OfficeMax 2015 Annual Report Download - page 6

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Table of Contents
Our contract sales channel employs a dedicated inside and field sales force that services the office supply needs to a range of small, medium and large-sized
businesses. Our contract business customers also include various schools and local, state and national governmental agencies. We also enter into agreements
with consortiums to sell to various entities and across industries, including governmental and non-profit entities, for non-exclusive buying arrangements.
Sales to our contract customers that are fulfilled at retail locations are included in the results of our North American Retail Division, while honoring their
contract pricing, as applicable.
Our direct sales channel primarily serves small- to medium-sized customers. Direct customers can order products through our public websites, from our
catalogs, or by phone. Website functionality provides customers the convenience of using the loyalty program and offers suggestions by product ratings,
pricing, and brand, among other features. Customer orders are fulfilled through our common supply chain; refer to the “North American Supply Chain”
discussion below for additional information on our supply chain network.

Office Depot Copy & Print Depot provides printing, digital imaging, reproduction, mailing, shipping through UPS, FedEx, and the U.S. Postal Service, and
other services. We also maintain nationwide availability of personal computer (“PC”) support and network installation service that provides our customers
with in-home, in-office and in-store support for their technology needs. Sales are recognized by the respective Division based on how the customer order is
serviced.

We operate a network of distribution centers (or “DCs”) and crossdock facilities across the United States, Puerto Rico, and Canada. Certain of our DCs operate
as flow-through facilities where merchandise is sorted for distribution and shipped to fulfill the inventory needs of our retail stores and customers. Some DCs
in the OfficeMax network are larger facilities primarily serving the retail business. The crossdocks in the OfficeMax network are smaller buildings where
customer orders are sorted and loaded onto private fleet trucks for last mile delivery. The DC and crossdock facilities’ costs, including real estate, technology,
labor and inventory, are allocated to the North American Retail Division and North American Business Solutions Division based on the relative services
provided.
Through the end of 2015, the integration of the companies has resulted in the closure of 8 DCs and crossdock facilities. In the next two years, we expect to
integrate additional supply chain facilities by changing the warehouse inventory management system and expanding capacity to service both Office Depot
and OfficeMax banner customers, create or repurpose some locations, and close some locations.
Inventory is held in our DCs at levels we believe sufficient to meet current and anticipated customer needs. Certain purchases are sent directly from the
manufacturer to our customers or retail stores. Some supply chain facilities and some retail locations also house sales offices, showrooms, and administrative
offices supporting our contract sales channel.
As of December 26, 2015, we operated 45 DC and crossdock facilities in the United States and Canada. Refer to Item 2. “Properties” for further information.
Out-bound delivery and inbound direct import operations are currently provided by us and third-party carriers.

In recent years, the International Division has undergone significant restructuring activities, including disposing of assets and streamlining processes,
primarily in Europe. In 2015, the Company substantially completed the European restructuring plan to realign the organization from a geographic-focus to a
business channel-focus (the “European Restructuring Plan”). The restructuring plan includes the creation of centralized and standardized processes that
operate across Europe. These activities have helped to lower operating expenses. Refer to Part II — Item 7. “MD&A” for further details on this plan.
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