural Resources Defense Council in Washington, DC on

federal climate and energy policy. Previously, she worked as a

consultant at Greenback Partners LLC, where she advised a

Fortune 100 retail client on strategic “sustainability” planning

and led the development of an on-line team assessment tool.

She also has experience working as an environmental educator

and an AmeriCorps volunteer, and has done several stints as a

field ecologist in Costa Rica, Panama, northern California, and

Antarctica.

Sokie holds an M.B.A. from Princeton University's Woodrow Wilson School, where she

focused on climate and energy policy, and a second master's degree in ecology and

evolutionary biology from the University of California-Berkeley. Sokie was a National

Science Foundation (NSF) Graduate Research Fellow. She received a B.A. with Honors in

Biology from Brown University, magna cum laude, Phi Beta Kappa.

Sokie serves as the Environmental Sustainability Director of the Center for Supply Chain

Excellence at California State University, Long Beach.

Karen Allec—Senior V.P. Business Development

Prior to joining ILC, Karen served as vice president of strategic

alliances at Siemens Business Services where she was

responsible for generating significant revenue via strategic

alliance relationships. Other executive roles include serving as

vice president of international business development at

NetVendor and director of consulting alliances at i2

Technologies.


Before joining ILC, Karen served as a unit manager within Ernst & Young LLP's supply chain

practice where she focused on supply chain network design and operations strategy

initiatives. Karen also held positions in supply chain planning and operations with Black &

Decker. Early in her career, Karen was a senior consultant within Andersen Consulting’s

Logistics Strategy Practice. Karen holds a master of science in business logistics from San

Diego State University and a bachelor's degree in business from USC.

Karen serves as Business Development Director of the Center for Supply Chain Excellence

at California State University at Long Beach.

Septiadi “Andy” Tjahjono - V.P. Information Technology

Andy has over 20 years of Information Technology industry

experience. He led the IT management team for the startup and

rapid growth of Northern Telecom and Sears Canada corporate

Data Centers. He also directed the rollout of the Northern

Telecom’s initial worldwide network. Most recently Andy was

responsible for global IT integration at McDonalds focusing on

delivering real time data solutions for the supply chain,

refrigerated warehouses, food industry and container ports.

Andy is a certified SaaS developer and a certified trainer in SAP

systems integration.

Previously, Andy was senior vice president and chief technology officer of Strategy and

Technology at Compaq Computers. Prior to joining Compaq, he served as president of

Internet Technology and Development at AT&T Labs, where he led a team responsible for

the architecture, planning and development of AT&T’s Internet technologies and services.

Andy has been a technology executive for nearly two decades, serving in leadership

positions at Cadence Design, Apple Computer and Schlumberger Research. In 2004, he was

named one of the world’s 25 most influential chief technology officers by InfoWorld. Andy

received a bachelor’s and master’s degrees in computer science from the University of

California at Berkeley.


Andy currently serves as Information Technology Director of the Center for Supply Chain

Excellence at California State University at Long Beach.

Dan Phillips—V.P. of Logistics

Over 25 years experience as key consultant in Logistics and

Supply Chain Management. He has served as Vice President of

Distribution & Transportation for both Value City Department

Stores and Big Lots. Dan was also Director/General Manager of

Distribution for Marshalls Department Stores (now a division

of TJX). His experience covers all Years of supply chain

management, construction, material handling installation, WH

site selection, productivity improvement, and SCM analysis.

Dan has served in director and VP assignments for distribution, logistics, supply chain and

operations. He has also served in internal consulting assignments and has established an

industrial engineering operation for a major retailer.

Dan earned his bachelor’s degree in industrial engineering and operations research from

Cal-Tech University and his MBA, with concentration in logistics analysis, from Stanford

University. He is a member of Warehousing Education and Research Council (WERC),

Council of Supply Chain Management Professionals and has served on the advisory board for

the National Conference on Operations and Fulfillment.

Dan currently serves as Logistics Director of the Center for Supply Chain Excellence at

California State University at Long Beach.


Sven von Borries—V.P. of Transportation

Sven started his professional career in 1992 with TNT’s

Express and Mail divisions. In 1994 he joined the team that set

up the Mercedes spare parts unit in Italy and Europe and

subsequently established TNT Automotive Logistics in Italy,

France, Spain and the UK. In 1995 he established TNT Logistics

Brazil and in 1999, he was appointed President and Managing

Director of TNT Logistics South America. Most recently he was

Director of Transportation Logistics at

Agility Brazil in São Paulo, Sven has almost 20 years of experience in Global Supply Chain

Management focusing on Transportation.

Sven has a PhD in Transportation Logistics and Supply Chain Management from the

University of Brazil at São Paulo. He specializes in Transportation Management and

Intermodal economics in his consulting. He has served as an expert witness in several

transportation cases and written numerous magazine and newspaper articles and books on

the subject.

Sven currently serves as Transportation and SCM Director of the Center for Supply Chain

Excellence at California State University at Long


Success Story

Client: Pantaloons Retail (India Retail Leader)

Objective: Sourcing system to integrate vendors in the supply chain for better visibility.

Customer Need

The customer was facing the following problems:

• Current system was not able to track, identify, and retrieve POs by vendors • Status of an order could not be assessed • Delivery date slippage leading to stocks-outs or over stocking • Sourcing problems also impacted quality team's checking routine during

manufacturing cycle • No access to stock volumes leading to wrong sourcing decisions

Solution

ILC's solution covered the following:

• Identification of all entities involved in the supply chain • Differentiating the key business from the moderate (revenue basis) to prioritize

sourcing • Integrating vendors into customer's sourcing process • Re-engineering processes to shorten PO life cycle • Establishing vendor collaboration • Establishing visibility in the PLC

Value Delivered

• PO processing cycle time reduced from three days to one • Vendor response time on order acknowledgment reduced from seven days to two • Online vendor request for change in delivery date reduced from seven days to two • Vendor rationalization resulted in on-time, and on-order delivery


Client Testimonies

"There's only one Supply Chain Consultancy in the Region, I know of, that truly

understands our industry. ILC’s experience and operational supply chain backgrounds

is the major difference between ILC and the others".

-Craig Hope-Johnstone, General Manager - Logistics, Australian Discount Retail (Trading).

"Innovative Logistics Consulting has been our preferred supply chain management

consulting business for 8 years as they have proven time and time again that they

provide value for money solutions that hit the bottom line"

-Brian Robinson, Chief Executive Officer, George Weston Foods Baking Division - Australia

“In today’s economy, strategic sourcing and supply chain organizations are expected to

achieve more than ever. Innovative Logistics Consulting can find the resources you

need to exceed expectations.”

-Jeff Savage, Senior Vice President, Sysco Corporation

`

CONCEPTUAL SUMMARY

SWOT Analysis

Assumptions/Major Issues

Information Technology

Proprietary legacy systems / Stand Alone;

o ACME’s current platform was developed in the 1990’s to accommodate the

processing of PO’s to Orient vendors, but requires manual forecasting. The

result of manual forecasting against planned sales at a 10% annual rate,

despite clear inventory visibility, has created inventory carrying cost of

approx. $10,000,000 year over year.

Key operating systems lack integration;

o ACME utilizes several software systems to manage the supply chain. They

include Warehouse, Inventory, PO, Transportation and Financial

Management. All separate, all requiring manual input to organize

information.

Unsuitable for large Enterprises such as ACME;

o 1990’s architecture was devised to handle a small to medium sized business.

CONCEPTUAL SUMMARY

o ACME’s current 800 stores and 40 DC’s has dwarfed its capabilities and

requires an updated ERP system to handle 10% annual growth.

Warehousing/Distribution

Four major contributors to ACME’s current warehousing inefficiencies;

Poor utilization of DC space. Vertical capacity limited to stacking one pallet high.

High Safety Stock as a result of poor forecasting. Contributes to high carrying costs.

Poor utilization of space and high safety stock combine to create over $13.8M in

carrying costs in the following areas;

o DC Overhead attributable to safety stock $10,000,080

o DC Overhead attributable to revolving stock $ 2,826,689

o Cost of Holding Inventory $ 1,027,877

ACME’s DC’s by the numbers;

ACME Current

# Stores 800 # DC's 40 Ratio - Store/DC 20 Avg DC SqFt 258000 TTL DC SqFt 10320000 Ratio - DC SqFt/Store 12900 DC Sq.Ft. Utilization 54437 DC Efficiency 21%* *DC efficiency explained in DC analysis **Table 2: ACME’s DC Efficiency

Transportation

Inefficient use of equipment o Ocean—LCL vs. 20 foot/40 foot o Intermodal—Double stack/thru rate vs. OTR

Poor CFT utilization. o Ocean—40’ STD vs. 40’ HC o Regional DC—40 foot trailer vs. 53 foot trailer

Inefficient use of modes o Container on Flat Car (COFC) o Trailer on Flat Car (TOFC) o Over the Road (OTR)

CONCEPTUAL SUMMARY

Inconsistent Transportation plan o DC’s do not have routing guides o No limits on mileage to destination DC

Environmental

ACME lacks sufficient environmental concern Large Carbon Footprint.

Goals and Objectives

#1 – Increase Ocean Container CFT capacity by 21.5% Utilize 40 HC containers vs. 40 STD containers 40’ STD = 1972.81 CFT vs. 40 HC = 2396.77 CFT 1972.81 / 2396.77 = 21.5% Apparel - Free two week warehousing in China

o This will help build additional capacity to support 20/40 containers #2 – Reduce Ocean Transit Time for Home Electronics by 26.1% Reduce suppliers from 5 to 3.

o Manila and Taiwan to Shanghai, HK, and Pusan o This shortened the miles traveled between Orient and US.

#3 – Reduce Ocean Transit Time for Apparel by 7.7% Reduce suppliers from 4 to 2.

o Manila, Shanghai, and Pusan to HK and PRD (Pearl River Delta) o This shortened the miles traveled between Orient and US.

#4 – Reduce overall ACME DC Footprint by 65% Switch from PUSH to PULL supply chain system Reduce number of DC’s from 40 to 13 Re-distribute inventory Reduce Inventory carrying costs by 51% Increase vertical capacity in DC’s;

o 1 high to 3 high o Add racking to go 4 high o Implement WMS as a module of ERP o Create key “Import” centers to facilitate intermodal distribution to Regional

DC’s. #5 – Develop On-Line presence to increase Sales. Potential Unknown Open dedicated E-Commerce facility in Louisville, KY

o Convert existing regional DC

#6 – Improve Cash Flow to $298,000,000

CONCEPTUAL SUMMARY

Sell ACME owned Real Estate; Idle DC’s

#7 – Replace 5 separate software systems with one integrated ERP system WMS (Warehouse Management), TMS (Transportation Management),

Accounting/Finance, HR, and Customer Relations Implement hosted ERP to improve visibility throughout the entire supply chain Streamline data collection Improve connectivity by introducing EDI

#8 –Improve Sustainability Awareness throughout ACME Decrease Carbon footprint by 20%

o Reducing the number of warehouses o Improve transportation

Double stacking containers Trailer on Flat Cars Less Containers/Trailers

Reduce water consumption o Replace 4,239 urinals o Save 192,681,818 gallons of water

ILC’S ANALYSIS

Below, ILC will develop both qualitative and quantitative information addressing each

Pillar of the proposed solution. We will compare ACME actual model vs. ILC plan of action.


ACME’s current Enterprise Resource Planning (ERP) system suffers from poor inventory

management controls, as seen by excesses and shortages in the retail stores. These huge

fluctuations in inventory have an impact on the overall flow of goods from vendor to

distribution centers and from distribution centers to retail stores. This is due largely on the

lack of visibility and information sharing along the entire supply chain.

*Illustration 2: ACME’s Current ERP Systems

Solution

Innovative Logistics Consulting recommends overhauling ACME’s current ERP system by

replacing it with ILC’s ERP Web Hosted system. ILC’s Web Hosted system reduces the

disparity in inventory and improves visibility and sales forecasting. ILC’s Web Hosted

system contains an EDI (Electronic Data Interchange) web-based module providing

information to all parties securely over the Internet. It allows parties to track inventory

levels and automate replenishment through Point-of-Sale (POS) transactions via the hosted

ILC’S ANALYSIS

ERP system. The key to our software is continuity and visibility as it integrates every aspect

of the supply chain into a single system.

*Illustration 3: ERP Concept

*Illustration 4: ILC’s Web-Hosted ERP System

ILC’S ANALYSIS

Using a service model, and typically the delivery vehicle of a secure Internet connection,

companies can now outsource the installation, delivery, and maintenance of their mission-

critical software to service providers that specialize in specific applications areas.

By successfully changing the delivery and economic model of these applications, Software-

as-a- Service companies are creating a seismic shift in the software industry. It is now a

mainstream and accepted idea that sophisticated, high-end enterprise applications like

customer relationship management (CRM), accounting, and intercompany data exchange

can be delivered successfully by ILC Hosted ERP systems.

ILC’s IT personnel are experts in this particular software category, handle all the messy

business of software maintenance and integration. Even though ILC will maintain secure,

reliable data centers for the delivery, ACME is more than to welcome to have their data

back up on Head Quarter office. The hosted ERP model is very attractive for companies that

want to concentrate on improving their core business rather than software maintenance

and upgrade skills.

Although the primary users are ACME employees, we can configure that every one involve

in ACME SCM can access necessary reports and screens. For instance, someone in Hong

Kong may want to proactively monitor movement on the certain item at the certain store,

they can easily access it through a web-based report.

Even thought with the easy access on the SCM information, ACME need to follows a strict

procedure and approval process to create user accounts and to designate the specific views

and reports that those customers can access.

Vendor Management Inventory (VMI)

ILC’s Vendor Management Inventory application will have the biggest impact as the

information is shared between all departments. Based on predetermined replenishment

levels, orders will be placed into restock as necessary. It streamlines much of the ordering

process by placing the responsibility for replenishment on the vendors. As goods are

ILC’S ANALYSIS

purchased or moved, ILC’s VMI application automatically updates all parties involved with

real-time inventory information.

Replenishment notifications are automated and updated in real-time, based on POS

purchases. When a particular item inventory level hits the reorder level a purchase order is

automatically generated from the vendor to the buyer.

The replenishment levels are set in advanced based on an agreed upon threshold between

the supplier and the buyer. ACME will leverage its current point-of-sale (POS) system as a

key inventory tracking tool.

ACME presently has an extensive POS system in its retail stores. However, ACME is not

leveraging the systems full capabilities. As it stands, ACME’s POS main function is compiling

sales data. Based on data collected from all ACME’s POS Stores, ACME orders all goods for

the following year, plus an additional 10% for assume increase business activity for the

coming year. Under VMI, POS would report real-time inventory and generate purchase

orders.

