Using Predictive analytics in supply chains. Reducing inventory costs and turnover ratios can help grocers and food retailers.

1. Optimizing Retail Inventory
using Predictive Analytics
How Data Analytics is Impacting Supply Chain Management
Fred Jezouit
Vice President of Finance & Treasurer
Southern States Cooperative, Inc.
@SouthernStates
Business Leadership track
March 7, 2013
1:15 – 2:00 pm

2. #
Who is Southern States?
• Agricultural cooperative founded in 1923
• East coast from Florida to Maine
• 2,400 employees, $2.3 billion in annual sales
Introduction to Southern States
Complex and Diverse Business Model
• 140 owned Retail locations
— Over 1000 retail distribution points including dealer network (Agway)
• Four Wholesale Divisions
— Feed – 8 feed mills
— Crops – 17 facilities managing fertilizer, seed and crop protectants
— Petroleum – 10th largest propane retailer in US
— Farm & Home – 3 distribution centers
We Help People Grow Things

3. #
Data Mining – Significant Potential
• Most of 300,000 customers purchase on an account
• Wide variety of third party demographic data and customer insights
• Numerous infrastructure and process improvement opportunities
Opportunities…and Challenges
Obstacles We Face
• Cultural awakening on how we measure and evaluate our business
• Limited functionality within certain information systems in place today
• Prioritizing projects and available resources
• No two retail locations are the same – different sizes, markets and products –
decentralized decision-making

4. #
Impact of Alteryx Felt Across the Company
• Customer segmentation
• Customer activity – new, lost, regained,
increased/decreased wallet share
• Wholesale and retail distribution study
• Marketing initiatives
— Predictive analytics - optimize mailers and
marketing programs (John Deere Financial partnership)
— Customer insights – defining customer
purchasing habits
• Financial variance analysis – sales, margins,
unit volumes down to customer level – complete
overhaul of operational metrics
18 Short Months – Alteryx is a Game-Changer

5. #
Multi-Faceted Project
• Data-mining provided valuable insights into performance and business rules resulting in
significant cultural and operational changes
• Initial focus is on our farm & home, animal health and packaged crop protectant products
• Emphasis on two specific areas of improvement
• Slow Moving Inventory (SMI)
— Global initiative to reduce inventory and positively impact working capital at wholesale and retail
— Identify root causes of SMI and implement business rules
— Strategy to monetize excess inventory
— Set stage for transition to centralized inventory management
— Implement ongoing reporting structure to ensure achievement of goals and compliance with business
rules
Supply Chain Improvement

6. #
Multi-Faceted Project Continued
• RIGHT inventory at the RIGHT stores at the RIGHT time
— Given limited showroom capacity, clean-up SMI to allow space for appropriate seasonal inventory
— Insight into seasonality
— Establish product start / stop dates for seasonal products
— Drive exit strategies
— Evaluate minimum / maximum stocking levels
— Forecasting to determine stocking levels and drive inventory purchasing decisions
— Lost sales due to outages analysis
Supply Chain Improvement

7. #
Reporting Capabilities Shed New Light on Inventory Management
• Slow moving defined as “dead”, no sales in last 12 months
or inventory in excess of 12 months sales
Magnitude of the Challenge – Attention Grabber
• Symptomatic of open purchasing rules for retail locations – business rules now in place
— Accumulate order requirements across all retail locations
— Expectations established for SMI management and reporting developed to
ensure compliance
RETAIL Total SKUs Slow Moving
Crop Protectant Products 13,361 4,476 34%
Farm & Home + Animal Health 165,690 54,400 33%
WHOLESALE Total SKUs Slow Moving
Crop Protectant Products 2,377 716 30%
Farm & Home + Animal Health 24,568 6,841 28%

8. #
Multiple Initiatives to Reduce Inventory – Global and Local
• Changed behavior from the store manager
all the way through buying group
• Dead and excess reports by store,
by SKU delivered to operations personnel
• Ability to identify nearest retail location to
move excess inventory
• Impacted buying decisions immediately –
working with suppliers
• Clearance sales at retail locations
• Centralized liquidation effort in process,
completed in spring
SMI Reporting Drives Action

