The Impact Of It On Product Innovation

September 27, 2005 Boston College 1

The Impact of IT on Product InnovationThe Impact of IT on Product Innovation

Peter Burrows

Sr. VP/ MIS and CIO

September 27, 2005

September 27, 2005 Boston College2

Reebok BackgroundReebok Background

Multiple Brands

Variety of Product Types

Multiple Retail Channels

Footwear, apparel,fitness equipment,licensed watches,bottled water, etc

Products may bemerchandised ascollections orassortments requiringcoordinated delivery

Products may requirespecial fixtures orcollateral promotionmaterial like posters,print ads, and storesignage

Department stores

Sporting goods

Specialty retailers

Company-owned stores

Licensees

Wholly-owned, international Subsidiaries and distributors

Sales in 140 countries

Internet


Reebok FinancialsReebok Financials

2004 Annual Sales = $4 billion

An improving financial performance for the last five years:

• Five consecutive years of earnings improvement.

• Compounded annual growth rate of 23.4%.

• Returned $226 million to shareholders in the form of dividends and share repurchases

• We have generated $900 million of operating cash flow.

• Our share price increased more than 400% and during the past year it outperformed the S&P 500 for the fifth consecutive year.

• Cash position at December 31, 2004, $565 million

• On August 3, 2005 Reebok agreed to be purchased by Adidas for $59 a share – a 34% premium.


IT GovernanceIT Governance

Project Steering Committee

IT Investment CommitteeCorporate Executive Management; establishes IT capital spending annually; meets once per year

IT Steering CommitteeBrand Presidents and CFO’s/Shared Services, selects and monitors projects; meets monthly

Global Process ExecutivesNominated owners of every key company process, referees changes to global process designs

IT Project Manager

Business ProjectExecutive

F/T Business Team Members

F/T IT Team Members

Data Conversion

Manager

Integration Test

Manager Change Management

& Training

Project Knowledge Coordinator

Mandatory for any project


Implementation Methodology Implementation Methodology of all Major Systems Investmentsof all Major Systems Investments

• Time boxed• Involve appropriate

brands/countries• Highest voice to

those that make money

• Don’t try to reach 100% consensus if process not needed for first usage

• Pilot or parallel if possible

• Select brand or location with best skills/greatest incentive to change

• Any gaps to the G1T model surfaced to global process executives

• Only two outcomes:– Improve model– Change practice

• Gaps to G1T should be smaller

• Project duration should be faster

Global One-Time

Design

First UsageRisk

Aversion

First Replication

Second Replication

G1T

G1T


Example 1: Example 1: Reebok Product DevelopmentReebok Product Development

• Reebok introduces thousands of new products as seasons or collections every year

• To ensure a steady supply of new products we are working on 5-7 active seasons of products all at the same time

• The average footwear product takes 18 months to engineer, commercialize and appear on retailer shelves, but quick to market products can move through the same process in less than 90 days.

• Continuous improvement in materials present an ever increasing list of construction choices that must be tested and approved before being included in any product

• Despite the availability of digital product representations of products, our industry requires physical product samples to test, approve and sell effectively

• We out source almost all manufacturing so we must work collaboratively with a network of supply chain partners


Product Development Re-Engineering ChallengesProduct Development Re-Engineering Challenges

• High volume process

• No exact-fit, off-the-shelf software that can scale to global requirements

• Geographically dispersed user base

• Large percentage of users not Reebok employees

• Desire to add more structure to current processes while reducing cycle times

• Footwear product development different than apparel and equipment

• No common workstation platforms due to nature of the work (PC’s, Mac’s, Unix workstations)

• Employees want to work online/offline at the office and on the road


One Example: Pump 2.0One Example: Pump 2.0

• Pump 2.0 introduced in April of 2005

• The original pump technology Reebok introduced in the 1980's eventually sold more than 20 million pairs

• Pump 2.0 needs no laces and inflates by itself


Pump 2.0 Facts and FiguresPump 2.0 Facts and Figures

• The inflatable bladder and smart valve took over four years to develop and perfect in our Advanced Research department

• 50 additional parts beside the bladder make up this shoe

• The parts are made from 25 different materials that had to be tested and approved by labs located in China, Korea and Taiwan.