Visibility in Supply Chain Management (SCM)

ACME’s employees use their ERP system in so many different areas and with little

standardization. Part of the issue is maintaining separate, stand-alone modules of its ERP

application. Information is NOT processed or shared along the supply chain. There are no

built in checks for handling inventory and addressing the principles of warehousing like

systematic stock management and stock traceability.

ILC’s SCM application is able to provide real-time inventory levels, track actual customer

usages and purchases instead of expected sales. Eliminating expected sales helps reduce

inventory overhead which increases efficiency and decreases operating costs in

warehousing and shipping. With this kind of system will help make ACME’s transition from

a push sales forecasting model to a pull sales forecasting model.

ILC’S ANALYSIS

IT Implementation

Owning an ERP / EDI based system is complicated. It requires expertise and attention to

detail during the initial setup and routine day-to-day processing. ACME’s decision to utilize

ILC’s ERP Hosted system has cost associated as shown below.

*Table 3: ERP Implementation Cost

The key to every successful project implementation is to understand and integrate all the

aspect of business and role. Integrations processes are more than technical challenges, they

also help map business processes across the boundaries of individual systems.

ACME and ILC will work together to accomplish this. It will involve cooperation from team

leader (both in Store and DC) to manager and the executive level. ILC will develop the IT

plan and responsibility for its implementation.

ILC’S ANALYSIS

Task Responsibility Estimated duration Pre-evaluation Screening ILC and ACME IT Manager 2 weeks

Evaluation Package ILC, ACME IT manager and chief Information technology

2 weeks

Project Planning ILC and ACME IT staff 1 weeks Organization Staffing ILC, ACME HR and COO 1 weeks

Team training ILC and ACME (DC, Store and HQ) Varies (2-4 weeks)

Testing ILC and ACME IT Staff 2 weeks *Table 4: IT Development Plan

Year 1 – Technology Integration

Pre-evaluation Screening: Once the company has decided to go for the ERP system, the

search for the package must start as there are hundreds of packages it is always better to

do a thorough and detailed evaluation of a small number of packages, than doing analysis of

dozens of packages. This stage will be useful in eliminating those packages that are not

suitable for the business process.

Evaluation Package: This stage is considered an important Year of the ERP

implementation, as the package that one selects will decide the success or failure of the

project. Implementation of an ERP involves huge investments and it is not easy to switch

between different packages, so the right thing is to ‘do it right the first time’. Once the

packages are evaluated and identified, the company needs to develop a selection criterion

that permits the evaluation of all the available packages on the same scale.

Project Planning: This is the Year that designs the implementation process. It is in this

Year that the details of how to go about the implementation are decided. Time schedules

and deadlines for the project are developed at this point in the process. The plan is

developed, roles are identified and responsibilities are assigned. It will also decide when to

ILC’S ANALYSIS

begin the project, how to do it and how to complete it. A committee of team leaders of each

implementation group usually does the planning.

Organization Staffing: It is in this Year that human factors are taken into consideration.

While every implementation is going to involve a significant change in number of

employees as well as their job responsibilities, and as the process becomes more

automated and efficient, it is best to treat ERP as an investment as well as a cost cutting

measure.

Team training: Training is also an important Year in the implementation, which takes

place along with the process of implementation. This is the Year where the company trains

its employees to implement and later, run the system. Thus, it is vital for the company to

choose the right employee who has the right attitude- people who are willing to change,

learn new things and are not afraid of technology and a good functional knowledge.

Testing: This is the Year where one tries to break the system. One has reached a point

where the company is testing the real case scenarios. The system is configured and some

extreme cases like system overloads, multiple users logging on at the same time, users

entering invalid data, hackers trying to access restricted areas and so on needs to be

considered. This Year is performed to find the weak link so that it can be rectified before its

implementation.

Year Two – Fully functional ERP Hosted and E-Commerce Integration

Post implementation: Once the implementation is over, ACME Staff will be able to handle

routine maintenance with help from ILC’s Staff. To reap the fruit of the implementation it is

very important that the system has wide acceptance. There should be enough employees

who are trained to handle problems that arise. The system must be updated with the

change in technology. The post implementation will need a different set of roles and skills

than those with less integrated kind of systems.

ILC’S ANALYSIS

E-Commerce implementation: On this Year the step will be similar with new ERP system

that ACME has. With having all the product data on the main server, ACME will be able to

launch their E-Commerce within one year

Global Trade Management (GTM)

ACME’s current ERP system cannot keep up with the constant changes in trade regulations

such as the bill of lading, classification of goods, and custom compliances. Much of the

information processed at ACME is done manually. Inputting information manually

increases the likelihood of mistakes caused by human error. In order to keep ACME up-to-

date with all the necessary administrative needs and reducing the number of human errors,

ILC will implement a GTM application.

Global Trade Management has the capability to provide up-to-date information to make

accurate global trade decisions. It will automate ACME’s trade processes by eliminating

many problems that slows down the process of goods traveling along the supply chain such

as misclassification of items, miscalculation of duties, and/or the incorrect filing of

necessary documentation. This application is designed to automatically flag any errors that

need to be fixed in order to continue processing the delivery of goods. It could also be used

as a tool to fasten the delivery of goods by having the current information available.

The GTM application will assist ACME in streamlining their supply chain by expediting and

clearing customs of all inbound and outbound shipments and reduce the number of

possible fines and penalties for incorrect filings. This will reduce overall working capital,

operating cost and increase trade efficiencies.

ILC’S ANALYSIS

Warehouse/Distribution

“Lean Logistics” has become the industry standard and companies are focusing on

improving their bottom line by increasing supply chain efficiency. Target and Walmart

realize the importance of efficiencies in their supply chain and invest significant portions of

their budget into supply chain management. Due to the current economic conditions,

Target Stores has reduced their total budget for capital improvements from $4.4B in 2007

to $1.8B in 2009, while increasing the percentage of their annual capital expenditures for

IT, distribution and other supply chain improvements from 22% in 2007 to 31% in 2009

(Target Co., 2009).

Walmart has 4200 stores and 42 DCs which service 100 stores each and is the industry

leader in supply chain management. Walmart attributed a 25.2 percent increase in gross

profit in the third quarter of 2009 to improvements in logistics. Walmart Stores Executive

Vice President Bill Simon said, “…in fiscal 2009, our logistics operation delivered about

$200 million in savings” (Target Co., 2009).

Reorganizing ACME marketing areas and distribution centers will eliminate waste and

inefficiencies. Currently ACME has 800 stores serviced by 40 distribution centers (DC’s)

with 250,000-282,000 sq ft. per center. Target has 1740 stores serviced by 37 DC’s with

128,000 sq. ft per center (Target Co., 2009). ACME store to DC ratio is 20/1 while Target’s

ratio is 47/1. The total warehouse square footage used by ACME for their DC’s is 10 million

square feet, while Target’s is 4.8 million square feet. That is less than half of the warehouse

space ACME currently requires, and Target is servicing almost twice as many stores.

Consolidating market areas would cut warehouse and transportation costs and facilitate

efficient movement of goods. Currently, ACME has 27 marketing areas servicing 30 stores

per area. A far more efficient model would include three strategically positioned import

centers, LA, Dallas, and Chicago, to receive incoming goods and disperse to nine regional

DCs for cross dock to stores. An additional DC servicing 18 stores in the MW area will also

handle E-Commerce and will be established in the UPS hub city of Louisville, KY.

ILC’S ANALYSIS

The import and regional centers will be 282,000 square feet and serve 62 stores each. This

is based on Target’s ability to handle 47 stores in a 128,000 square foot warehouse space.

This “spoke and wheel” distribution model will efficiently cover the U.S. LA import center

plus 1 DC would service the western region with 120 stores, Dallas import center plus 2

DC’s would service the southeast region with 180 stores, and Chicago import center plus 7

DC’s would service the northeast region with 500 stores. This model will bring ACME more

into the ratio of store to DC and warehouse square footage utilization of ACME competitors.

The three import centers were selected using location allocation software (See Appendix

2) and the DC’s to be closed were also identified by use of this software. In Year 1, three

import centers in LA, Chicago, and Dallas will be established and 9 DC’s will be consolidated

and closed. In Year 2, the DC in Louisville, KY will be retrofitted for E-Commerce, and an

additional 9 DC’s will be consolidated and closed. In Year 3, no additional new DC’s will be

established and final 13 existing DC’s will be closed. Utilization of existing DC’s, wherever

possible, is preferred to opening new facilities to mitigate costs and business disruption. At

the end of Year 3, Import Centers in Los Angles CA, Chicago IL, and Dallas TX, and DC’s in

Louisville KY, Seattle WA, Atlanta GA, Littlerock AR, Charleston SC, Hartford CT, Edison NJ,

Detroit MI, Akron OH, Des Moines IA, and Indianapolis IN will be fully operational.

The Novell warehouse will no longer be used. All apparel garments will clear US Customs in

the LA/LB import center and will be shipped LTL directly to regional DC’s. Over the period

of three years ACME will reduce their total DC’s from 40 to 13. In closing 27 warehouses,

savings in operating costs and employee wages will be realized. Currently ACME spends

$270,000,000 annually in operating expense to maintain their 40 DC’s. By eliminating 27

DC’s, ACME would realize an on-going annual operating cost savings of $175,500,000 plus

the employee wage and benefits savings. ($6,500,000 x 27 DC’s)

ACME currently owns all of their stores and DC’s. If 27 were sold, the closed warehouses

will realize a cash infusion of $298,000,000 over three years based upon an average

warehouse per square footage prices from $19/sf in Arkansas and $73/sf in California

(http://www.loopnet.com/). We recommend the sale of DC closures in Year 1 and 2 of the

logistic plan. For the balance of the closed DC’s, we would recommend further research be

ILC’S ANALYSIS

done by ACME’s CFO to determine optimum disposition of the real estate owned to

improve cash flow, maximize tax advantages and accommodate future growth.

In addition to restructuring distribution centers and increasing visibility due to improved

technology integration, we would recommend more efficient warehouse space utilization

and flow to eliminate waste and inefficiency and improve productivity. In our analysis of

ACME’s Distribution and Warehousing model we researched ACME competition to define

the industries “best practices” and created a benchmark model using Target which we will

propose to ACME as follows:

*Table 5: Benchmark

Further to the point;

4,736,000 Warehouse sq. ft / 1740 = 2722

2722 x 47 DC’s = 128,000 into the avg DC sq. ft = 100% efficiency

ACME’s 10 million sq. ft / 800 stores = 12,900 DC sq. ft/store

Using the Target benchmark (2722 sq. ft of each DC used per store x the number of stores

serviced per DC currently) as the 100% baseline efficiency rate, for ACME we come up with

a comparable DC efficiency of 21%. ILC proposes to bring ACME to 78% efficiency over the

three year period. Bottom line, the more efficiently the DC space is used, the fewer DC’s it

will take to service more stores.

ILC’S ANALYSIS

Inventory management IT systems and warehouse management systems will combine to

make the movement of goods through the warehouse transparent. Improved warehouse

operations such as the industry standard of double or triple stacking pallets, alone would

cut ACME’s current warehouse space utilization by a minimum of 60% (Appendix 3 & 4-

Whse Layout). Coupled with other strategies such as cross docking and automation will

maximize efficient flow of goods and the DC overhead cost attributable to revolving stock

and the cost of holding inventory will also significantly improve. Strategies such as

negotiating two weeks free warehousing during consolidation of apparel in China also

eliminates holding cost in the U.S.. ACME’s current average dwell time for Home Electronics

is ten days. With above improvements, dwell time will be reduced to 3-5 days. ACME’s

current warehouse/distribution model could be strengthened greatly by implementing

these logistic strategies ACME’s competitors have adopted.

The Innovative Solution Innovative Logistics Consulting has developed a strategic logistics plan for ACME to allow

for the following:

• Increased Gross Profit

• Improved Cash Flow

• Minimal Capital Investment

• Reduced Waste

• Improved Efficiencies

• Meet or Exceed Industry Standards

Impact on Productivity

The new distribution/warehouse model will move more goods in less square footage with

less manpower. By initiating a “Pull” rather than the current “Push” distribution model

ACME will have more efficient inventory control. And due to the IT improvements, there

will be greater integration and cooperation from all parties to the supply chain.

ILC’S ANALYSIS

Impact on Cost of Operation

The new strategic logistic plan will reduce warehouse cost, manpower cost, transportation

cost and inventory holding cost with minimal capital investment. ACME has been able to

compete in the marketplace with the current logistic plan, and will be able to capture an

even larger market share with the initiation of the proposed improvements.

Overall Benefits

Increased Warehouse Efficiency

• ILC proposes to bring ACME in line with its competitor’s efficiency rating

from 21% to 78% over a 3 year period.

• ACME’s supply chain will have increased visibility and efficiency due to the

introduction of state-of-the-art IT solutions.

• Warehouses will operate at maximum efficiencies with the introduction of

automation, cross-docking, and maximum utilization of cubic capacity by

implementing new stacking procedures.

Fully Optimized Distribution Model: Elimination of waste in the distribution

model due to more optimal location of DC’s and reduced number of total DC’s.

Positioned for Future Growth: Part of ACME’s Mission is growth. With the

improved logistic plan ACME will be more than 3 times more efficient and able to

accommodate and manage that growth efficiently well into the future.

Planning

Pre-launch planning will be a joint effort between ILC and Corp. Level executives from

ACME. A team will be established to integrate ILC distribution and warehousing concepts

into ACME business model and to analyze and coordinate efforts to affect the new strategic

logistics plan until completion. They will meet a minimum on a quarterly basis but status

reports will be provided by ILC on a monthly basis.

Two teams will be established to handle the Warehouse Efficiency Plan (WEP)

implementation and the other to handle the Distribution Center Consolidation Plan (DCC).

ILC’S ANALYSIS

The Warehouse Efficiency Plan team will have a representative from ILC, Warehouse

Operations Managers, and other required staff from ACME. Their job will be to over-see the

warehouse improvements. They will meet as needed and prepare a monthly report. .

The Distribution Center Consolidation team will also have a representative from ILC, a

representative from the ACME legal and finance departments, and other required ACME

staff. Their job will be to over-see the consolidation of the ACME warehouses. As needed

ILC’s experts from IT and the “Green Initiative” will participate on both teams.

