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Seven-Eleven Japan Co.

Success Story

Group 1
Akhil 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

History
Founded by Mr. Masatoshi Ito after the second World war
1st Seven Eleven
convenience store
opened in Tokyo

Sole Control, Single


Store had grown into a
$3 million company

1960

1972

Approached Southland
Corporation

1974

Southland corporation
entered bankruptcy
protection

1979-84

Seven eleven Japan


experienced Rapid
tremendous growth
591-2001. Continued
till 2004 10,356 stores

1990

1991

IYG acquired 70% of


Southlands common
stock

Stores Growth

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

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?

Convenience Store
Chain
-Proximity
Risk: Not all demands can be fulfilled, Demands
change over time.

-Offer host of services: ATMs, 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 trends
Risk: Customer is unpredictable
Efficient distribution systems linked to the entire
supply chain network
Risk: Breakdown can result in disruption
in
services
Quick replenishment
Risk: Cost of transportation are very high

Seven-Elevens 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 competitors
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 SevenEleven Japan? From a supply
chain perspective is it likely to
be more successful in Japan or
the United States?
Why?

Review 7dream
7Dream is an e-commerce company of 7-11

It allowed 7-11 customers to pick up their online


purchases at the local convenience store

Japanese 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 7-11s 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 Cons


Wholesalers 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 Replenishment
An overall loss of control
An increased number of deliveries to each
store
Difficulty of integrating information flows
across disparate systems.

Less transportation, material handling,


and labor costs for your own system
Possible for the distributors to perform
the aggregation/demand smoothing
function with minimal intervention by
the individual Seven-Eleven franchise.