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Seven- Eleven Japan Co. Case
AnalysisGroup 4:Ruchi Sao 13PGP048 Geeta Hansdah 13PGP079Trisha Gajbhiye 13PGP116 Bhavana Ziradkar13PGP118Sai Shilpa 13PGP124
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Seven – Eleven Japan Co. Established in 1973 by Mr. Masatoshi Ito
1973-1991 managed by Southland corporation, later by Ito-Yokado Group
In 2004, Convenience store in Japan and in US contributed to 48.2% total revenue of IYG
Seven-Eleven Japan contributed 87.6% of operating income received from convenience store by IYG
In 2004, the average daily sales at four major convenience store chains excluding Seven-Eleven was 484,000 Yen where as Seven-Eleven has daily sales of 647,000 yen
Core strengths were information systems and distribution systems
Worked on franchise model and followed a market dominance strategy
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Contd.Limited geographical presence in Japan and about 70% (32 out of 47) of prefectures within Japan but their presence was dense
All store had standard size of 125 m2 which was increased to 150m2 in 2004
Seven-Eleven offered to keep SKU of 5000. on average store kept 3000 SKU
Food items were classified in 4 broad categories depending upon storage & transportation temperature- warm items, Room temperature items, Chilled items and frozen items
In 2004, Processed foods and fast foods contributed to 60% of total sales at each store
By 2004, Seven-Eleven had 290 manufacturing plants to produce fast food items and 293 DC’s
Offered services in store like bill payment services, photocopying, ticket sales and 7dream.com etc.
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Contd.Integrated services digital network (ISDN) linked more than 5000 stores
IS support was through Graphic Order terminal, Scanner terminal, Store computer, POS register- to improve ordering process
POS analysis data was provided each day to each store- removal of product with no demand, forecasting, identification of slow and non moving items
3 times daily delivery of rice dishes and Replenishment cycle time of less than 12 hours
At DC, delivery of like product were stacked in one vehicle and transportation was done by Transfleet
In US, Distribution was through direct store delivery (DSD), wholesalers and CDC’s. Inventory turnover of 17 compared to that 50 in Japan
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A convenience store chain attempts to be responsive and provide customers what they need, when they need it, where they need it.
What are some different ways that a convenience store supply chain can be responsive?
What are some risks in each case?
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Ways to become responsive SC can become responsive by reducing lead time. This can be done in
following ways:
Real time information flow between suppliers, distributors and storeStrong supplier network Good relationship maintenance with suppliers and distributorsAnalysis of day to day data for each store and each SKU will enable in
forecasting & reduction of replenishment timeCross-docking is one of the ways to be responsive
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Risk associatedReal time information flow risk
• Server breakdown or hacking
Strong supplier network & good relationship maintenance with suppliers and distributors
• Over-dependency on one supplier• Risk due to natural calamities increase if all suppliers lie in close proximity
Analysis of day to day data for each store and each SKU
• Data congestion due to large volume of data from 3000 SKU × 10000 stores
Cross-docking
• Vehicle breakdown• Natural calamities
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Seven – Eleven’s Supply chain strategy in Japan can be described as attempting to micro-match supply and demand using rapid replenishment.
What are some risk associated with this choice?
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Risk associatedOver-dependency on Information Systems
Any calamity on supplier end would lead to stock out situation in Seven-Eleven because of absence of inventory in supply chain
No warehouse
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What has seven-eleven done in its choices of facility location, inventory management, transportation and information infrastructure to develop capabilities that support its supply chain strategy in Japan?
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Support systemsFacility location
One distribution catering 50-60 stores
High density market presence
TransportationDedicated vehicle for each category
Delivery during off-peak hours
Delivery using scanner terminals
Allocation of stores per truck dependent on sales volume
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01/05/2023Indian Institute of Management Raipur
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Seven-eleven does not allow direct store delivery in Japan with all products flowing through its distribution centre.
What benefits does seven-eleven derive from its policy?
When is direct store delivery more appropriate?
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Benefits of current system Proper product assortment as per required temperature at DC thus
reducing perishability Reduction in number of vehicle required for daily delivery at each store
(1974, 70 vehicles visited each store every day, in 1994, only 11 were necessary)
Reduction in delivery costs Rapid delivery of variety of fresh foods thus making the chain responsive Rapid and reliable delivery to distribution trucks through dedicated DCs
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Appropriate direct store delivery Demand from retailer is high enough to require FTL When lead time is critical Manufacturers and retailers in close proximity
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What do you think about the 7dream concept for Seven-Eleven Japan? From a SC perspective, is it likely to be more successful in Japan or in US? Why?
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7Dream.com concept
Virtual convenienc
e store
Increase in customer service level• Reduction
in queuing at billing counter
• Time saving for consumers
No additional cost as they
are using existing
distribution system and
no home delivery system
Catering to new
market
Increase in market share,
revenue and footfall
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Successful in Japan or in US? Number of store in Japan = 10,615 Number of stores in US = 5,798 More convenient in Japan to pick delivery from any store because of
number of stores Transportation cost will increase in US as there is different distribution
structure and consumer prefer home delivery Store density area ratio is higher in Japan than in US, thus making it
inconvenient for US customers to pick up from stores
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Seven-Eleven is attempting to duplicate the SC structure that has succeeded in Japan in the US with the introduction of CDC’s. what are the pros and cons of this approach? Keep in mind that stores are also replenished by wholesalers and DSD by manufacturers.
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Duplication effectPros Increase in responsivenessIncrease in variety of fresh
productsReduction in stock outIncrease in distribution network
and support to storesReduction in lead time for Fresh
products
ConsProduct assortment will occur at
store thus increase in timeIncrease in Labour costHigh coordination is required
between DSD, Wholesalers and CDC
Increase in cost for CDC
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The US has food service distributors like McLane that also replenish convenience stores. What are the pros & cons to having a distributor replenish convenience stores versus a company like Seven-Eleven managing its own distribution function?
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Seven-Eleven: Self distribution systemPros Backward integrationScope for future expansionControl over SC Reduction in replenishment timeReduction in dependency
ConsExtra effort to build supplier
networkMIS maintenanceHigh risk
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Outsource ProsNo effort to build supplier networkNo data maintenanceLow cost Risk sharing
ConsIncrease in dependencyNo control over supply chainIncrease in lead timeForward integration chances by
outsourcing party
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23 Thank You
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