Warehouse Implementation

Year 1

• Import Center Identification: ILC, using location allocation software, identifies all

proposed DC locations, whether new start-ups or closures. ACME DCC team works with

commercial Realtors and contractors and others to acquire and retrofit the warehouses,

including IT and “Green” solutions. The 3 import center warehouses are ready to open

within the first 12 months. Open LA, Dallas and Chicago Import Centers at a cost of $75

million. In ILC negotiations with the cities, Bond Funds will be used to finance the

projects at a lower than market rate. A 1% reduction in the cost of funds represents

ILC’S ANALYSIS

$750,000 annual interest savings. Amortized over 30 years is a $22.5 million savings in

finance costs for ACME.

Import Center Start Up Expense ($ In Millions) LA/LB Chicago Dallas Real Estate Costs* 20.6 14.7 13.3 Acquisition Costs 2.0 1.5 1.3 Retrofit Costs 7.0 7.0 7.0 Total Costs $29.6 $23.2 $21.6 $74.4 *Footnote - Loop Net Commercial Real Estate Online 2010

*Acquisition costs include real estate fees and closing costs. Retrofit costs include design fees $470K Green Retrofit $2.15M, 36 electric forklifts and batteries $1.24M, Racking and set-up $3.9M, Office Retrofit $450K, Security Systems $360K, Signage $30K *Table 6: Import Center Start Up Expense

• Relocation of Washington State Distribution Center

ACME currently operates a DC in Spokane, WA. ILC recommends relocating the DC to

Seattle, WA for several reasons. Seattle will serve as an alternate port of entry in the event

of weather or labor issues that could cause disruption of freight movement in LA and

Prince Rupert. It is also a better transportation hub for rail and trucking than Spokane, and

provides a larger labor force. The ILC DCC Team will handle the acquisition of the new

warehouse, closure of the Spokane DC, and the movement of equipment to the new

location. This will also be completed within the first twelve months.

Washington DC Relocation ($ In Millions) Real Estate Costs* $12.8 Acquisition Costs $1.2 Retrofit Costs $2.0 (Ret. Costs lower due to equipment moved from Spokane) Total Costs $16.0 *Footnote - Loop Net Commercial Real Estate Online 2010

*Acquisition costs include Real Estate fees and closing cost. Retrofit includes design $156K, Green retrofit $230K, Racking and set-up $1.3M Office retrofit $150, Security Systems $120K, Signage $10K

**Table 7: Washington DC Relocation

• Warehouse Efficiency Plan: The ILC consultant and a representative from the WEP

team will visit the nine warehouses that have been identified as non-closures and begin

ILC’S ANALYSIS

working, in coordination with their Operations Managers, to develop a warehouse

layout and flow that will maximize efficiency for each warehouse. An immediate

implementation of this warehouse efficiency plan will be to begin to double or triple

stack pallets in all 40 warehouses immediately, which will represent a minimum of 50%

increase in usable warehouse space, and eventually reaching 4 high with the addition of

racking in Year 2. This will allow for warehouse consolidation of stock from closed

warehouses. ACME’s current average dwell time for Home Electronics is 10 days. That

would be reduced to 3-5 days.

• Distribution Center Reductions: The DCC will over-see the closure of 9 additional

warehouses in Year I at a cost of $2.7 million.

Distribution Center Closure Expense DC Shut Down Costs $500,000 Sale of Equipment $200,000 Cost of Closure Per DC $300,000 Year One Closure Expense $300,000 x 9 $2,700,000 Year Two Closure Expense $300,000 x 9 $2,700,000 Year Three Closure Expense $300,000 x 13 $3,900,000 Total DC Closure $9,300,000

*Shut Down costs includes Contractor and Personnel costs for a two month period. Sale of Equipment such as forklifts, racking systems, office and other equipment total approximately $200K. **Table 8: Distribution Center Closure Expense

• Disposition of Real Estate: ILC would recommend the immediate sale of the nine

closed warehouses in Year I to off-set cost of the new import centers and the relocation

of the Washington distribution center. The sales of the nine warehouses will yield $72.7

million in net proceeds.

Sale of DC's in Year 1

($ In Millions) Real Estate Value* $83.7 Cost of Sale ($8.3) DC Closure Expense ($2.7) Profit $72.7 *Average Per Sq. Feet Value of ACME DC's is $37/SF X 250,000 SF = 9.3 Mil/DC *Footnote - Loop Net Commercial Real Estate Online 2010

*Cost of Sale expense assumes max. 10% sales commission. DC Closure Expense includes cost of repairs, removal of equipment and labor for repairs and removal and also property security during closure. **Table 9: Sale of DC’s in Year 1

ILC’S ANALYSIS

*Illustration 5: Year 1 Distribution Model

Year 2

• Import Centers Fully Operational: In coordination with ILC transportation experts

the DCC team will implement the Import Center openings and the commencement of

ocean transportation of goods to LA and Prince Rupert will begin.

• Distribution Center Reductions: The DCC team will consolidate and close 9 additional

warehouses at a cost of $2.7 million, with an annual savings of $58,500,000 due to these

reductions. (9 DC’s x $6,500,000)

• E-Commerce Distribution Center: The DC in Louisville, KY, the hub city for UPS will

be modified for IT and act as the center for E-Commerce at a cost of $1.5 million. The

DCC team will coordinate the retrofit and work with ILC’s IT experts. The E-Commerce

center will utilize UPS Ground for its LTL service and they will assist in the web-based

tracking of shipments for ACME customers. E-Commerce is a new source of revenue for

ACME and annual sales of $5,000,000 are expected in the first year. If we assume the

income remains the same for three years, the time value of that money is $16,232,320.

at 4% interest rate over the three years of the strategic logistic plan.

• Warehouse Efficiency Plan: The WEP team finalizes the warehouse efficiency plan

started in Year I and is implemented at all 13 of the facilities that will remain active in

ACME’s strategic logistic plan. A second shift will be added and the same warehouse

ILC’S ANALYSIS

equipment will perform twice the production each day. New import centers and

existing DC’s implement cross-docking and improved warehouse flow methods. New

racking will be installed and pallet stacking will reach four high to optimize the volume

of the warehouse.

• Warehouse Management IT Systems Fully Operational: DCC team will assist IT in

facilitation training and implementation of the new system. The efficiencies that the

new warehouse management system brings to ACME allows for the consolidation of all

stock from the closed DC’s.

• Disposition of Real Estate

Sale of Year 2 closed DC’s will generate $72,700,000 in net proceeds.

Sale of DC's in Year 2

($ In Millions) Real Estate Value* $83.7 Cost of Sale $8.3 DC Closure Expense $2.7 Profit $72.7 *Average Per Sq. Feet Value of ACME DC's is $37/SF X 250,000 SF = 9.3 Mil/DC *Footnote - Loop Net Commercial Real Estate Online 2010

*Cost of Sale expense assumes max. 10% sales commission. DC Closure Expense includes cost of repairs, removal of equipment and labor for repairs and removal and also property security during closure. **Table 10: Sale of DC’s in Year 2

ILC’S ANALYSIS


Year 3

• Distribution Center Reductions: The DCC will consolidate and close 13 warehouses at

a cost of $4.2 million. Because cash flow in this economy is vital to the health of a

company, ACME is in a very good position because these last warehouses can generate

significant capital, whether sold or leased. You may want to hold these assets until a

more favorable real estate market and generate income from leases now. We

recommend that you have the CFO evaluate the final disposition of these assets taking

into consideration ACME’s complete financial picture, the current market conditions

and tax consequences. If ACME were to sell all real estate, it would generate

approximately $298,000,000 in net proceeds.

• Fully Integrated Logistics Plan Completed: Import Centers in LA, Dallas, and Chicago,

E-Commerce Center in Louisville, KY and nine Regional DCs are in full operation. ACME

will have 13 DC’s servicing 80 stores with an average efficiency rating of approximately

78%, and DC square footage that will allow for a growth of ACME stores projected at 8-

10% annually (See Illustration 1). The new warehousing and distribution model has

been completed at a cost of $117,700,000 and a total operating cost savings of

$275,500,000.

ILC’S ANALYSIS


Combined with both Operating savings of $275,500,000, plus the added value of the real

estate disposition of $298,368,000, the total financial benefit of the proposed changes to

ACME warehouse and distribution model would be $573,868,000.

ILC’S ANALYSIS

Transportation

ACME’s current Transportation model is underutilized, generating waste, and is

inefficiently used.

Home Electronics

UNDERUTILIZED EFFICIENCY

Currently, ACME is utilizing two ports of entry in the U.S; Long Beach and Baltimore. Cargo

shipped via Baltimore services five H.E. DC’s at the East Coast: Hartford, CT; Atlanta, GA,;

Edison, NJ; Little Rock, AR; Charleston, SC where the transit time is an average of 32.5 days.

Long Beach services the other five H.E. DC’s in the Mid-west, where containers are cross-

docked before getting to the destination DC’s: Detroit, MI; Springfield, Il; Akron, OH; Des

Moines, IA; Indianapolis, IN ending with a transit time of an average of 14 days. When

combined, the average transit time for Ocean transportation for H.E. is 23.25 days.

ILC is proposing ACME to eliminate the East Coast port of entry of Baltimore, shipping all of

their cargo through the West Coast, where 60% of the total FEU’s will be sent via Prince

Rupert, Canada. From there, the goods continue on to Chicago via intermodal. Another

25% will be shipped via through rates from the Orient direct to Dallas arriving in Los

Angeles port and being sent intermodal on double stacked trains. The remaining 15% will

be held in LA, where half of it will be cross-docked to the Seattle Regional DC. From the

Chicago and Dallas Import DC’s, proportionate cargo will be cross-docked to the remaining

eight Regional DC’s.

ACME is purchasing from five different Orient suppliers located in HK, Shanghai, Manila,

Pusan and Taiwan.

ILC proposes to move the production from Manila and Taiwan to only three suppliers; HK,

Shanghai and Pusan. The impetus for this change was Taiwan becoming too expensive to

manufacture so many suppliers are changing production line locations to Mainland China.

Manila is still further away from the West Coast, North America (WCNA) which makes the

ILC’S ANALYSIS

Ocean freight rate higher. These three suppliers are strategically chosen and are

considered as Asian Base Ports (ABP) which retain a lower/same rate level.

UNDERUTILIZED CAPACITY

ACME is using 40’ DRY Containers to ship cargo from the Orient to the U.S. utilizing the

inside capacity of 1,972.81 cft per box which as a total per year, imports 2544 FEU’s. This

capacity enables 80 TV’s, 340 DVD/VCR and 75 Portal Stereos summing up to a logistic cost

per 40’ Container of $11,231.58.

ILC proposed to move the Home Electronic cargo into 40’ HC (High Cubic) containers,

where the inside capacity increases to 2396.81 or approx. 424 cft per container, decreasing

the total volume of container to the U.S. by 450 FEU’s.

2544 FEU’s x 1,972.81 cft = 5,018,829 c.ft (Current Model)

2094 FEU’s x 2,396.77 cft = 5,018,829 c.ft (Proposed Model)

-450 FEU’s +423.96 cft

*Table 11: Home Electronic Cubic Feet Calculations

Domestic Transportation; ACME’s current model is cross-docking 1316 Trailers in Rancho

Dominguez from 40’ Containers to 40’ Trailers to be sent via Intermodal to the DC’s in the

Mid-West with an overall cost of $2,835,519.

ILC proposal for the Domestic Transportation consists in Cross-docking the cargo from the

mentioned Import DC’s (LA, Dallas and Chicago) into 53’ Trailers optimizing space and

being able to distribute 1316 Trailers to all 10 proposed regional DC’s (not only five as

shown in current model).

ILC’S ANALYSIS

Another improvement that ILC tackled is to change the distribution model to send the 53’

trailers on TOFC’s (Trailer On Flat Car’s) for destinations over 500miles, and utilize OTR

(Over The Road) for distances lower than 500 miles, bringing a saving to the operation of

$1,952,866 (spreadsheet below – comparing current vs. proposed model).

The main improvement with the Transportation model relies on use of larger Import DC’s.

Bringing the cargo into the U.S. via “through rates” to the same Import DC’s bring them

strategically closer to the remaining 10 Regional DC’s, which lowers the rate per mile

guaranteeing the savings illustrated above.

OCEAN FREIGHT COSTS

ACME’s current Ocean Freight rates had their last review in 09/01/2007 working on an

average of $3,897.78 by dividing the total logistic ocean cost by the current quantity of

containers. Looking at ACME’s Budget Summary, the Ocean Transportation is the 2nd

highest cost (total $9,915,940), and when added to the Domestic Transportation

($2,835,519) and the Cross-Docking charges ($394,800) ACME has a total Transportation

cost for Home Electronics of $13,146,259.

Market research was performed to see where ACME could save on existing Ocean

Transportation rates. Comparing ILC’s new bid against ACME’s current rate structure, we

arrived at a savings of $685 per container (if compared to 40’ DRY). ILC proposes to use

40’ HC containers, the saving will not be that big…even though saving in Ocean

Transportation $1,031,800.

ILC’S ANALYSIS

*Table 12: Home Electronics Savings

In general, the main proposal that ILC is doing to ACME, generates a savings for the Home

Electronics of $2,984,668 in the first year that will start in the first quarter after the

business is awarder to us (See Gantt Chart in appendix).

Apparel

UNDERUTILIZED EFFICIENCY

ACME is today moving their cargo as LCL (less than container load) from 4 origins in Asia

(Hong Kong, Shanghai, Pusan, Manila) to LA/LB and afterwards moved to an 3rd party

Warehouse (Novell) which takes in average 13 days being sent only once a month from

each supplier.

In order to improve the inventory and the transit time, ILC proposes to develop a new

supplier in the Pearl River Delta area (mainland China) and move the production from

Shanghai, Pusan and Manila into only 2 suppliers; the one in Hong Kong and the new

ILC’S ANALYSIS

developed one in PRD. After being consolidated in Hong Kong, the cargo will be shipped

ever 15 days in 20’ Dry containers to Los Angeles Import DC in only 12 days of transit.

UNDERUTILIZED CAPACITY

ACME currently sending the cargos on LCL basis, from 4 different places, is not combining

the cargo which could improve capacity and reduce costs.

After having only 2 suppliers close to each other in the PRD area, ILC proposes to

consolidate the every 15 days at the Kuehne Nagel Warehouse in Hong Kong, where we

negotiated a 14 days Free Storage. The cost for the consolidation will be $26.5 per CBM

(which already includes the 14 days Free Storage, receipt of cargo in the CFS, loading of the

container and roundtrip CY/CFS).

The Reason to consolidate the cargo is that we can have 23.91 CBM to be loaded each 15

days, which is enough for a 20’ Dry container on the low season.