• 15 different manufacturers supplied these materials from five different countries

• Special tooling had to be created for manufacturing to support RF welding dies, cutting dies, midsole molds, outsole molds, flow molds, hot press molds and injection molds

• Physical samples of this shoe had to manufactured for initial product review, prototype, confirmation meetings, retail and consumer feedback meetings, photo-shoots, bulk sales samples for distribution to more than 30 countries, 3 rounds of fit and wear testing and final manufacturing confirmation

• Hundreds of product wear testers had to be identified, provided product and then surveyed for results


THE PASTTHE PAST

• Islands of Information• Redundant views of information• Technology makes factory participation

difficult • Manual hand offs between groups• Data integrity issues• No visibility or control over process• Increasing pace of market changes

leading to employee stress

Factories

Materials group

Costing

Sales

Development

Marketing

Current EnvironmentCurrent Environment

• Increased investments in automating the product development process

• Single database for all product information

• Only one version of the truth• Internet based to allow factory

participation• Workflow agents for electronic handoffs

Product Development TechnologyProduct Development Technology

Sales

Materials Group Factories

Costing

DevelopmentMarketing

Product Information


Key Attributes of Current EnvironmentKey Attributes of Current Environment

• Single product vault for all product information regardless of where the products are designed or what technologies are used to create them

• Ability to view and comment on aspects of a product digitally, without the need to have specialized software that might have been used to create digital view

• Every electronic device used in product development is connected to the network to support 100 % flow of information

• Individual products can be grouped into categories, lines and seasons so the timelines can be managed as a collection that must be delivered to the market together


Key Attributes of Current EnvironmentKey Attributes of Current Environment

• Electronic workflow to move all products through specific process gates defined for each product type

• Web browser user interface

• Digital product images are used in all reports and management dash boards

• Collaboration with supply chain partners for 7/24 hour global engineering

• Management alerts on products not hitting timelines or margin expectations


Product Developmen

t Tools

MAC-based Design Tools

PC-based Design Tools

2D & 3D CAD/CAM

Tools

Pattern Engineering

Software

Tooling Design

Software

Digital Cameras

Electronic Last

Design Software

Material Testing

Technologies

Wear Testing

Software

Color Matching Lab Dip

Software

QA Analysis Tools

Product Development Technology PortfolioProduct Development Technology Portfolio


Product Developmen

t Tools



2D & 3D CAD/CAM

Tools

Pattern Engineering

Software

Tooling Design

Software

Digital Cameras

Electronic Last

Design Software

Material Testing

Technologies

Wear Testing

Software


Software

QA Analysis Tools

Databases and

Transaction Systems

Quality Analysis

Database

ERP for Supply Chain

Management

Product Vault “Single

Vision of the Truth”

Approval Materials Database

Digital Asset

Library

Fit and Wear Test Databases



Product Developmen

t Tools



2D & 3D CAD/CAM

Tools

Pattern Engineering

Software

Tooling Design

Software

Digital Cameras

Electronic Last

Design Software

Material Testing

Technologies

Wear Testing

Software


Software

QA Analysis Tools

Databases and

Transaction Systems

Quality Analysis

Database


Management




Digital Asset

Library


Communication and

Collaboration Tools

Secure E-Mail

Supplier Portal/E-

Hub

Secure File

Transfer Servers

Web Conferencin

g

Video Conferencing

Remote Visualization

Tools



Product Developmen

t Tools



2D & 3D CAD/CAM

Tools

Pattern Engineering

Software

Tooling Design

Software

Digital Cameras

Electronic Last

Design Software

Material Testing

Technologies

Wear Testing

Software


Software

QA Analysis Tools

Databases and

Transaction Systems

Quality Analysis

Database


Management




Digital Asset

Library


Communication and

Collaboration Tools

Secure E-Mail

Supplier Portal/E-

Hub

Secure File

Transfer Servers

Web Conferencin

g

Video Conferencing

Remote Visualizatio

n Tools

Presentation Tools and Analysis

Decision Support

Information Warehouse

Product Viewer

Line Planning

tools

Executive Dashboards

Custom Product catalogs

Marketing and Sales

Presentation Tools



Results So FarResults So Far

In the sixth inning of a nine inning game

15 Complete Seasons in footwear and apparel now managed

Over 45,000 electronic files are stored in the product vault

24 reports and 35 line plan views are utilized daily by 64 different user profiles/roles

8 footwear and 9 apparel milestones are tracked as workflow gates


Example 2: Supplier E-Hub - What is it ?Example 2: Supplier E-Hub - What is it ?

Web enabled application that can be used to extend internal ERP and PLM systems to factories, transportation providers and other supply chain partners.

Can facilitate:– Distribute PO’s electronically– Publish ticketing and labelling requirements– Track work in process– Obtain shipping services– Creation of advanced shipping notices

– Exchange shipping documents


Logistics FactsLogistics Facts

40 Main Footwear Factories in 8 Countries

600 Apparel Factories in 29 Countries

450 Raw Material Suppliers

27 Freight Forwarders Transportation modes include Ship, Truck, Rail and Air

34 Custom Brokers

Over 5,000 purchase orders placed each month


Purchase Order Management Lack of complete purchase order visibility to trading partners

(sales offices, factory, raw materials supplier, ticketing, consolidator, transportation, Distribution Center) to manage supply chain lead time & inventory

Difficult to extend internal systems to link different supply chain parties.

