Transporting Gourmet Food & Gift Items April 9, 2015 Jeff Brady Director, Transportation & Logistics Company Overview 80 years ago, Harry and David Holmes turned their extraordinary pears into the perfect gourmet gift. You can still send Harry & David’s Royal Riviera® Pears as well as many other high quality fresh fruits, handpicked to exacting standards in 19 Southern Oregon orchards and in many other orchards around the world. Harry & David is a well recognized direct marketing, retail, B2B, wholesale and vertically integrated grower and distributor of gourmet gifts consisting of the highest quality fruits, baked goods, hard goods and other assorted entertaining items. These great gifts are then shipped to arrive on time, in perfect condition; guaranteed. In September 2014, Harry & David, a near half-billion dollar omni-channel retailers, was acquired as a wholly owned subsidiary of 1-800 Flowers.com and the future is bright as we look at enterprise integration and cross-brand marketing opportunities. Transportation Network • Domestic Small Parcel • Best in Breed, True Zone Skipping Capability • Domestic TL, LTL, Intermodal • Dry and Temp Controlled, across various Temp requirements • Outbound: Retail, Wholesale, Transfers and DM Induction Hubs • Pool Distribution in select areas for Retail • Consolidation points for Inbound LTL • Domestic Ocean (HI & AK at Peak) • International FCL and LCL Ocean for Imports (components primarily) • International Outbound Small Parcel • De-centralized Execution for Small Parcel, with Centralized strategy • Centralized Inbound w/ direct and cross-dock, across multi-modes • Inventory placement strategy designed to optimize Delivery network • Logistics Planning team w/ tools to manage to the Commitment • Strategic, Core and Transactional Partner base Complexity, Challenges & Continuity • • • • • • • • • • • • • • • • Hyper Seasonality High degree of Perishability Complexity of CYO / POD Drop Shippers Wine Compliance Geographic Locations : Oregon / Ohio Gifting vs. Self-Consumption Vast demographic with varying expectations The Amazon Effect Infrastructure – Build the Church for Easter Sunday? Marketplace dynamics for Freight Economic headwinds Integration Seasonal Operations – complexity and timing Off-season Capacity across modes Page 4 Strictly confidential. Do not copy or distribute. Combatting Challenges • Robust systems to manage: • Customer commitments • SKU proliferation • Gift Customization • FIFO • Proper zoning to allow downgrades • Gel pack specific SKUs w/ seasonal timing • Expedited shipping when required • Dry Ice • Days @ Ambient rules • Ship To State rules • Monitor Hub performance by mode; daily in Peak, to drive optimized and proper hub induction and service selection • Strategic Linehaul partners for hyper seasonal support • SSF facilities to support Volumes • Forward deployment of inventories • Marketing growth of off-peak • Integration efforts & synergies • Risk mitigation strategies…. Forecasting, Carriers, etc. Late Order Curve Challenges our Partners (and Us) Hyper Seasonal Velocity Pre Peak 2 weeks ramps up to 155K ave. per week; a 48% increase First week of Peak season, volume explodes by 300% to over 515K shipments Peak Week is over 2.1 Million Shipments Next 2 weeks ave. 105K per week; increase of 128% 6 Weeks prior to Peak, ave. weekly shipments of 46K • 4.3 million OB shipments in 3 weeks of December • 57% of annual volume in the course of less than 6% of the Year • 3 million OB shipments in the remaining 49 weeks in 2014 Network & Outbound Hub Induction Enterprise Challenges and Future Opportunities • Capacity and Industry trends continue to impact H&D • Cost, Service, Capacity and Communication • Geographic and Temp Controlled constraints add to Industry pressures • Perishability, short-production runs, CYO offerings limits optimal placement • Hyper Seasonality adds massive complexity • The need to Strategically design the Network for the Future • Intermodal, Temp Controlled, to become a Capacity play (not price) • Inbound and Outbound • Hybrid of Best in Breed carriers, with committed capacity • True collaboration and Partnerships • Dedicated & asset-light hybrid for Inbound & Outbound TL capacity • Inbound LTL centralization / consolidation, across all Temps • Food Safety and Risk mitigation: always a consideration • Quality of gifts (Cold / Hot weather) • Collaboration with like-minded visionary partners AND shippers • Intermodal needs to become a core component in our supply chain Partnership Principles • • • • • • • • • • • • Challenges are healthy Change is good Collaboration is key Speed of execution is critical Strong silos = corporate weakness from the customer’s perspective Clear expectations drive results It’s Okay to say no = don’t overcommit Open and honest dialogue strengthens partnerships What used to be, may not always be Listen to your customers’ wants and needs Performance and relationships count Accountability and ethics; make them your driving principles Objective: Create a holistic and mutually beneficial partnership approach, committed to deliver and never stop striving to improve. 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