Total cargo sent on Low Season:

That means that for the low season, the total rate per year for apparel is $47,006.73

(calculation below)

$26.5 x 47.81 CBM = $1,266.97 (Consol charge) + ( 2x $1978) (20’ Ocean rate) =

$5,222.97 per month x 9 (low season months) = $47,006.73

Now for the 3 months that are considered Peak Season (July, August, September) ILC

recommends ACME to use 40’ Dry containers due to the volume increase (as seen below).

ILC’S ANALYSIS

So using the same math as below (26.5 x CBM + 40’ Dry container) we get the total Apparel

Ocean cost and are able to save $50,104.97 if compared to the current Apparel cost of

$127,653.00 (as been below + appendix) .

OCEAN FREIGHT COSTS

The ocean costs for 20’ and 40’ Dry were also negotiated with Kuehne Nagel as seen below:

The Domestic Transportation done today by ACME won’t change, being only consolidated

more packages to the same 10 Regional DC’s.

But as a second project, ILC can be studying an improvement for the Apparel Domestic

Distribution by negotiating special rates for Small Package sent direct to the stores,

avoiding one more step/cost at the Regional DC’s.

Planning The Transportation planning for the whole project will be fully implemented by Year 2,

after the Import Warehouses are open and running in LA, Dallas and Chicago. The first year

ILC’S ANALYSIS

will be used to offshore the new suppliers and consolidate the volume to the awarded ones

in Hong Kong, Shanghai and Pusan for Home Electronics, and Hong Kong and PRD (Pearl

River Delta) for Apparel.

After each supplier for Home Electronics is selected and instructed to be working with 40’

HC Containers, work done in partnership between ACME’s and ILC’s Transportations Corp

Team, the new Domestic Transportation model will be implemented in synergy with the

Distribution Center Consolidation (DCC) Team at the Import Warehouses.

The Apparel consolidation will also happen as soon the new supplier in PRD is developed,

where the cargo will be sent to Hong Kong and combined at the Kuehne Nagel’s Warehouse

to be sent as scheduled to LA. This will occur all together within Year 1.

The Domestic transportation for Apparel won’t suffer any changes at the moment, being

sent as current model to the Regional DC’s on LTL basis.

When fully implemented, the combined savings for the Home Electronics, Apparel and

Domestic Transportation will generate a total benefit of $3,034,773 which will improve

cash flow and reduce waste.

To guarantee the best rate quotation, at the beginning of each year ILC will manage a new

bidding for ACME to make sure all rates being used are in average to the market.

As a special benefit by quoting with Kuehne Nagel for a 3 year plan, where the rates will

just be revised to the market level each January, no GRI or PSS will be applied if the whole

project is awarded to them as Ocean Freight Forwarder.

ILC’S ANALYSIS

PROPOSED ILC TRANSPORTATION MODEL

*Illustration 8: ILC’s Proposed Transportation Model

Contingency Plan In the event of a strike in the West Coast USA, ILC has established a backup plan to reach

the Import DC’ in Dallas and Los Angeles by going the freight via Panama Canal into

Houston, TX. In case any strike occurs in the Canada West Coast, cargo will be shifted from

Prince Rupert into Seattle, WA, and railed to Chicago.

ILC’S ANALYSIS

Green Initiatives Logistics is the integrated management of all the activities required to move products

through the supply chain. Green logistics is the practice of these movements that take both

environmental and social factors into consideration.

Why Go Green?

GOVERNMENT POLICIES & REGULATIONS

Governments around the world have begun to introduce laws that govern the rational and

conservation of energy. For example, Tokyo has to comply with the Revised Energy

Conservation Law of 2006. The law is a comprehensive act that regulates energy

management in manufacturing, commercial and transportation sectors; energy efficiency

standards for vehicles and appliances; energy efficiency standards for houses and buildings

(The Energy, 2010).

In 2006, California introduced Assembly Bill 32 (AB 32). AB 32 grants California the rights

to set emission standards and implement greenhouse gas guidelines, promote alternative

fuels and technologies by way of rebates and other incentives. AB hopes to reduce harmful

emissions statewide and return emissions levels from a decade ago (Taylor, 2010). It is

only a matter of time before other states follow suit and it would be wise for ACME to be

the leader in green.

SOCIAL FACTOR

Consumers are becoming increasingly aware and conscious over the impact that products

and business have on the environment. A 2007 Intellitrends market study revealed that 93

percent consumers were willing to spend or pay more to get products labeled as a green

product and shop with companies that have a support in environmental sustainability

(Bishop, 2007).

ILC’S ANALYSIS

FUTURE COST SAVINGS

Huge upfront cost is the main deterrent preventing many businesses from going green.

Such simple changes as energy efficient light bulbs and water conservation techniques have

been met with hostility, but the huge future savings cannot be denied.

For example, improving fuel mileage efficiency in the trucking fleet by one mile per gallon

would save more than $52 million per year (Is Walmart, 2005).

A waterless urinal saves on average 20,000 to 45,000 gallons of water a year. Twenty-two

Waterless urinals can save up to 1,000,000 gallons of water per year (Waterless, 2010).

The Green Situation at ACME

ACME currently employs a PUSH program for their inventory system that not only causes

excess inventory, but also a higher amount of carbon footprint and inefficiencies in the

production, storage, and transportation of goods. This is due to a lack of visibility along the

supply chain and a lack of appropriate technology in place to support ACME and their

efforts to go green.

INFORMATION TECHNOLOGY

Many of the green benefits from information technology are indirectly related to

improvement in efficiencies along the supply chain. For example, improvements in

forecasting provide additional lead time for maximizing and transporting goods. This

means less trucks and fewer trips and that equates to less harmful emissions.

Additionally, allowing ILC to host ACME’s data centers, has the added benefit of lowering

C02 emissions. ILC data centers utilize the latest in software and storage capability

requiring less power, cooling, and space than other data centers.

ILC’S ANALYSIS

3R Principle (Reducing, Reuse and Recycle)

ILC suggest implementing a 3R principle to eliminate waste as much as possible. For

example:

• Recycle paper

• Use double-sided paper when printing

• Replace disposable batteries with rechargeable ones

• Recycle printer cartridge

• Implementing paperless ordering systems to reduce paper waste.

DISTRIBUTION CENTERS

Lighting

ILC recommends that lighting in all distribution centers be retrofitted and replaced with

Energy Star Qualified Light Emitting Diode (LED) Lighting. The benefits of LED lights

include:

• Lowering operating expense. LED lights use 75% less energy than incandescent

lights (“Energy Star”, 2007).

• Reduces maintenance costs. LED lights last 35 to 50 times longer than

incandescent lighting and about 2 to 5 times longer than fluorescent lighting

(“Energy Star”, 2007).

• Reduces cooling costs. LED lights produce very little heat.

• Minimum three-year warranty. This guarantee is far beyond the industry

standard of 1 year.

• Added features. Some indoor LED models have dimming capabilities. Outdoor

models have automatic daylight shut-off and motion sensors on some outdoor

models. The ability to turn lights on only while they are in use will conserve energy

and further reduce energy cost.

ILC’S ANALYSIS

Skylights

ILC recommends that ACME install Skylights in all 13 distribution centers. Skylights have

the ability to increase energy efficiency by maximizing natural lighting, eliminating heat

transfer and making the most of passive solar heating reducing overall operating cost and

lowering C02 emissions (Save the Bulbs, 2010).

In addition, the natural lighting provided by skylights has been known to increase

productivity. There seems to be a direct correlation between natural lighting and

productivity. It seems as though natural lighting has a positive psychological effect. Some

studies suggest that the human brain perceives the color properties of natural light as

‘normal’ and thus we respond in a positive, physical way when it is present. The National

Commission on Sleep Disorders Research estimates that, in the United States alone,

businesses lose more than $150 billion a year in productivity as a result of employee

fatigue due to lack of daylight (Velux America, 2010).

Recently, Lockheed Martin reported a 15% increase in worker productivity after installing

skylights. They were awarded a $1.5 billion defense contract based on increased

productivity and saved $300,000 to $400,000 a year on energy bills due to natural light

from skylights (Velux America, 2010).

Lighting Sensors

Lighting sensors will also help reduce energy cost and usage by limiting the use of lights as

necessary. The lights will turn off and on as people enter or leave a room. This is

particularly useful in rooms that are used in short durations, such as bathrooms.

Water Conservation

ILC recommends the replacement of 4,239 flush urinals with waterless no-flush urinals.

The cost to replace the no-flush urinals is $429 per urinal for a total of $1,818,531 with an

ILC’S ANALYSIS

average cost of $1.00 per 1000 uses and a payback period between one and three years. A

waterless urinal saves on average 20,000 to 45,000 gallons of water a year. ACME is

expected to save over 192,681,818 gallons of water per year with waterless urinals

(Waterless, 2010). The savings associated with water alone at $1.50 per 1000 gallons

equates to $289,023 (http://www.fcwa.org/Story_of_water/html/costs.htm).

TRANSPORTATION

Improved Freight Logistics

The new IT system in place should improve efficiencies in the transportation of goods, as it

provides information on how many hours and miles each route should use, allowing ACME

to determine how many trucks and drivers are truly needed. Simplifying delivery routes

reduces the number of trucks needed to transport goods and also reduces distances for

deliveries, which in turns saves on fuel consumption, green house emissions, and lowering

overall cost. Real-time visibility will also allow ACME to maximize load capacity by

providing real time inventory levels and lowering the number of trips.

Increase Railway Use

Transporting goods by railway and ships emits less C02 than that of trucks and airways.

Transporting containers by rail rather than trucks reduces carbon footprints by as much as

62%. Transporting trailers by train rather than truck cuts carbon footprints by as much as

49% (See Figure X for example). This is why ACME will route 1257containers via Prince

Rupert and 837 containers to LA and Dallas.

DOUBLE STACK CONTAINERS BY TRAIN (LA to Chicago)

CONTAINERS BY TRUCK (LA to Chicago)

1 train carrying 256 units 256 trucks 2,200 rail miles 2,015 highway miles Consuming 25,400 gallons of diesel fuel Consuming 79,400 gallons of diesel fuel 420 metric tons CO2 footprint 1,113 metric tons CO2 footprint

*Source: The U.S. EPA’s Climate Leaders program emission factors (Direct Emissions from Mobile Combustion Sources, May 2008); BNSF’s carbon emission estimator was formed in collaboration with ClearCarbon Consulting, Inc.; Other sources include BNSF shipment history and internal shipping metrics, along with route mileage calculation programs, trucking system averages (Truck Assumption: 6.5 mpg highway), and other data sources. **Table 13: Carbon Savings | BNSF Intermodal Containers vs OTR

ILC’S ANALYSIS

53’ TOFC TRAILERS BY TRAIN (LA to Chicago)

TRAILERS BY TRUCK (LA to Chicago)

1 train carrying 123 units 123 trucks 2,200 rail miles 2,015 highway miles Consuming 19,400 gallons of diesel fuel Consuming 38,100 gallons of diesel fuel 270 metric tons CO2 footprint 535 metric tons CO2 footprint

*Source: The U.S. EPA’s Climate Leaders program emission factors (Direct Emissions from Mobile Combustion Sources, May 2008); BNSF’s carbon emission estimator was formed in collaboration with ClearCarbon Consulting, Inc.; Other sources include BNSF shipment history and internal shipping metrics, along with route mileage calculation programs, trucking system averages (Truck Assumption: 6.5 mpg highway), and other data sources. **Table 14: Carbon Savings | BNSF Intermodal Trailers vs OTR

This method will have a profound savings on fuel expended on the transportation of home electronics. The current model is as follows:

Current Model Origin DC Destination W/hse Miles Total Crossdock 40' Qty

SHA / PUS / HKG /

MNL / TW

Hartford, CT 247

Atlanta, GA 271

Edison, NJ 259

Little Rock, AR 193

Charleston, SC 258

Rancho Dominguez Detroit,MI 2300 1,316

Springfield,IL 2000

Akron,OH 2400

Des Moines, IA 1700

Indianapolis,IN 2100

Avg Miles 2100 2,544

Miles Traveled

2,763,600 * Mulitiplied by 1316 containers

Sub Total

ILC’S ANALYSIS

The new model will have save 485,933 gallons of fuel for a savings of $1822,248.75.

New Model Origin Import DC's Destination W/hse Miles Total Crossdock - 53' Qty

SHA / PUS / HKG

LA Seattle,WA 1140 104

Dallas Atlanta,GA 780 108

Little Rock,AR 320 108

Charleston,SC 1100 108

Chicago Hartford, CT 900 148

Edison, NJ 800 148

Detroit, MI 290 148

Akron, OH 370 148

Des Moines, IA 340 148

Indianapolis, IN 190 148

Avg Miles 623 1,316

Miles Traveled

819,868

* Mulitiplied by 1316 containers

Sub total

Less Miles Traveled

1,943,732

Gallons of Fuel Saved

485,933 Savings

Based on 4 miles to gallon

TTL Fuel Savings @ $3.75/gallon $ 1,822,248.75

*Table 15: Green Implementation Cost

Comparable Green Efforts by Competitors

Target

• Target’s total C02 emissions in 2006 was 2.63 million metric tons of CO2

ILC’S ANALYSIS

• Placed energy efficient technologies, advanced refrigeration and renewable energy

technologies into Target buildings

• Reduce energy use 50% by using light emitting diodes (LEDs) in freezers and

coolers.

• 70% of items destined for landfills have been reused, recycled, or rethought

• 40% energy savings by converting overhead store light from four lamps to two.

• Low-flow toilets that meet Federal standards

• Ultra low-flow hand-wash faucets that are 75 % more efficient than required and

reduce wash-water flow to sewer treatment plants

Walmart

• Walmart’s total C02 emissions in 2008 was 20 million metric tons of CO2

• Over the next five years, Walmart plans on reducing CO2 emissions by 20 million

metric tons

• Placed energy efficient technologies, advanced refrigeration and renewable energy

technologies into Walmart buildings

• In 2009, Walmart improved fleet efficiency by 60% compared to 2005 in the United

States, while still carrying 77 million more cases, driving 100 million miles and

reducing 145,000 C02 emissions

JCPenney

• Since 2003, JCPenney has invested over more than $130 million to install energy

management technology, more efficient lighting and high-efficiency heating,

ventilation and air-conditioning (HVAC) systems in its stores

• JCPenney reduce its total C02 emissions by 80 million pounds in 2008 with future

plans to lower C02 by another 20% per square foot through 2015

• Launched the EMPowered program where associates are regarded as

environmental stewards who are actively involved in helping to reduce the

Company’s overall emissions by curtailing unnecessary energy usage.

