Seven-Eleven Japan Co. Success Story

Group 1Akhil S.Mohit M.Pooja K.Shweta V.

Agenda• History• Convenience Store chain• Responsiveness• Risks

• Rapid Replenishment• Micro-Match Supply and Demand• Risks

• Seven-Eleven Capabilities• Seven-Eleven Policies• 7dream Concept• Seven Eleven CDCs• Outsourcing Replenishment – Pros and cons

7-Eleven • Mission

• Our Mission is to be Your Convenient Neighborhood Store. 

• Vision• Our Vision Is to Be the Best Retailer of Convenience.

• Servant Leadership Culture

• “With "breakthrough thinking" that is not constrained by the past, Seven- Eleven will continue to always tackle new challenges and create a convenience store business that responds to expectations from customers and franchisees.” – Message from Chairman

1972 1974 1979-84 19901960 1991

Sole Control, Single Store had grown into a $3 million company

1st Seven Eleven convenience store opened in Tokyo

Southland corporation entered bankruptcy protection

Approached Southland Corporation

Seven eleven Japan experienced Rapid tremendous growth591-2001. Continued till 2004 – 10,356 stores

IYG acquired 70% of Southland’s common stock

History• Founded by Mr. Masatoshi Ito after the second

World war

Stores Growth

Source : http://www.sej.co.jp

A convenience store chain attempts to be responsive and provide customers what theyneed, 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?

Convenience Store Chain

-Proximity Risk: Not all demands can be fulfilled,

Demands change over time.•

-Offer host of services: ATM’s, pick up online services, electronic money service, mail order service, internet shopping

-Risk: Processes disrupted due to Information system failure

•-Establishment of ecommerce: 7dream.com

-Risk: Danger of fraud, system abuse

Responsiveness and Risk…

• Customer Shopping trendsRisk: Customer is unpredictable

• Efficient distribution systems linked to the entire supply chain network

Risk: Breakdown can result in disruption in services

• Quick replenishmentRisk: Cost of transportation are very

high

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 risks associated with this choice?

Rapid Replenishment

• Micro Match – Demand and Supply• Location, season, time of day

• Open new stores in target areas

• Consolidate warehousing and transportation functions

• All stores connected electronically to head office, DCs and suppliers.

Risks

• Risk of dealing with inconsistent customer demand resulting in over or under stocking inventory

• If information systems fail, they will result in mismatch of stocks and demand

• Seasonal demands can be highly unpredictable

• Many clusters of stores results in high transportation and inventory holding costs

Seven Eleven does not allow direct store delivery in Japan with all products flowing through its distribution center. What benefit does Seven Eleven derive from this policy? When is direct store delivery more appropriate?

Direct Store Policy

Seven Eleven Policy Benefits :• Reducing the number of vehicles used in

transportation• Aggregation of demand • Reducing the holding inventory cost, delivery

cost and less time• Management can focus on core tasks

More appropriate when: • When Stores places orders with high

volume/high value• Have special handling requirements

(Newspapers or alcoholic beverages)

What has Seven-Eleven done in its choice of facility location, inventory management, transportation, and information infrastructure to develop capabilities that support its supply chain strategy in Japan?

Capability Development

Facility Location

• Aim: Improve Distribution System Efficiency

• Action: Used Market Dominance Strategy by expanding in clusters of 50-60 Seven-Eleven stores

• Benefits:• Ensured demand already

exists.• Ensured a high-density

market already exists.• Prevented competitor’s

entrance into that area• Improved Brand

awareness

Capability Development

Inventory Management & Information Infrastructure

• Aim• To better match supply with

demand• Effectively track sales of items• Increase number of original

items• Action

• Total Information System• Benefits

• Detailed analysis on store, district and company-wide basis to improve ordering process

• Reduced Inventory at distribution centers

• Reduced wastage of shelf space

• Effectively test new products• Stock “fresh” products based

on JIT demand

Capability Development

Transportation

• Aim• Achieve short

replenishment cycles• Increase sales of “original”

items• Action

• Combined Delivery System (CDS)

• Off-peak hour delivery• Benefits

• Flexibility in delivery schedules could be achieved

• Reduced transportation/delivery costs

• Reduced delivery time

Benefits of CDCs

Reduced delivery time

Reduced delivery costs

Can deliver variety of “fresh” products based on Just-In-Time demand.

Zero inventory at Distribution centers – reduced overall costs

Short replenishment cycle time

What do you think about the 7dream concept for Seven-Eleven Japan? From a supply chain perspective is it likely to be more successful in Japan or the United States?Why?

Review 7dreamJapanese customers like picking up their stuff than have home delivery. Moreover stores are easily accessible.

It uses the existing distribution system and hence does not add significantly to 7-11’s costs.

7dream – US or Japan Store density is higher than

that in US.

Accessibility in US is not as good as in

Japan

Americans have a different mindset. Would not go all

the way to a store to pickup some item when

for a few dollars somebody would deliver it to you.

Japan

Seven-Eleven is attempting to duplicate the supply chain structure that has succeeded in Japan in the United States with the introduction of CDCs. What are the pros and cons of this approach? Keep in mind that stores are also replenished by wholesalers and DSD by manufacturers.

CDCs in US : Pros and ConsWholesalers may have issues because of these

distribution centers

Manufacturers may prefer Direct Store

delivery as they have more

control here

Ensures Fresh supply of items

Operational efficiency

The United States has food service distributors like McLane that also replenish convenience stores. What are the pros and cons to having a distributor replenish convenience stores versus a company like Seven Eleven managing its own distribution function?

Outsourcing ReplenishmentAn overall loss of control

An increased number of

deliveries to each store

Difficulty of integrating

information flows across disparate

systems.