CFO’s Perspective on Fast Data

Ralph Balestriere, EVP & CFO Red Wing Shoe Company

Our Brands

Company Profile

• Founded 1905 – Red Wing, MN

• Revenue – greater than $600 M

• 2,300 employees world-wide

• 3 USA Factories

• Manufacturing Partners

• China / Vietnam

• Dominican Republic

• Strong Distribution Capabilities

• 50 States / 110 Countries

Global Work

Industrial

Work Garments

Heritage

Outdoor – Vasque / Irish Setter

USA Manufacturing

SB Foot Tanning

Distribution Centers

St. James Hotel

Insert “The Factory” video

1905 1920 1934 1940 1953 2009

Oil King Steel Toe Mobile Founded Pecos Garments Multichannel

2013+

An Innovative History

Perfect Storm

2009 - 2010:

• Economic Global Recovery = Higher Demand

Issues:

• High backorders / Poor service levels to customers

• High inventory / wrong inventory

• Poor supplier relationships

• Lack of E-commerce capabilities

• Insufficient financial information

SWOT Team Formed:

• Over 200 pain points identified

Response: Strategic Solutions

• Multichannel

E-Commerce

CRM

Point of Sale

• Demand Planning

• Warehouse Management System

• Financial Capabilities Roadmap

Key

Drivers

Accommodate Retail Store Growth

Fill Competitive Gap for Industrial Account Offering

Fill Competitive Gap for Consumer Buying Options

Implement CRM For Multichannel Customer Management

© 2013 Copyrighted Material

Multi-channel Drivers

Multi-channel Benefits

© 2013 Copyrighted Material

Multi-channel Solution

Multi-channel Business Impacts

Top-line Drivers:

Digital channel expansion – new B2B, B2B2C, and B2B online storefronts

Brick & mortar expansion – new Red Wing stores

Cross-channel access to inventory will improve working capital

Two $20 million tenders honored in the Middle East through a portal

Bottom-line Drivers:

Contact Center Insights – Improve product & service offerings by analyzing

customer cases in Saleforce.com

Field Personnel Access - Providing cases information to field personnel on

mobile devices

Order to Cash sped up by two weeks through Middle East portal

+ = CRM

CRM: Centralized Hub for Customer Information

• 360° view of customers

• Efficiencies in processes, reporting and communication

• Integration to ERP, POS and e-Commerce platforms

• Improve the RWS Customer Experience

• Create a feedback loop for product information

• One master file for account information

• Lead Tracking

• Corporate Account Reports

• Business Development Top Line

• Vendor Compliance

• Distribution Realignment

• Shipping Issues

• Cartons vs. Shrink wrap

Bottom Line

CRM: Business Value Delivered

• 5,000 Contacts added (Safety Directors, Buyers, etc.)

• 2,600 incremental Leads added

• 28,000 Cases added • 1,766 Shipping Cases – lead to root cause & solution

• 683 - Shipping Shortage /overage

• 110 - Wrong label

• 382,000 Activities added

CRM: Metrics

Demand Planning Background

• Complex product lines servicing 6 brands

• Explosion of SKU’s

• Fashion factor

• Multiple distribution sites

Styles SKU’s

Footwear 1,300 27,800

PPE Garments 2,100 239,000

Accessories 900 2,000

4,300 269,400

Demand Planning Issues

• Poor inventory management

• Highly manual – heavy volume in 500 page spreadsheet

• Inaccurate forecasting

• Turns close to 2X (Industry Average = 4X)

• Excess discontinued / close-outs

• Limited backorder visibility

• Significant cash drain

• Implemented in 2012

• 6 months – implementation / training

• $700k investment Investment

• Better revenue forecasting capabilities

• Discrete planning for big box customers

• Speed to market Productivity

Demand Planning Response

• Inventory turns doubled

• 17% or $35 million reduction in inventory

• Backorders reduced 50%

• Debt reduction

Financial Benefit

• Acquisition in Scotland

• Investment in Product Development Strategic Benefit

Demand Planning (Value Delivered)

Financial Capabilities - Vision

Graphic Source: Accenture - Transforming the finance function for high performance

Financial Capabilities - Roadmap

2014

Foundational Improvements

Automation & Agility

Data Governance

Long-Range

Capabilities Plans

Platform Analyses

Talent Development

2015

Scale & Advance

Advanced Analytics

Common Calendar

Continue Automation

Platform Upgrades

Talent Development

2016-2017

Foresight

Advanced Business Advisory

Advanced Scenario Planning

Advanced Portfolio Mgmt.

Talent Development

- Roadmap -

Financial Capabilities - Solution

• Upgrade ERP System

• Upgrade Financial Consolidation System or

Research new solution

2014 - 2016

Results

• Average sales growth 2010 – 2013 = 11%

• Record profits – 2012

• Stock price increase CAGR 10%

• Debt reduction

• Acquisitions

Summary

• Faster receipt of data with integrity

• Faster, more educated financial decisions

• Happier customers and employees

Questions?