ILC’S ANALYSIS

• JCPenney was the first retailer to earn the ENERGY STAR® Award for Sustained

Excellence by the U.S. Department of Energy and the U.S. Environmental Protection

Agency with plans on retrofitting an additional 200 stores

In conclusion, ACME will reduce its carbon footprint by 20% of its average yearly output of

3.43 metric tons of CO2 emissions. This will be achieved by leveraging energy efficient

technologies in the areas of Information Technology, Distribution Centers. and

Transportation. It is the hope of these efforts to remain competitive in the area of

sustainability.

CONCLUSION

ILC’s proposed Supply Chain Solution to ACME is a Three Year Plan which consists of three

main pillars with an added benefit of Green; Information Technology, Warehousing,

Transportation. Which after implemented will mirror the industry’s best practices,

generating significant savings and improving cash flow.


Year 1

o Integration of all Key Operational Systems

o Switch to EDI Webhosted ERP

Year 2

o Implement E-Commerce

o Fully Operational ERP

Warehousing

Year 1

o Implementation of 3 Import Warehouses in Los Angeles, Chicago and Dallas

o Relocate Spokane, WA Distribution Center to Seattle, WA

o Close 9 DC’s (Las Vegas, NV; San Francisco, CA; Phoenix, AZ; Denver, CO;

Kansas, KS; La Grange, GA; Savannah, GA; Baton Rouge, LA; Spokane, WA)

Year 2

o Conversion of Louisville, KY Regional DC into E-Commerce DC

o Close 9 DC’s (Wilmington, DE; Rockford, IL; Normal, IL; Baltimore, MD;

Northbridge, MA; East Orange, NJ; Moon, PA; Macon, GA; Springfield, IL)

Year 3

o Close 13 DC’s (Clearwater, FL; St. Paul, MN; Raleigh, NC; Albany, NY;

Washington, DC; Miami, FL; Birmingham, AL; Plymouth, PA; Tulsa, OK; Salt

Lake City, UT; Houston, TX; Albuquerque, NM; Detroit, MI)

Overall

o Keep 10 Regional DC’s and 3 Import DC’s (Los Angeles, CA; Seattle, WA;

Dallas, TX; Louisville, KY; Atlanta, GA; Hartford, CT; Edison, NJ; Little Rock,

AK; Charleston, SC; Chicago, IL; Akron, OH; Des Moines, IA; Indianapolis, IN)

CONCLUSION

o Improve DC’s Ratio from 20 stores per DC (Yr 1), to 62 stores per DC (Yr 2) to

80 stores per DC (Yr 3).

o Improve DC Efficiency from 21% to 78% (Yr 3)

o Total Implementation Cost $117,700,000

o Total Cash Flow improvement by selling Real State $298,368,000

Transportation

Home Electronics

o Consolidate production from 5 suppliers to 3 (Shanghai, HK and Pusan)

o New Rate negotiation to market standard

o Capacity improvement on international portion by switching from 40’ DRY to

40’ HC, reducing total containers to less than 450 containers per year

o Capacity improvement on domestic portion by switching from 40’ into 53’

trailers, reducing total outbound trailers to less than 1228 Trailers per year

o New Domestic distribution model by sending 53’ trailers as TOFC (Trailer On

Flat Car) for more than 500 miles and as OTR (Over The Road) for less than

500 miles from the Import DC’s to the Regional DC’s

o Cost benefit of $2,984,668

Apparel

o Consolidate production from 4 suppliers only to 2 (HK and a new one in

Pearl River Delta – Mainland China)

o Consolidate the cargo into a Warehouse in HK to be sent every 15 days on 20’

Containers to Los Angeles for regular months and into 40’ for Peak Season

o Cost Benefit of $50,105

Overall

o Rate reduction for Home Electronics and Apparel

o Transit Time reduction from 23 to 17 days

o Total Cost benefit of $3,034,773

CONCLUSION

Green

Distribution

o Installation of new Light Emitting Diodes (LED)

o Installation of Light Sensors in appropriate areas

o Improve Skylights

o Add Waterless Urinals

Transportation

o Improved Freight Logistics by usage of multi-mode transportation

o Increase Railway use for through rates on double stack containers to the

Import DC’s which reduces 62% of the Carbon Footprint

o Increase Railway use for Domestic Distribution on 53’ Trailers TOFC which

reduces 49% of the Carbon Footprint

Overall

o Make ACME a more Environmental Conscious Retailer

o Implementation Cost of $9,307,981

Although the plan requires a total investment of $139,142,481, which includes ILC’s

consulting fee of $3,000,000, when fully implemented, this proposal will generate the

following

Total savings: $224,064,792

Cash Flow: $298,368,000 over three years

ROI: 61%

Payback Period: 22 months

CONCLUSION

THANK YOU.

ILC Consulting Team would also like to thank ACME’s Board for the opportunity to

present this proposal and will be available for a meeting in the coming weeks to

discuss start up procedures.

BIBLIOGRAPHY

Bishop, C. (2007, May). Intellitrends LLC Initiates a Go-Green Quarterly Survey Among U.S. Homeowners to Track and Monitor Attitudes and Behaviors Toward Environmental Issues. BusinessWire. Retrieved from http://proquest.umi.com/pqdweb?index=0&did=1268132681&SrchMode=2&sid=3

Cost of Water. (2002). Is Water Free? Retrieved from http://www.fcwa.org/Story_of_water/html/costs.htm

Earth Easy. (2010). Fuel-efficient Driving. Retrieved from

http://www.eartheasy.com/live_fuel_efficient_driving.htm Energy Star. (2007, June 7). In Wikipedia, the free encyclopedia. Retrieved from

http://en.wikipedia.org/wiki/Energy_Star Is Wal-Mart going green? (2005, October 5). MSNBC. Retrieved from

http://www.msnbc.msn.com/id/9815727/ JCPenney Corp. (2009). Corporate Social Responsibility Report. Retrieved from

http://www.jcpenney.net/shared/content/CSR/csr_2009/document_0/09CSRann al0426.pdf

LoopNet - #1 in Commercial Real Estate Online http://www.loopnet.com/

Saves the Bulbs. (2010). Productivity. Retrieved from

http://www.savethebulbs.org/productivity.html Target Co. (2009). Annual Report. Retrieved from http://media.corporate-ir.net/media_files/irol/65/65828/AP_Hi.pdf Taylor, M. (2010, April 4). Implementation of AB 32—Global Warming Solutions Act of

2006. Retrieved from http://www.lao.ca.gov/reports/2010/rsrc/ab32_implementation/ab32_implemen ation_041410.pdf

Technologies, Strategies, and Policies. (2010). Retrieved from http://www.epa.gov/smartway/transport/what-smartway/carrier

strategies.htm#train Velux America, Inc. (2010). Commerical Skylights. Retrieved from

http://www.thenextgenerationskylight.com/ng/literature/docs/X20187-1009_Commercial.pdf

Walmart Co. (2010). Annual Report. Retrieved from

http://cdn.walmartstores.com/sites/AnnualReport/2010/PDF/WMT_2010AR_FI AL.pdf

BIBLIOGRAPHY

Waterless. (2010). Advantages. Retrieved from http://www.waterless.com/ The Energy Conversation, Japan. We Support Your Energy Conservation Activities. (2010).

Retrieved from http://www.asiaeec-col.eccj.or.jp/brochure/pdf/eccj_2009- 2010.pdf

6/27/2010

1 of 2 Gantt Chart Finalt-ALL

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Consolidate from 5 to 3 Suppliers in the orient for H.E. (SHA / HKG / PUS) ACMEUse new negotiated rates / renew bidding ILCNew Routing / Intermodal (Chicago / Dallas) - (H.E.) ILCSwitch from 40' Dry into 40' HC Container for international Transportation (H.E.) ILCSwitch from 40' into 53' Trailer for Domestic Trasportation (H.E.) ILCImplement new distribution model (TOFC vs. OTR) depening on the distance ILC & ACMEConsolidate from 4 to 2 suppliers in the orient for Apparel (HKG / PRD area - China) ACMEConsolidation of cargo in a warehouse in HKG tro be sent twice a month on Ctnr's ACME

C-Level Planning Team Created (ILC Consultants and ACME executives) ILC & ACMEReview Warehouse/Distribution Plan ILC & ACMEILC creates DC Closure Procedure and Planning team approves ILCILC's IT team uses location allocation software to identify year 1 closures ILCILC's IT team uses LA software to identify year 1 Import Ctr. Locations ILCMeetings scheduled with Realtors in LA, Chicago, Dallas ILCMeetings scheduled with mgrs of DCs identified for closure ILC & ACMECP reviewed with managers ILCEmployees notified and given notice ACMESale of equipment ILC & ACMEFinal Closures year 1- 9 DCs ACMEProperties identified for Import Centers ILCOnsite Improvements Completed ACMEStaffing completed ACMEOpen 3 Import DC's (Chicago / Dallas / Long Beach) ILC & ACMEPlanning Team Meeting ILC & ACMEILC's IT team uses LA software to identify year 2 DC closures ILCILC" IT team uses LA software to identify year 2 E-Commerce DC ILCMeetings scheduled with Realtors in Memphis ILC & ACMEMeeting scheduled with mgrs of DCs identified for closure ILC & ACMECP reviewed with managers ILC & ACMEEmployees notified and given notice ACMESale of equipment ACMEFinal Closures year 2- 8 DCs ACMEProperties identified for E-Commerce DC ILCOnsite Improvements Completed ACMEStaffing completed ACMEOpen 1 E-Commerce DC in Memphis ILC & ACMEPlanning Team Meeting ILC & ACMEILC's IT team uses LA software to identify year 3 DC closures ILCMeetings scheduled with mgrs of DCs identified for closure ILC & ACMECP reviewed with managers ILC & ACMEEmployees notified and given notice ACMESale of equipment ACMEFinal Closures year 3-14 DCs ACME

Planning Team Meeting- ILC consulting team and 3 warehouse mgrs. ILC & ACMEILC Warehouse Efficiency Plan reviewed and approved ILC & ACMEMeetings scheduled with 9 Mgrs of DCs identified as non-closures ILC & ACMEILC conducts site inspections with Warehouse managers ILC & ACMEWarehouse layout and flow plan is created for each DC ILCNew Warehousing L&F plan started in the 9 non-closure DCs ILCCross-docking started ACMEDouble stacking initiated in all warehouses ACMETriple and Quadruple stacking initiated ACMEMeetings scheduled with Import Center Managers ILC & ACMESite inspections done and Warehouse L&F plans created for Import Ctrs ILCImport Centers L&F plan fully operational ILC & ACMEMeeting scheduled with E-commerce Center mgr ILC & ACMESite inspections done and Warehouse L&F plans created for E-commerce Ctr ILC & ACMEE-Commerce L&F plan fully operational ACME

Transportation

Distribution/Warehousing

Septiadi Tjahjono (ILC)

Dan Phillips (ILC), Karen Allec (ILC)

Sven von Borris (ILC)

Gregory Matthew (ILC)Warehousing


ILC Team #1 TRANSITION AND IMPLEMENTATION PLAN - Progress Checklist

TASKS - TARGET DATES (Week Ending) ResponsibilitiesYear 1 Year 2 Year 3

6/27/2010

2 of 2 Gantt Chart Finalt-ALL

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

ILC Team #1 TRANSITION AND IMPLEMENTATION PLAN - Progress Checklist

TASKS - TARGET DATES (Week Ending) ResponsibilitiesYear 1 Year 2 Year 3

Start of Project ILCReview installation plan ILCReview existing procedures ILCReview hardware systems ILCReview existing facilities ILCReview trading partner ILCReview ACME staffing ILCReview project time frame ILCEducation processExecutive and mgt Education (Dept Manager, Store manager and Supervisor) ILCSetup data input procedure ILC & ACMESetup master data ILC & ACMESetup operational procedure ACME1st year Implementation processMapping data to new Hosted ERP ILCTranslation data to new Hosted ERP ILC & ACME

Database build ILCData load ILCSystem Integration ILC

Failover testing ILC & ACME

Back up and recovery testing ILC & ACME

DC Implementation process1st DC area hardware / software verification ILC1st DC area User training ILCLive testing 1st DC area ILC & ACMEPost implementation verification ILC & ACME2nd DC area hardware / software verification ILC2nd DC area User training ILCLive testing 2nd DC area ILC & ACMEPost implementation verification ILC & ACME3rd DC area hardware / software verification ILC3rd DC area User training ILCLive testing 3rd DC area ILC & ACMEPost implementation verification ILC & ACMEStore Implementation process1st Store area hardware / software verification ILC1st Store area User training ILCLive testing 1st DC area ILC & ACMEPost implementation verification ILC & ACME2nd Store area hardware / software verification ILC2nd DC area User training ILCLive testing 2nd Store area ILC & ACMEPost implementation verification ILC & ACME3rd Store area hardware / software verification ILC3rd Store area User training ILCLive testing 3rd Store area ILC & ACMEPost implementation verification ILC & ACMEEcommerceE-Commerce preparation and implementation ILC & ACMEE-Commerce Live ILC & ACME

Enforcing No Idling Policy ACMENo empty truck Poicy ACMERecycling Program ACMEChange ALL incandescent lights to Energy Star light bulbs ACMEWarehouse Retrofitting-Skylight installation ACMEWater Conservation Policy ACMERide Share Program ACMEResponsible Sourcing--Enforcing vendor to be Green ILC & ACME

Septiadi Tjahjono (ILC)

Green Sokchanda "Sokie" Im (ILC)


APPENDIX 1 - ROI / PAYBACK

Goals Year 1 Year 2 Year 3TOTAL INVESTMENT /

SAVINGS•Implement Hosted ERP •E-commerce Integration

> E-commerce DC

•Increase Stacking Racks; •26 DC's →13DC's> Stack 2 high vs. single stack) > Stack 3-4 high > Close 13 DC's•40 DC's→35 DC's •35 DC's→26 DC's > Close 9 DC's > Close 9 DC's > Open 3 Import DC's > Convert Louisville, KY > Open 1 Regional DC DC to E-Commerce•Convert to 40STD→40HC •Annual Rate Review (Bids) Annual Rate Review (Bids)•Implement competitive "thru rates" to CHI & DAL. Emphasis on double stack train.

Convert to TOFC vs. OTR to Regional DC's.

