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This presentation discusses the supply chain drivers and associated trade-offs for each. The case has been picked up from Pearson\'s SCM book authored by Peter Meindl and Sunil Chopra
Citation preview
Seven-Eleven Japan Co.Rohan Raj Mishra
IIFM
Supply Chain Drivers Analysis for
Outline
• History & Profile• Strategy & Tactic of Seven Eleven• Food Items Classification• Convenience at the Store• Schematic Representation of the Supply Chain• Supply Chain Framework• Supply Chain Drivers Analysis• Case Questions Discussion
History and Profile
• Founded by Masatoshi Ito post 2nd World War.• By 1960, the single store had grown into a $3 million
company.• In 1961, realized that superstores were the wave of the
future.• In 1972, approached Southland Corporation .• In 1973, Southland agreed to a licensing agreement.• In 1974, first 7-11 convenience store opened in Tokyo.• In 1990, Southland Corporation entered into bankruptcy
protection.• In 1991, IYG acquired 70% of Southland’s common stock.
Number of Stores ofSeven-Eleven in Japan
19741975
19761977
19781979
19801981
19821983
19841985
19861987
19881989
19901991
19921993
19941995
19961997
19981999
20002001
20022003
0
2000
4000
6000
8000
10000
12000Number of Stores
Number of Stores
Annual Sales in Billion Yen of Seven-Eleven in Japan
19741976
19781980
19821984
19861988
19901992
19941996
19982000
20020
500
1000
1500
2000
2500
Annual Sales (Billion Yen)
Annual Sales (Billion Yen)
So how did 7-eleven manage such phenomenal growth?
7-Eleven Japan’s Competitive Strategy
• To provide high-availability of a variety of reasonable quality products at reasonable prices
Strategy & Tactic of Seven Eleven
• Strategy of 7-Eleven Japan– Market Dominance– Cluster of stores (50-60) in small geographical area
supported by a Distribution Centre (DC)• Tactic– Combination of Own and Franchisee Stores– In 2004 Franchisee Commissions accounted for 68%
of Total revenue from operations– By 2004, the company had presence in 70 prefectures
of Japan
• Advantage of Dominance Strategy– High Distribution Efficiency– Brand Awareness– System efficiency– Franchisee Support Services– Advertising effectiveness– Entry barrier for competitors
Continued
• Store Size was 150 square metres• Average inventory at store of 3000 Stock Keeping
Units (SKU), with max capacity of 5000 SKUs• Emphasis on regional merchandizing• Goods included:– Food Items– Beverages– Magazines– Soaps, Detergents etc.– Game, Software
Continued
Food Items Classification
• Chilled temp item.– Sandwiches, sweets, milk
• Warm temp item.– Box lunch, rice balls, fresh bread
• Frozen item– Ice cream, Ice cube etc.
• Room temp item– Canned food, Instant noodles etc.
Convenience at the Store• Payment of Bills
– Electricity– Telephone– Gas– Insurance Premium
• Accepting Installments on behalf of credit companies• Payment for internet shopping• ATMs at almost all the stores• Meal Delivery service for aging population of Japan• Ticket Sales, Photocopying• Pick up location for parcel delivery.• 7dream e-commerce• etc.
Supplier(frozen)
Supplier(Warm)
Supplier(Room Temp.)
Supplier(Cold)
DC
Stores Stores Stores Stores
Stores Stores Stores Stores
50-60 stores
Schematic Representation of Supply Chain
Supply Chain Drivers Analysis
Competitive Strategy
Supply Chain Strategy
Efficiency Responsiveness
Facilities Inventory Transportation
Information
Supply chain structure
Cross Functional Drivers
Sourcing Pricing
Logistical Drivers
Supply Chain Decision-Making Framework
Facility• Facilities were at 2 levels
– Distribution Centres (DCs)– Stores
• DCs– less in number – held no inventory, – served stores in its cluster– Increased Efficiency as opposed to Responsiveness
• Stores – More in number– kept inventory on shelf– Located in abundance and dominated the market– Were more responsive than efficient
Inventory
• @ DC– No inventory– Highly efficient– Poor at responsiveness
• @ Stores– Kept Daily Stocks– Low Inventory– Were efficient but not very responsive
Transportation
• Transportation was at two levels– Vendor to DC (Vendor delivered)– DC to Store (Seven-Eleven delivered)
• Transportation Network Design– Each truck would be stocked at the DC– One truck would deliver supplies to more than one store.
• Mode of transportation– Road (Vans &Trucks were used)
• Rapid replenishment cycles• High Frequency• Provided High responsiveness as opposed to efficiency
Information
• Information System Components– Graphical Order Terminal (GOT) @ Stores– Scanner Terminals (ST) for inventory checking– Store computer
• Processed information from GOT , ST & POS• Was connected to the network• Tracked inventory levels, placed orders, maintained store equipment
etc.
– POS register• Information about sale, customer details like age, sex, item of sale
etc.
– Data was relayed to Suppliers, Distribution Centres and the Headquarters automatically.
– Increased both efficiency and responsiveness
Sourcing
• Outsourced transportation– From DC to Stores to Transfleet Ltd.
• Risk of Fuel Price Fluctuation, Fleet Maintenance and Cost of Fleet staff was transferred.
• The company increased profits and reduced risk.
Pricing
• Seven-Eleven offered reasonably priced products.
• Their market dominance allowed ease of access to the customers.
• Both these factors led to stable demand• Thus, such pricing decision increased the
efficiency of the supply chain.
US Market
• Existing system– Store replenishment through Direct Store Delivery
from Manufacturers– Remaining products delivered by Wholesalers
• Introducing Combined Distribution Centre concept– 23 CDCs across North America– Supported 80% of Store Network
• Introducing Fresh Foods like in Japan
Q1
• Different Approaches for Increasing responsiveness– Local Capacity– Local Inventory– Rapid Replinishment
Q2
• Risks associated with attempting to micro-match Supply & Demand– High Cost of Transportation– High Order Costs
Q3
• Supply Chain Drivers have already been discussed
Q4
• Benefits of DCs– Reduces complexity at store level– Organizes Store demand at DC– Reduces complexity and costs for Vendors to
directly deliver at the stores• When Direct Store Delivery?– Variety of products is less– Order size is more– Delivery Destinations are few.
Q5
• 7dream.com- an e-commerce initiative• In 2004
• Area of USA is more than 26 times that of Japan• 7dream concept would be more successful in
Japan
Country No. of StoresJapan 10615US 5798
Thank You