Halfords Retail's strategy is clear: we need a 21^st century supply chain and IT infrastructure to support our aspirations in delivering a significantly-enhanced customer experience. Our aim is ensure customers can purchase what they want whenever they visit stores, either because the product is on our shelves or because they have the opportunity to order goods for prompt delivery or collection.

This means that our distribution centres hold the right stock and are able to pick orders accurately. It also requires the supply chain capability to deliver in a timely manner, at a time to suit our customers. It also means that we need the right IT solutions to support these activities, allowing customers to benefit from short delivery lead times, choosing from our extended range of products online.

Coventry Distribution Centre.

IT

Recently our IT team has been significantly reorganised to provide the appropriate building blocks to support the business as a whole. Our capability is now based on simplifying the technical solutions used within the Company, putting relevant and quality information at the heart of our improvement processes.

During FY14 our IT department has supported:

• The launch of new faster card-payment processes in stores
• A trial to introduce free wi-fi into stores
• Moving all store telephony onto a Voice-over-IP network, reducing costs and delivering a more robust solution
• The inclusion in our refurbished stores of video screens, informing customers of our additional service offerings and providing engaging product information on our ranges, together with point-of sale-messaging via video
• The trials of tablets in store, enabling colleagues to have access to the Halfords extended range via halfords.com
• The upgrade of SAP, the core operating platform for the business, was completed in May 2014

Over the next twelve months IT projects that will support the business in delivering its customer promises include:

• A project to enable store colleagues to place orders for next-day delivery
• Supporting improvements in distribution centre processes
• Refreshing store and distribution centre hardware
• Introducing a new set of email and collaboration tools to improve knowledge-sharing

Supply Chain

During the year we have acknowledged the need for our Supply Chain to deliver a consistent, convenient and reliable customer experience and to do this we will be enhancing the standards of our supply chain operations. We will focus on procurement and stock management, delivery scheduling and improving the working environment for our colleagues. We will work more closely with our suppliers, ensuring we have an efficient end-to-end supply chain, whilst adopting a continuous improvement methodology across all operations. We will also improve flexibility, lead times and standardise operating principles.

We are committed to putting our customer at the heart of all supply chain activity. We will support sales by balancing stock across the UK and the Far East to stabilise lead times. We have already introduced out-of-hours deliveries to 90 stores and are trialling more frequent deliveries to stores in the UK and Ireland.

We know that customers' delivery expectations are continually evolving; no longer are the protracted timescales of the past acceptable. Customers want their purchases delivered when it's convenient for them across all channels, so we need to deliver against these high expectations such as the capability to book the building of a bike or have a Sat Nav product fitted. All of this requires 21^st century supply systems delivering 21^st century customer solutions.

Case study

In 2012, Halfords embarked on a review of their payments infrastructure with the aim of developing a long-term strategy across all payment systems and processes. Not only did we want to refresh our PIN Entry Device (PED) estate and future-proof our systems in relation to PCI DSS compliance but we also wanted to give customers a great shopping experience whilst minimising the cost of change.

We identified that a managed payment service would best meet our requirements and following a comprehensive procurement exercise, selected FIS as our Payment Services Provider (PSP) partner.

FIS provided PA-DSS certified EFT software (TRANSAXpay EFT) which meets the latest encryption guidelines as laid down by the PCI Security Standards Council. This software encrypts card data at the point of PIN entry to ensure no card data is held "in the clear" on the Point of Sale (PoS) system or Halfords network. Card data is routed through the FIS Payment Gateway, a PCI DSS Level 1-certified environment, for authorisation, settlement and financial reporting. When used in conjunction with certified processes, the scope and cost of PCI compliance for retailers can be drastically reduced.

Following integration with Halfords BT Expedite PoS, we commenced a pilot scheme in July 2013, in a single store with 3 PEDs. After an initial 2 week period, a further 8 PEDs were added in two stores to the pilot scheme for a 1 week period. A further pilot to 43 stores and 217 PEDs

quickly proved that the concept logic and the roll out strategy worked. We then initiated an aggressive roll out strategy which resulted in the successful roll out of 2,400 PEDs over a 14 week period. At peak, 411 PED's were rolled out in 1 week and the full roll out completed in October 2013.

Peter Lawrence, our Principal Business Analyst commented: "This was a text book project, roll out completed on time and to budget. We have never had so much positive feedback from store colleagues on how quick the new PEDs are."

The FIS' TRANSAXpay solution has enabled us to maintain PCI DSS compliance whilst improving the customer payment experience through reduced queue times and enhanced card data security.

Internal surveys at our stores have shown that on average New CHIP & PIN pads in over 300 stores saved our customers 19 seconds per transaction, meaning we now have one of the fastest card transaction times in UK retail in these stores.

In support of the above, Halfords has provided FIS with a selection of 'Payment Card Performance Monitor' data that we have collated from various stores during the pilot phase. The data shows the time difference in performing various stages of the card payment transaction process, before and after the implementation of the TRANSAXpay solution, and the overall time saving for comparison.