Apparel-Consolidate to 20' containers + 2 weeks free warehousing in Orient.•Energy Star Lighting •Water Conservation Policy •Responsible sourcing•Warehouse retrofitting •Ride Share Program(Skylight installation)•Recycling program

ILC Consulting Fee ($1,500,000.00) ($1,000,000.00) ($500,000.00) (3,000,000)$

TOTAL INVEST 139,142,481$ TOTAL SAVINGS 224,064,792$

CASH FLOW 298,368,000$

TOTAL NET BENEFIT 522,432,792$

224,064,792$ Benefit 139,142,481$ Cost of Improvement139,142,481$ Investment Cost 74,688,264$ Savings per year61.0% ROI 22.4 ROI

IT (42,162,000)$

3,034,773$

275,500,000$

(9,307,981)$

PAYBACK = 22.4 MONTHSROI = 61%

Transportation

Green (Value added)

9 Original DC's + 3 Import DC's + 1 E-Commerce DC = 13 Total Regionals

Distribution Centers

Fully Operational ERP system

Appendix 2 - Example ESRI Location Allocation Software

Citation: GIS in Logistics & Fleet Management, Karl Terry ERSI

APPENDIX 3 - WHSE LAYOUT CURRENT

Ground PlatformLevel

# # # # # # # # # # # # # # # # # # # # # # # # # # # #

14

#

#

36 35 36 35 36 35 3638 37 38 37 38 37 38 37 38 37 38 37 38 37 3840 39 40 39 40 39 40 39 40 39 40 39 40 39 4042 41 42 41 42 41 42 41 42 41 42 41 42 41 4244 43 44 43 44 43 44 43 44 43 44 43 44 43 4446 45 46 45 46 45 46 45 46 45 46 45 46 45 46

# 48 47 48 47 48 47 48 47 48 47 48 47 48 47 4850 49 50 49 50 49 50 49 50 49 50 49 50 49 5052 51 52 51 52 51 52 51 52 51 52 51 52 51 5254 53 54 53 54 53 54 53 54 53 54 53 54 53 5456 55 56 55 56 55 56 55 56 55 56 55 56 55 5658 57 58 57 58 57 58 57 58 57 58 57 58 57 5860 59 60 59 60 59 60 59 60 59 60 59 60 59 6062 61 62 61 62 61 62 61 62 61 62 61 62 61 6264 63 64 63 64 63 64 63 64 63 64 63 64 63 6466 65 66 65 66 65 66 65 66 65 66 65 66 65 66

# 68 67 68 67 68 67 68 67 68 67 68 67 68 67 6870 69 70 69 70 69 70 69 70 69 70 69 70 69 7072 71 72 71 72 71 72 71 72 71 72 71 72 71 7274 73 74 73 74 73 74 73 74 73 74 73 74 73 7476 75 76 75 76 75 76 75 76 75 76 75 76 75 7678 77 78 77 78 77 78 77 78 77 78 77 78 77 7880 79 80 79 80 79 80 79 80 79 80 79 80 79 8082 81 82 81 82 81 82 81 82 81 82 81 82 81 8284 83 84 83 84 83 84 83 84 83 84 83 84 83 8486 85 86 85 86 85 86 85 86 85 86 85 86 85 8688 87 88 87 88 87 88 87 88 87 88 87 88 87 88

# 90 89 90 89 90 89 90 89 90 89 90 89 90 89 9092 91 92 91 92 91 92 91 92 91 92 91 92 91 9294 93 94 93 94 93 94 93 94 93 94 93 94 93 9496 95 96 95 96 95 96 95 96 95 96 95 96 95 9698 97 98 97 98 97 98 97 98 97 98 97 98 97 98100 99 100 99 100 99 100 99 100 99 100 99 100 99 100

102 101 102 101 102 101 102 101 102 101 102 101 102 101 102

104 103 104 103 104 103 104 103 104 103 104 103 104 103 104

106 105 106 105 106 105 106 105 106 105 106 105 106 105 106

# 108 107 108 107 108 107 108 107 108 107 108 107 108 107 108

110 109 110 109 110 109 110 109 110 109 110 109 110 109 110

112 111 112 111 112 111 112 111 112 111 112 111 112 111 112

114 113 114 113 114 113 114 113 114 113 114 113 114 113 114

116 115 116 115 116 115 116 115 116 115 116 115 116 115 116

118 117 118 117 118 117 118 117 118 117 118 117 118 117 118

120 119 120 119 120 119 120 119 120 119 120 119 120 119 120

122 121 122 121 122 121 122 121 122 121 122 121 122 121 122

124 123 124 123 124 123 124 123 124 123 124 123 124 123 124

# 126 125 126 125 126 125 126 125 126 125 126 125 126 125 126

128 127 128 127 128 127 128 127 128 127 128 127 128 127 128

130 129 130 129 130 129 130 129 130 129 130 129 130 129 130

132 131 132 131 132 131 132 131 132 131 132 131 132 131 132

134 133 134 133 134 133 134 133 134 133 134 133 134 133 134

136 135 136 135 136 135 136 135 136 135 136 135 136 135 136

138 137 138 137 138 137 138 137 138 137 138 137 138 137 138

140 139 140 139 140 139 140 139 140 139 140 139 140 139 140

142 141 142 141 142 141 142 141 142 141 142 141 142 141 142

144 143 144 143 144 143 144 143 144 143 144 143 144 143 144

146 145 146 145 146 145 146 145 146 145 146 145 146 145 146

148 147 148 147 148 147 148 147 148 147 148 147 148 147 148

150 149 150 149 150 149 150 149 150 149 150 149 150 149 150

# 152 151 152 151 152 151 152 151 152 151 152 151 152 151 152

154 153 154 153 154 153 154 153 154 153 154 153 154 153 154

156 155 156 155 156 155 156 155 156 155 156 155 156 155 156

158 157 158 157 158 157 158 157 158 157 158 157 158 157 158

160 159 160 159 160 159 160 159 160 159 160 159 160 159 160

162 161 162 161 162 161 162 161 162 161 162 161 162 161 162

164 163 164 163 164 163 164 163 164 163 164 163 164 163 164

166 165 166 165 166 165 166 165 166 165 166 165 166 165 166

168 167 168 167 168 167 168 167 168 167 168 167 168 167 168

170 169 170 169 170 169 170 169 170 169 170 169 170 169 170

# 172 171 172 171 172 171 172 171 172 171 172 171 172 171 172

174 173 174 173 174 173 174 173 174 173 174 173 174 173 174

176 175 176 175 176 175 176 175 176 175 176 175 176 175 176

178 177 178 177 178 177 178 177 178 177 178 177 178 177 178

180 179 180 179 180 179 180 179 180 179 180 179 180 179 180

182 181 182 181 182 181 182 181 182 181 182 181 182 181 182

184 183 184 183 184 183 184 183 184 183 184 183 184 183 184

186 185 186 185 186 185 186 185 186 185 186 185 186 185 186

188 187 188 187 188 187 188 187 188 187 188 187 188 187 188

190 189 190 189 190 189 190 189 190 189 190 189 190 189 190

192 191 192 191 192 191 192 191 192 191 192 191 192 191 192

# 194 193 194 193 194 193 194 193 194 193 194 193 194 193 194

196 195 196 195 196 195 196 195 196 195 196 195 196 195 196

69' 69'

702

196

702

72

OFFICE

560 560 560

2Stack Hgt

3Stack Hgt

10072

BULK DOCK RACK

8400 2952

282,000SQUARE FEET

TOTAL PALLETS

560

1476 196

69'

560

10072

560

ACME WAREHOUSE LAYOUT V.1

DOCKBULK RACKS TTL

560

PILE POSITIONS

560 560

69' 69' 69'

560 560 560

PALLETS STACKED 1.0 HIGH

10072

Stack Hgt

1

560 560

588

ACME CAPACITY - CURRENT CAPACITY

560

8400

APPENDIX 4 - WHSE LAYOUT YEAR 3

Ground PlatformLevel

# # # # # # # # # # # # # # # # # # # # # # # # # # # #

#

#

#

36 35 36 35 36 35 3638 37 38 37 38 37 38 37 38 37 38 37 38 37 3840 39 40 39 40 39 40 39 40 39 40 39 40 39 4042 41 42 41 42 41 42 41 42 41 42 41 42 41 4244 43 44 43 44 43 44 43 44 43 44 43 44 43 4446 45 46 45 46 45 46 45 46 45 46 45 46 45 46

# 48 47 48 47 48 47 48 47 48 47 48 47 48 47 4850 49 50 49 50 49 50 49 50 49 50 49 50 49 5052 51 52 51 52 51 52 51 52 51 52 51 52 51 5254 53 54 53 54 53 54 53 54 53 54 53 54 53 5456 55 56 55 56 55 56 55 56 55 56 55 56 55 5658 57 58 57 58 57 58 57 58 57 58 57 58 57 5860 59 60 59 60 59 60 59 60 59 60 59 60 59 6062 61 62 61 62 61 62 61 62 61 62 61 62 61 6264 63 64 63 64 63 64 63 64 63 64 63 64 63 6466 65 66 65 66 65 66 65 66 65 66 65 66 65 66

# 68 67 68 67 68 67 68 67 68 67 68 67 68 67 6870 69 70 69 70 69 70 69 70 69 70 69 70 69 7072 71 72 71 72 71 72 71 72 71 72 71 72 71 7274 73 74 73 74 73 74 73 74 73 74 73 74 73 7476 75 76 75 76 75 76 75 76 75 76 75 76 75 7678 77 78 77 78 77 78 77 78 77 78 77 78 77 7880 79 80 79 80 79 80 79 80 79 80 79 80 79 8082 81 82 81 82 81 82 81 82 81 82 81 82 81 8284 83 84 83 84 83 84 83 84 83 84 83 84 83 8486 85 86 85 86 85 86 85 86 85 86 85 86 85 8688 87 88 87 88 87 88 87 88 87 88 87 88 87 88

# 90 89 90 89 90 89 90 89 90 89 90 89 90 89 9092 91 92 91 92 91 92 91 92 91 92 91 92 91 9294 93 94 93 94 93 94 93 94 93 94 93 94 93 9496 95 96 95 96 95 96 95 96 95 96 95 96 95 9698 97 98 97 98 97 98 97 98 97 98 97 98 97 98100 99 100 99 100 99 100 99 100 99 100 99 100 99 100

102 101 102 101 102 101 102 101 102 101 102 101 102 101 102

104 103 104 103 104 103 104 103 104 103 104 103 104 103 104

106 105 106 105 106 105 106 105 106 105 106 105 106 105 106

# 108 107 108 107 108 107 108 107 108 107 108 107 108 107 108

110 109 110 109 110 109 110 109 110 109 110 109 110 109 110

112 111 112 111 112 111 112 111 112 111 112 111 112 111 112

114 113 114 113 114 113 114 113 114 113 114 113 114 113 114

116 115 116 115 116 115 116 115 116 115 116 115 116 115 116

118 117 118 117 118 117 118 117 118 117 118 117 118 117 118

120 119 120 119 120 119 120 119 120 119 120 119 120 119 120

122 121 122 121 122 121 122 121 122 121 122 121 122 121 122

124 123 124 123 124 123 124 123 124 123 124 123 124 123 124

# 126 125 126 125 126 125 126 125 126 125 126 125 126 125 126

128 127 128 127 128 127 128 127 128 127 128 127 128 127 128

130 129 130 129 130 129 130 129 130 129 130 129 130 129 130

132 131 132 131 132 131 132 131 132 131 132 131 132 131 132

134 133 134 133 134 133 134 133 134 133 134 133 134 133 134

136 135 136 135 136 135 136 135 136 135 136 135 136 135 136

138 137 138 137 138 137 138 137 138 137 138 137 138 137 138

140 139 140 139 140 139 140 139 140 139 140 139 140 139 140

142 141 142 141 142 141 142 141 142 141 142 141 142 141 142

144 143 144 143 144 143 144 143 144 143 144 143 144 143 144

146 145 146 145 146 145 146 145 146 145 146 145 146 145 146

148 147 148 147 148 147 148 147 148 147 148 147 148 147 148

150 149 150 149 150 149 150 149 150 149 150 149 150 149 150

# 152 151 152 151 152 151 152 151 152 151 152 151 152 151 152

154 153 154 153 154 153 154 153 154 153 154 153 154 153 154

156 155 156 155 156 155 156 155 156 155 156 155 156 155 156

158 157 158 157 158 157 158 157 158 157 158 157 158 157 158

160 159 160 159 160 159 160 159 160 159 160 159 160 159 160

162 161 162 161 162 161 162 161 162 161 162 161 162 161 162

164 163 164 163 164 163 164 163 164 163 164 163 164 163 164

166 165 166 165 166 165 166 165 166 165 166 165 166 165 166

168 167 168 167 168 167 168 167 168 167 168 167 168 167 168

170 169 170 169 170 169 170 169 170 169 170 169 170 169 170

# 172 171 172 171 172 171 172 171 172 171 172 171 172 171 172

174 173 174 173 174 173 174 173 174 173 174 173 174 173 174

176 175 176 175 176 175 176 175 176 175 176 175 176 175 176

178 177 178 177 178 177 178 177 178 177 178 177 178 177 178

180 179 180 179 180 179 180 179 180 179 180 179 180 179 180

182 181 182 181 182 181 182 181 182 181 182 181 182 181 182

184 183 184 183 184 183 184 183 184 183 184 183 184 183 184

186 185 186 185 186 185 186 185 186 185 186 185 186 185 186

188 187 188 187 188 187 188 187 188 187 188 187 188 187 188

190 189 190 189 190 189 190 189 190 189 190 189 190 189 190

192 191 192 191 192 191 192 191 192 191 192 191 192 191 192

# 194 193 194 193 194 193 194 193 194 193 194 193 194 193 194

196 195 196 195 196 195 196 195 196 195 196 195 196 195 196

10072

Stack Hgt

3.5

784

2Stack Hgt

4

560

8400

69' 69' 69'

560 560 560 560 560 560 560

ACME WAREHOUSE LAYOUT V.1

DOCKBULK RACKS

560

PILE POSITIONS

ACME CAPACITY - YEAR 3 CAPACITY 282,000SQUARE FEET

TOTAL PALLETS

560

1476 196

69'

560 560 560

Stack Hgt

33136

BULK DOCK RACK

2952

560

SUB TTL

PLTS

29400

PALLETS STACKED 3.5 HIGH33136

69' 69'

702

196

702

72

OFFICE

560

No-Flush™ UrinalsHIGH PERFORMANCE COMPOSITE OR VITREOUS CHINA

© Waterless Co. LLC 0107

FIND YOUR SAVINGS

# of Users # of Urinals Savings/Urinal/Year Total Savings for all Gallons Saved Urinals in Facility/Year per Year

150,000 1500 $765.00 $1,147,500 248,400,000 120,000 1200 $765.00 $918,000 198,720,000 100,000 1000 $765.00 $765,000 165,600,000 90,000 900 $765.00 $688,500 149,040,000 40,000 800 $442.00 $353,600 66,240,000 35,000 700 $442.00 $309,400 57,960,000 30,000 600 $442.00 $265,200 49,680,000 25,000 500 $442.00 $221,000 41,400,000 22,500 450 $442.00 $198,900 37,260,000 20,000 400 $442.00 $176,000 33,120,000 17,500 350 $442.00 $154,700 28,980,000 15,000 300 $442.00 $132,600 24,840,000 12,500 250 $442.00 $110,500 20,700,000 10,000 200 $442.00 $88,400 16,560,000 7,000 150 $419.00 $62,850 11,592,000 5,000 100 $442.00 $44,200 8,280,000 4,000 80 $442.00 $35,360 6,624,000 3,000 60 $442.00 $26,520 4,968,000 2,000 40 $442.00 $17,680 3,312,000 1,500 30 $442.00 $13,260 2,484,000 1,000 20 $442.00 $8,840 1,656,000 500 10 $442.00 $4,420 828,000 250 10 $280.50 $2,805 414,000 125 5 $280.50 $1,402.50 207,000

The above savings are based on the following assumptions: Approximately 100 or more uses per urinal per day; 3 visits by the user per day; 3 gallon flush – no double or leakage included; $4.50 per 1000 gallons, water & sewer charge; $0.50 per 1 oz BlueSeal® @ .50 per oz.; ± 7000 uses per EcoTrap® Insert @ $5.50 ea.; $119.00 maintenance and repair charge for flushed urinals; 184 work days.

