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Case about supermaket Seven-Eleven
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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)
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
CONTINUED
• 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
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
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