Difficult to accurately implement customer specific services (e.g. ASN, pre-ticketing, labeling, mark-for-store)

Transportation Logistics Management Different carriers, different way to trace & track Non completeness of consignment check point Manual processes for smaller carriers, air and exceptions Last minute inventory management difficult

Past Supply Chain ChallengesPast Supply Chain Challenges


Country Liaison Offices

Label Providers Banks

Factories

Raw Material &

& Component

Suppliers

TransportationProviders

Customs

ReebokHQ

Drop ship

customers

Communication Methods: Fax, Mail, Couriers, site visits, EDI, proprietary file transfers

the Old Waythe Old Way

Reebok Trading Hong Kong


the New Waythe New Way

Reebok HQ

Country/Liaison Offices

Raw material &Component

supplies

Factories

Banks

Employees

Drop ship

customers

CustomsTransportation

Providers

Label Providers

Business-to-Business data sharing /Vendor Neutral E-Hub/ Hosted Environment (ASP model)

Workflow, message alerts, backoffice integration with reporting capabilities

Custom-built e-HUB with LINE,

a division of container port operator,

Hutchinson- Whompoa in Hong Kong

Reebok Trading Hong Kong


• Increased operational efficiency through electronic transmission of order information directly into the factory systems

Improved data accuracy Reduced administration cost through data inheritance

• Some factories now using same solution for raw material suppliers.

• Neutral & common platform compared to having different system for each shipper/carrier

• Purchase order history and version control logs benefit factories

• Dashboard design with “To Do List”, “Overdue Tasks” and “Alerts” for each user level

• Ability to print / re-print purchase orders on demand

• Numerous pre-delivered reports to manage PO activity



Example 3: Digital Asset ManagementExample 3: Digital Asset Management

WHAT IS IT?WHAT IS IT?

– A central repository for all digital assets capable of handling all of Reebok image types (video, products, lifestyle)

– Ability to push digital assets to a channel partners

– A work flow system that enables a stream-lined process for creating and approving digital assets

BENEFITSBENEFITS Cost reduction

Improved brand image

Enable better communication with distribution partners and customers requiring digital images

Allows the use of digital images in all executive dash boards


The Past The Past . . .. . .

Librarian

Product Development

Centers

US

E-Mail

strain on network and mail servers

Manually resize all images - low, med, hi versions

Manually Archiveto CD

Users requesting images

PrintCatalogs


Reebok’s New DAMS Process DiagramReebok’s New DAMS Process Diagram

Product Development Centers

Global Users

Product Data

AccessSystem

Librarian

ProductImages

Deployment AgentPush of Assets

Internal

Folder Locations

FTP to Partners

Prototypes

Line Confirmations

LifestyleMarketing Materials

Catalog Stage

ManualProcess

Hot Folder

Footwear and ApparelLine Planning System

Reebok Websites



Central Repository for all of Reebok’s digital assets. Reduction / elimination of redundant photo shoots Better control of copyrighted assets - automated expiration of assets Access to the correct and most current version of assets

Store only the core asset; Render to needed format and resolution “on-the-fly”.

Self-service model for image requests - Reduction of CD creation costs Reduction of Shipping Costs Reduction of Product Catalog Printing Costs Instant fulfillment – reduced time-to-market


Results So Far (cont.)Results So Far (cont.)

Reduced network traffic: Automated upload of product assets via FTP and not E-mail View thumbnail and only download high resolution if desired Use of shortcut links in emails to reference images, instead of attaching image file

Improved worker efficiency by providing a one stop location for product images and product data.

Product data from Reebok’s Line Planning System automatically mated with appropriate asset

Built in search tools

Better control of access to assets through user groups and permissions.

Browser based application accessible from any public Internet connection and does not require any client install.


Central Repository for Reebok’s AssetsCentral Repository for Reebok’s Assets


Advice when using technology to improve product development: Obtain executive leadership at the highest possible level Balance top-down objectives for change with ample benefits for the

people who work in the process Avoid long-duration, big-bang implementations

Try to deliver some benefits every 3-6 months Initial focus on low hanging fruit to gather support and momentum If possible, defer most complex technology challenges until team has

mastered the technology and gained confidenceRetire Legacy modules along the way to increase compliance to new

processes/simplify maintenance Do not accept software that is NOT a good fit

Influence suppliers if you can/custom build if you cannot


Advice when using technology to improve product development (continued):

Fund full-time, business team members in project cost Pay close attention to systems technical architecture so it can

scale and handle performance and allow secure collaboration outside of the firewall

Adjust project calendar to recognize and accommodate seasonal product development calendars

Use the project as an opportunity to clean up data Adhere in strong project methodology and focus attention on

issues and off plan items.

The Impact Of It On Product Innovation

Technology

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