Example: 100 users x 3 uses per day x 3 gals x 184 work days with 4 urinals = 165,600 gals per year usage; 165,600 ÷ 1000 x 4.50 ÷ 4 = $186.30 water & sewer charge per urinal + $119.00 maintenance and repair charge per urinal = $305.30 individual cost for a flushed urinal per year. Minus: 100 uses x 3 uses/day ÷ 4 urinals = 75 uses/day x 184 work days = 13,800 uses/year÷ 500 uses per oz. = 27.6 oz BlueSeal®; 27.6 x $0.55= $15.18; 13,800 ÷ 7000 = 1.97 (or 2) EcoTrap® exchanges per year; 2 x $6.50 = $13.00; $15.18 + $13.00 = $28.18 ~ costs for Waterless No-Flush™ Urinals; $305.30 - $28.18 = $277.12.

Net Total Savings per Urinal per Year: $277.12 through retrofit with Waterless No-Flush™ Urinals.

WaterWise Technologies International Distributed by

P.O. Box 18959 • Asheville, NC 28814 USAOffice: 828.252.8144 www.waterwisetech.net

© Waterless Co. LLC 0107

URINAL COST COMPARISON

Manufacturer Kohler Amer. Standard Amer. Standard Waterless Co.

Size 18” 18” 18” 18”

Model Stanwell Innsbrook Lynbrook Yukon™

List Price $480.00* $871.00* $508.00 $399.00

Wall Support required required required not required

Flush Valve Delaney Integral Fl. Valve Sloan 980 None

Valve Type Handle Activated Battery Handle Activated None

List Price $148.00 Integrated $140.00 $0.00

Sub Total $628.00 $871.00 $648.00 $399.00

New Construction Water Supply required Water Supply required Water supply required Not Needed

Install Labor** $124.00 $124.00 $124.00 $30.00

Total $752.00 $995.00 $772.00 $429.00

Water Use/Flush 1.0-3.0 gallons .5-1.0 gallons 1.0-3.0 gallons None

*Unit has integrated flush valve ** Water supply related labor and pressure test on flushed urinals only

ANNUAL WATER/SEWER AND MAINTENANCE COST COMPARISON: No-Flush™ Urinals vs. Flush UrinalsAssumption: A urinal uses 45,000 gallons of water/sewer or has 15,000 uses per year. Flush valve repair parts and time = Labor is estimated at $85.00/year for flushed urinals and $33.50 / year for Waterless Urinals.

Based on the above yearly operating cost numbers, Waterless No-Flush™ Urinals carry paybacks from 1.15 to 2.6 years.

Partial List of Water Agencies which have established Rebate or Voucher Programs forWATERLESS NO-FLUSH™ URINALS

Location Amount

Austin, TX $ 75.00 each Los Angeles, CA $ 60.00 each Oakland, CA $150.00 each Pasadena, CA $ 290.00 (limited time) City of San Diego, CA $ 75.00 each County of San Diego, CA $ 400.00 (limited time) Santa Monica, CA $ 90.00 each Seattle, WA $ 160.00 each Sonoma Valley Water District, CA $ 260.00 each City of Toronto, Canada $ 100.00 -200.00 each

Waterless No-FlushTM Urinals versus Flush UrinalsSame size urinals and published list pricing are compared for equality of comparison

No-Flush™ UrinalsHIGH PERFORMANCE COMPOSITE OR VITREOUS CHINA

WaterWise Technologies International Distributed by

P.O. Box 18959 • Asheville, NC 28814 USAOffice: 828.252.8144 www.waterwisetech.net

ACME Current Operating Cost - 3 Years 844,156,008$ ACME 3 Yrs Plan 620,091,216$

Saving 224,064,792$ Whse sales profit (cash flow) 298,368,000$ Benefit including Cash Flow 522,432,792$

total benefit 224,064,792$ total cost - 139,142,481$ total cost/ 0.61

61%

Cost of Improv. 139,142,481$ Saving per year 74,688,264$ Payback time 22.4 months

Current vs. Proposed

ACME Return On Investment

Pay back time

ROI

DC Operating Cost 193,200,000.00$ DC Operating Cost 146,400,000.00$ DC Operating Cost 77,200,000.00$ DC Cost: 93,100,000$ DC Cost: 20,400,000$ DC Cost: 4,200,000$ IT Cost 19,284,850$ IT Cost 11,499,950$ IT Cost 11,377,200$ Transportation Cost 10,373,745$ Transportation Cost 10,373,745$ Transportation Cost 10,373,745$ Green Cost 7,489,450$ Green Cost 1,818,531$ Green Cost -$ Consulting Fee 1,000,000$ Consulting Fee 1,000,000$ Consulting Fee 1,000,000$

Investment cost 110,588,200$ 23,354,281$ 5,200,000$

324,448,045$ 191,492,226$ 104,150,945$

Total Cost Over 3 yrs Period 620,091,216$ 620,091,216$

ACME Cost over 3 Years period

Year 1 Year 2 Year 3

Year 1 Total Cost Year 2 Total Cost Year 3 Total Cost

8,998,750$ 135,750$

-$

10,286,100$ 11,364,200$ 11,377,200$

42,162,000$

Startup Cost

Information Technology Cost - Year 3

Year 1 Total Startup Cost



Grand Total

Year 1 On-going Cost



On-going cost over 3 yrs period

DC Cost: Qty Price E-Commerce DC Cost: Qty Price DC Cost (@282,000 sqft) Qty Price

T-1 Bandwitdh 1 x 250$ 250$ T-1 Bandwitdh 1 x 250$ 250$ x -$

Radio Frequency Gun 30 x 3,000$ 90,000$ Radio Frequency Gun 30 x 3,000$ 90,000$ x -$

RF Antena 10 x 2,500$ 25,000$ RF Antena 10 x 2,500$ 25,000$ x -$

RF Cabling Installation 1 x 5,000$ 5,000$ RF Cabling Installation 1 x 5,000$ 5,000$ x -$

User License 30 x 150$ 4,500$ E-Commerce User License 30 x 150$ 4,500$ x -$

Training (@days) 15 x 450$ 6,750$ Training (@days) 5 x 450$ 2,250$ x -$

131,500$ -$

1,578,000$ 127,000$ -$

Store Cost: Qty Price Store Cost: Store Cost:(@107,000 sqft)

T-1 Bandwitdh 1 x 250$ 250$ N/A x -$

User License 30 x 150$ 4,500$ x -$

Training (@days) 10 x 450$ 4,500$ x -$

9,250$ -$ -$

7,400,000$ -$ -$

HQ Cost: Qty Price HQ Cost: Qty Price HQ Cost: Qty Price

T-1 Bandwitdh 1 x 250$ 250$ T-1 Bandwitdh 1 x 250$ 250$ x -$

User License 35 x 150$ 5,250$ E-commerce User License 15 x 150$ 2,250$

Data Storage Cost 4 x 1,000$ 4,000$ E-Commerce Data Storage Cost 4 x 1,000$ 4,000$

Training (@days) 25 x 450$ 11,250$ Training (@days) 5 x 450$ 2,250$

20,750$ 8,750$ -$

8,998,750$ 135,750$ -$

9,134,500$

Information Technology Start-up Cost over 3 Years period

Total Startup Cost (over 3 yrs period)

Total Store Cost (@800)

Head Quarter Total Cost

Each Store CostTotal Store Cost (@800)



Each DC Cost


Year 2 E-Commerce

Total E-Commerce DC Cost


Each Store Cost


Year 1 Start-Up Cost

Total Store Cost (@800)

Total DC Cost (@12)

Year 3 Start-up Cost

Each DC RFID CostTotal DC Cost (@13)

Each Store RFID Cost

DC Cost: Qty Price E-Commerce DC Cost: Qty Price DC Cost (@282,000 sqft) Qty Price

T-1 Bandwitdh 1 x 250$ 250$ T-1 Bandwitdh 1 x 250$ 250$ T-1 Bandwitdh 1 x 250$ 250$

Maintenance Fee 1 x 900$ 900$ Maintenance Fee 1 x 900$ 900$ Maintenance Fee 1 x 900$ 900$

T-1 Bandwitdh E-Commerce 1 x 250$ 250$ T-1 Bandwitdh E-Commerce 1 x 250$ 250$

Maintenance Fee E-Commerce 1 x 900$ 900$ Maintenance Fee E-Commerce 1 x 900$ 900$

1,150$ 2,300$ 2,300$ 13,800$ 13,800$

13,800$ 16,100$ 16,100$

Store Cost: Qty Price Store Cost: Store Cost:(@107,000 sqft)


Maintenance Fee 1 x 900$ 900$ Maintenance Fee 1 x 900$ 900$ Maintenance Fee 1 x 900$ 900$

1,150$ 1,150$ 920,000$ 920,000$ 920,000$

HQ Cost: Qty Price HQ Cost: Qty Price HQ Cost: Qty Price


Maintenance Fee 1 x 1,050$ 1,050$ Maintenance Fee 1 x 1,050$ 1,050$ Maintenance Fee 1 x 1,050$ 1,050$

T-1 Bandwitdh E-Commerce 1 x 250$ 250$ T-1 Bandwitdh E-Commerce 1 x 250$ 250$

Maintenance Fee E-Commerce 1 x 450$ 450$ Maintenance Fee E-Commerce 1 x 450$ 450$

Web Hosting Fee E-Commerce 1 x 10,000$ 10,000$ Web Hosting Fee E-Commerce 1 x 10,000$ 10,000$

4 10,700$ 10,700$

1,300$ 1,300$

1,300$ 12,000$ 12,000$

10,286,100$ 11,364,200$ 11,377,200$ Year 3 Total Startup Cost

Information Technology On-going Cost over 3 Years period

Total Monthly Store Cost (@800)

Head Quarter Monthly Total Cost on Year 2

Each Store CostTotal Monthly Store Cost (@800)

Head Quarter Total Monthly Cost on Year 3

Year 1 On-going Cost Year 2 On-going Cost

Year 2 E-Commerce Monthly On-going Cost

Each Store Cost

Head Monthly Quarter Total Cost

Total DC Cost (@12 DC)


Total E-Commerce DC Cost

l Monthly DC Cost Year 2 (@12 DC+ E-Commerce DTotal DC Cost (@12 DC)

Head Quarter E-Commerce Cost


Total Monthly DC Cost Year 2 (@12 DC+ E-Commerce DC)

Head Quarter E-Commerce Cost


Total Startup Cost (over 3 yrs period) 33,027,500$

Year 1 Monthly On-going Cost

Total Monthly Store Cost (@800)

Total Monthly DC Cost Year 1 (@12 DC)

Total E-Commerce DC CostEach DC Cost

90,400,000$ 17,700,000$

-$

2,700,000$ 2,700,000$ 4,200,000$

117,700,000$

Year 3 Total DC Closing Cost

Grand Total

Distribution Center Cost over 3 Years period

Year 1 DC Total Startup Cost





Startup Cost

Closing Cost

DC Cost: Cost E-Commerce DC Cost: Cost DC Cost

Real Estate Cost (LA/LB, CHI & DAL) 48,600,000$ Real Estate Cost MEM 9,800,000$ N/A

Acquisition Cost (LA/LB, CHI & DAL) 4,800,000$ Acquisition Cost MEM 900,000$

Retrofit Cost (LA/LB, CHI & DAL) 21,000,000$ Retrofit Cost MEM 7,000,000$

Relocation SEA (RE Cost) 12,800,000$

Acquisition Cost SEA 1,200,000$

Retrofit SEA 2,000,000$

74,400,000$ -$ 16,000,000$ 17,700,000$

90,400,000$ 17,700,000$ -$

Distribution Center Acquisition / Relocation Cost over 3 Years period


Year 3 Start-up Cost Year 1 Start-Up Cost


Year 2 E-Commerce

Total E-Commerce DC Cost (@1)

108,100,000$ Total DC Startup Cost (over 3 yrs period)


Total Import DC (@3)Total Relocation DC (@1)

DC Cost: DC Cost: DC Cost

Closure DC (@9) 4,500,000$ Closure DC (@9) 4,500,000$ Closure DC (@13) 6,500,000$

Las Vegas, NV – San Francisco, CA – Phoenix, AZ – Denver CO – Kansas, KS – La Grange, GA –Savannah, GA – Baton Rouge, LA – Spokane, WA

Wilmington, DE – Rockford, IL – Normal, IL – Baltimore, MD – Northbridge, MA – East Orange, NJ – Moon, PA – Macon, GA – Springfield, IL

Clearwater, FL – St. Paul, MN – Raleigh, NC –Albany, NY – Washington, DC - Miami, FL – Birmingham, AL – Plymouth, PA – Tulsa, OK – Salt Lake City, UT – Houston, TX – Albuquerque, NM – Detroit, MI

Sale of Equipment (1,800,000)$ Sale of Equipment (1,800,000)$ Sale of Equipment (2,600,000)$

2,700,000$ 2,700,000$ 3,900,000$

2,700,000$ 2,700,000$ 3,900,000$

9,300,000$

Total DC Closing Cost (@13)


Year 2 DC Closing Cost

Total DC Closing Cost (@9)

DC Closing Cost over 3 Years period


Year 3 DC Closing Cost

Total DC Closing (over 3 yrs period)