9. #
Still Early In Process – Benefits Already Realized
Impact on Inventory
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
$140,000,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2011
2012
InventoryonHand
Total Inventory
Farm & Home,
Animal Health &
Crop Protectants
Retail division
maintaining sales
with 31% less
inventory

10. #
Learning Process for Buyers and Retail Operations
Right Inventory at the Right Time
• Needed better understanding of seasonality of products – many products kept
on shelves year round
• Developed quick view of sales at the SKU level – used to drive entry/exit timing

11. #
Needed to Provide Greater Visibility Into Inventory Requirements
Ensure Products In Stock for Spring Season
• Expected sales compared to inventory on hand
• Identify replacement SKUs
• Incorporate marketing efforts – products included in circular advertisement
SKU and Item Description
Day
1-30
Avg
Units
Day
31-60
Avg
Units
60
Days
Units
60 Day
Sales $
Total Inv On-Hand On-Order
Days to
Sell
Current
Inv
Past Fut
Circ Circ
Inactive repl_SKU DO WHSE
02142803 – SS PREMIUM TURF FESCUE 20 LB (BG) 40 193 223 $ 8,904 1 1 0 60 X X 02142804 X X
02142783 – SOUTHERN STATES TALL FESCUE 20 (BG) 79 495 574 $12,030 777 777 0 60 X 02142804
88861300 – PGMG F/SPECIAL TURFGRASS (EA) 37 154 191 $10,697 1 1 0 0
88861200 – PGMG F/KENTUCKY 31 (EA) 23 159 182 $ 2,479 1 1 0 0
02132070 – FESCUE KY 31 50 LB (BG) 25 27 52 $1,349 7 7 0 90 X 0213207 X X
02132074 – FESCUE KY 31 20 LB (BG) 9 38 47 $1,057 148 148 0 90 X X
02145220 – GRASS SUNNY/SHADY MIX 3 LB (EA) 6 31 37 $ 335 0 0 0 60 X X 02132074
02145221 – GRASS SUNNY/SHADY MIX 10 LB (EA0 5 8 13 $ 300 0 0 0 60

12. #
Provide Insight into Effectiveness of Inventory Initiatives
Measure Impact of Out of Stocks
• Are stores being too aggressive on inventory control?
• Identify trends at store and within buying group
• Impact of centralized purchasing pilot
Product Type Group SKU's in Group
Stores with
Outages Resulting
in
Lost Sales
Outage Sku Group
Days with
Lost Sales
Lost
Sales
Lost
Sales Units
Farm & Home 05900001 05900001 - STATESMN WOOD PELLET FUEL 40LB (BG),) 23 377 $28,991 6,610
Farm & Home 58892066 58892066 - SS COMPLETE SPORT 24-20 40LB (BG) 52 719 $24,534 1,577
Farm & Home 58893066 58893066 - SS DOG FOOD 21-9 40LB (BG) 39 982 $17,414 1,458
Farm & Home 58890066 58890066 - SS COMPLETE ADULT 21-10 40# (BG) 44 723 $16,630 1,174
Packaged CPP 11100511 11100511 - QUIK QUAT 265 GA RUP (EA) 1 25 $15,484 3
Packaged CPP 11100233 11100233 - ETHEPHON 2.5 GA (EA), 11102995 - PREP 2.5 GAL (EA) 15 39 $12,244 241
Farm & Home 10237218 10237218 - SSC PELLETED LIMESTONE 40LB (BG) 20 182 $11,242 3,578

13. #
Changes to Our Organization Have Been Dramatic
Summary – What Have We Accomplished?
• Restructuring of business rules around inventory management at retail and wholesale
• Actionable data delivered to multiple operating units to improve inventory management
• Greater insight into seasonality, impacting timing of delivery of seasonal products
• More accurate sales forecasting, tied to inventory levels, to ensure in-stock positions –
driver of sales
• Reduction in inventory levels – impact on working capital and debt levels
• Facilitated transition to centralized inventory management – 20 stores now in
centralized pilot program
• Most important – cultural shift in use of information to improve our business –
less decisions based upon gut feelings, more based upon analysis of the business

14. Thank You!
#
Fred Jezouit
Vice President of Finance & Treasurer
Southern States Cooperative, Inc.
@SouthernStates