Year 1 Closing Cost

Total Closing DC (@9)

Current Model Origin DC Destination W/hse Miles

Total Crossdock 40' Qty Ocean Freight

Cossdock Charge (U$ 300 / 40' trailer)

Hartford, CT 247 1,073,018$ Atlanta, GA 271 1,344,463$ Edison, NJ 259 1,020,353$ Little Rock, AR 193 1,016,378$ Charleston, SC 258 1,222,545$ Rancho Dominguez Detroit,MI 2300 1316 4,239,185$ 86,400$

Springfield,IL 2000 81,000$ Akron,OH 2400 67,500$ Des Moines, IA 1700 83,400$ Indianapolis,IN 2100 76,500$

Avg Miles 2100 2544Miles Traveled 2763600

Sub Total 9,915,942$ 394,800$

Grand Total 13,146,261$

TOFC -> 500 miles or more ($ 1.04 / mile)

OTR -> 500 miles or less ($ 1.36 / mile)

LA Seattle,WA 1140 104 857,115$ 31,200$ 123,302$

Dallas Atlanta,GA 780 108 2,384,025$ 32,400$ 87,610$ Little Rock,AR 320 108 32,400$ 47,002$ Charleston,SC 1100 108 32,400$ 123,552$

Chicago Hartford, CT 900 148 5,643,000$ 44,400$ 138,528$ Edison, NJ 800 148 44,400$ 123,136$ Detroit, MI 290 148 44,400$ 58,371$ Akron, OH 370 148 44,400$ 74,474$ Des Moines, IA 340 148 44,400$ 68,435$ Indianapolis, IN 190 148 44,400$ 38,243$

Avg Miles 623 1,316 596,128$ 286,525$ Miles Traveled 819868

Sub total 8,884,140$ 394,800$

1943732 Grand Total 10,161,593$

485933 Savings 1,031,802$ -$ Based on 4 miles to gallon

H.E. Savings 2,984,668$

SHA / PUS / HKG

882,653$

1,952,866$

Transportation Home Electronics Costs

Less Miles Traveled

Gallons of Fuel Saved

Domestic Intermodal / OTR

609,984$ 513,000$ 569,250$ 596,310$ 546,975$

2,835,519$

Total Charge from Orient to Destinated Whse

SHA / PUS / HKG / MNL / TW

Domestic Intermodal

Import DC'sNew Model OriginCossdock Charge (U$

300 / 53' trailer)Ocean FreightTotal Crossdock -

53' QtyMilesDestination W/hse

Origin DC Ctns Kg's CBMMNL / SHA / HKG / PUS 621 11,178 47.81

MNL / SHA / HKG / PUS (Peak Season - July) 1,979 35,622 152.36MNL / SHA / HKG / PUS (Peak Season - August) 1,755 31,590 135.21MNL / SHA / HKG / PUS (Peak Season - September) 1,314 23,652 101.16

ACME's Current

Ocean Rates / month x9 months + July + Sept.

Manila 1,878.00$ Pusan 1,763.00$ Hong Kong 1,855.00$ Shanghai 2,401.00$

Total: 7,897.00$ 71,073.00$ 22,423.00$ 14,727.00$ LTL 134,604.00$

Apparel Transp 262,257.00$ New Model

Consolidation (Apparel):

Origin DC Ctns Kg's CBM $26.5 Consol/cbmHKG / PRD (regular month) 621 11,178 47.81 1,266.97$

HKG / PRD (Peak Season - July) 1,979 35,622 152.36 4,037.54$ HKG / PRD (Peak Season - August) 1,755 31,590 135.21 3,583.07$ HKG / PRD (Peak Season - September) 1,314 23,652 101.16 2,680.74$

Ocean Rates / month x9 months + July + Sept.

Total: 5,222.97$ 47,006.69$ 11,627.54$ 7,740.74$ 2x20' ($ 1978) 3x40' ($ 2530) 2x40' ($ 2530) LTL 134,604.00$

Apparel Transp 212,152.03$ Cost is USD 26,50 per cbm. This includes 14 days free storage, receipt of cargo in CFS, loading of container, roundtrip of cont CY / CFS

50,104.97$

Transportation Apparel Costs

19,430.00$ 127,653.00$

+ August TOTAL

11,173.07$ 77,548.03$ 3x40' ($ 2530)

Peak Season

App. Savings

TOTAL

LA

LA

Peak Season

+ August

GREEN IMPLEMENTATION COST

Green Implementation Cost

Skylight Installation $ 390,000

Bathroom Lighting Sensor $ 984,000

Warehouse Lighting sensor $ 130,000

LED Lighting $ 5,985,450

Water less urinals $ 1,818,531

Grand Total $ 9,307,981

Startup cost over 3 yrs period Cost

Year 1 Total Startup Cost $ 7,489,450

Year 2 Total Startup Cost $ 1,818,531

Year 3 Total Startup Cost $ -

Grand Total $ 9,307,981

DC Cost: Qty Price DC Cost: Qty Price DC Cost (@282,000 sqft) Qty PriceSkylighting Installation 20 x 1,500$ 30,000$ 390,000$ Water less urinals 18 x 429$ 7,722$ 100,386$ N/A -$ Bathroom Lighting sensor 6 x 300$ 1,800$ 23,400$ Warehouse Lighting sensor 20 x 500$ 10,000$ 130,000$ LED Lighting 5000 x 9$ 45,000$ 585,000$

86,800$ 7,722$ -$ 1,128,400$ 100,386$ -$

Store Cost: Qty Price Store Cost: Store Cost:(@107,000 sqft)LED Lighting 750 x 9$ 6,750$ 5,400,000$ Waterless Urinal 5 x 429$ 2,145$ 1,716,000$ N/A -$ Bathroom Lighting sensor 4 x 300$ 1,200$ 960,000$

7,950$ 2,145$ -$ 6,360,000$ 1,716,000$ -$

HQ Cost: Qty Price HQ Cost: Qty Price HQ Cost: Qty PriceLED Lighting 50 x 9$ 450$ 450$ Waterless Urinal 5 x 429$ 2,145$ 2,145$ N/A -$ Bathroom Lighting sensor 2 x 300$ 600$ 600$

1,050$ 2,145$ -$

7,489,450$ 1,818,531$ -$

Total Store Cost (@800) Total Store Cost (@800) Total Store Cost (@800)

Total Cost (over 3 yrs) 9,307,981$

Head Quarter Total Cost Head Quarter Total Cost Head Quarter Total Cost

Phase 1 Total Startup Cost Phase 2 Total Startup Cost Phase 3 Total Startup Cost

Total DC Cost (@13) Total DC Cost (@13) Total DC Cost (@13)

Each Store Cost Each Store Cost Each Store RFID Cost

Green Project Cost over 3 Year periodYear 1 Year 2 Year 3

Each DC Cost Total DC Cost Each DC RFID Cost

ACME CURRENT H.E. D.C. BUDGETNEW OPERATING COSTS - SINGLE DC

January February March April May June July August September October November December YTD TTLAlarm & Security 14,707 12,075 20,164 17,163 19,044 18,260 13,724 14,987 17,960 17,586 15,675 19,241 200,586Depreciation 15,345 15,209 14,969 14,322 14,322 15,198 14,625 15,221 14,406 13,628 13,019 12,858 173,121Equipment Maintenance 3,109 2,877 2,384 3,381 3,476 1,866 4,274 2,922 6,509 2,370 7,139 6,866 47,174Equipment Rental 7,343 6,531 6,867 7,459 8,459 7,377 3,809 (1,107) 4,706 5,600 6,801 8,521 72,364Maintenance & Repairs - bldg. 2,572 3,763 13,491 7,784 5,259 12,087 11,329 8,929 8,360 9,492 11,326 9,168 103,559Pest Control 453 785 619 785 619 195 877 625 625 166 625 1,084 7,458Propane 2,673 3,144 2,956 4,140 1,084 1,466 2,284 1,858 1,898 2,582 3,002 4,448 31,534Mortgage @ $0.70 per square foot 197,400 197,400 197,400 197,400 197,400 197,400 197,400 197,400 197,400 197,400 197,400 197,400 2,368,800Rubbish Removal 1,143 5,105 3,878 4,366 6,555 3,003 3,694 3,738 4,509 2,854 2,524 5,815 47,185Salaries - Managers/Supervisors 48,135 48,135 48,135 48,135 48,135 48,135 48,135 48,135 48,135 48,135 48,135 48,135 577,620Salaries & Wages - Operations 137,320 116,700 124,531 126,460 116,885 123,682 123,211 108,382 111,531 109,327 116,931 142,080 1,457,040Temporary Labor: Warehouse 107,998 108,031 98,317 158,591 72,014 65,196 103,615 116,746 124,413 132,189 101,029 142,630 1,330,768Freight & Deliveries 14,759 13,129 13,075 13,717 16,001 16,356 18,632 17,181 15,040 26,900 15,453 22,430 202,672Trucking Expense 44,789 30,732 46,312 45,910 25,353 29,581 30,117 25,352 29,765 36,617 30,523 42,558 417,611Utilities 12,187 11,920 11,896 13,067 14,050 15,564 19,772 19,596 20,541 17,359 12,070 12,163 180,183Warehouse Supplies 29,754 9,594 24,910 33,393 8,210 18,404 14,331 23,442 25,131 38,215 16,696 40,245 282,324

OPERATING COSTS 639,686 585,130 629,902 696,071 556,866 573,771 609,829 603,407 630,928 660,420 598,348 715,643 7,500,000

PAY DAYS 21 20 22 22 21 22 23 21 22 22 21 21 258OP COST PER DAY 30,461.22$ 29,256.51$ 28,631.89$ 31,639.58$ 26,517.45$ 26,080.51$ 26,514.31$ 28,733.67$ 28,678.53$ 30,019.07$ 28,492.76$ 34,078.22$ 29,069.77$

20% Savings comes from the following:

AVERAGE COST PER DAY

Re-Financed Loans at lower interest rates Current Costs @ $0.70/sq.ft. @ $197,400 per month

Salaries Total Current Salaries: 577,620$ TTL SalariesCurrent Managers 4 Avg. Annual Salary: 86,643$ 346,572$ MgrsCurrent Supervisors 5 Avg. Annual Salary: 46,209$ 231,045$ Supv

Salaries & Wages - Operations/Cust.Serv. New DC Salaries: 1,457,040$ TTL WagesCurrent Supervisors 10 FTE 39,923$ 437,112$ 30%Current Wages 29 FTE 32,122$ 1,019,928$ 70%

Temps Current = 9320 mhrs per month @ $11.70/hr or 54 FTE

Utilities Current = approx. $15,000/mth or $180,183 annually

29,069.77$

ACME NEW 282,000 sq.ft. DC BUDGETNEW OPERATING COSTS - SINGLE DC

January February March April May June July August September October November December YTD TTLAlarm & Security 14,707 12,075 20,164 17,163 19,044 18,260 13,724 14,987 17,960 17,586 15,675 19,241 200,586Depreciation 15,345 15,209 14,969 14,322 14,322 15,198 14,625 15,221 14,406 13,628 13,019 12,858 173,121Equipment Maintenance 3,109 2,877 2,384 3,381 3,476 1,866 4,274 2,922 6,509 2,370 7,139 6,866 47,174Equipment Rental 7,343 6,531 6,867 7,459 8,459 7,377 3,809 (1,107) 4,706 5,600 6,801 8,521 72,364Maintenance & Repairs - bldg. 2,572 3,763 13,491 7,784 5,259 12,087 11,329 8,929 8,360 9,492 11,326 9,168 103,559Pest Control 453 785 619 785 619 195 877 625 625 166 625 1,084 7,458Battery & Charger Maintenance 2,673 3,144 2,956 4,140 1,084 1,466 2,284 1,858 1,898 2,582 3,002 4,448 31,534Mortgage @ $0.55 per square foot 155,100 155,100 155,100 155,100 155,100 155,100 155,100 155,100 155,100 155,100 155,100 155,100 1,861,200Rubbish Removal 1,143 5,105 3,878 4,366 6,555 3,003 3,694 3,738 4,509 2,854 2,524 5,815 47,185Salaries - Managers/Supervisors 37,064 37,064 37,064 37,064 37,064 37,064 37,064 37,064 37,064 37,064 37,064 37,064 444,768Salaries & Wages - Operations 93,378 79,356 84,681 85,993 79,482 84,104 83,783 73,700 75,841 74,343 79,513 96,615 990,787Temporary Labor: Warehouse 80,998 81,023 73,737 83,943 54,010 48,897 77,711 87,560 93,309 93,542 75,771 86,972 937,473Freight & Deliveries 14,759 13,129 13,075 13,717 16,001 16,356 18,632 17,181 15,040 26,900 15,453 22,430 202,672Trucking Expense 44,789 30,732 46,312 45,910 25,353 29,581 30,117 25,352 29,765 36,617 30,523 42,558 417,611Utilities 12,187 11,920 11,896 13,067 14,050 15,564 19,772 19,596 20,541 17,359 12,070 12,163 180,183Warehouse Supplies 29,754 9,594 24,910 33,393 8,210 18,404 14,331 23,442 25,131 38,215 16,696 40,245 282,324

OPERATING COSTS 515,372 467,407 512,101 527,584 448,088 464,523 491,126 486,168 510,763 533,417 482,301 561,148 6,000,000

PAY DAYS 21 20 22 22 21 22 23 21 22 22 21 21 258OP COST PER DAY 24,541.54$ 23,370.36$ 23,277.33$ 23,981.10$ 21,337.52$ 21,114.70$ 21,353.31$ 23,150.86$ 23,216.51$ 24,246.24$ 22,966.71$ 26,721.33$ 23,255.81$

20% Savings comes from the following:

AVERAGE COST PER DAY

DC's Re-financed at lower interest rates New Single DC Costs @ $0.55/sq.ft. @ $155,100 per monthSavings: $507,600 per year or $43,200 / mth

Salaried Directors/Managers New DC Salaries: 444,765$ TTL SalariesNew 3 Managers Avg $86,643 annual salary 259,929$ MgrsNew 4 Supervisors Avg $46,209 annual salary 184,836$ SupvSavings: $132,855 annually

Salaries & Wages - Operations/Cust.Serv. New DC Salaries: 990,787$ TTL WagesCurrent Supervisors 7 FTE 39,923$ 284,103$ 31%Current Wages 22 FTE 32,122$ 706,684$ 69%Savings: $466,253 annually

Temporary Associates New DC Cost: 111840 mhrs annually @ $11.70/hr or 54 FTESavings: 106661 mhrs or $60,699 or 2.5 FTE

Utilities Current = approx. $15,000/mth or $180,183

23,255.81$

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