Seven-Eleven Japan Co.

Outline

History & Profle

Strategy & Tactic of Seven Eleven

Food Items Classifcation

Convenience at the Store

Schematic Reresentation of the Suly

Chain

Suly Chain Frame!or"

Suly Chain #rivers $nalysis

Case %uestions #iscussion

History and Profle

Founded &y 'asatoshi Ito ost (

nd
)orld )ar*
+y ,-./0 the single store had gro!n into a 12 million
comany*

In ,-.,0 reali3ed that suerstores !ere the !ave of the

future*
In ,-4(0 aroached Southland Cororation *

In ,-420 Southland agreed to a licensing agreement*

In ,-450 frst 46,, convenience store oened in To"yo*

In ,--/0 Southland Cororation entered into
&an"rutcy rotection*

In ,--,0 I78 ac9uired 4/: of Southland;s common

stoc"*
<um&er of Stores of
Seven6Eleven in =aan
/
(///
5///
.///
>///
,////
,(///
Number of Stores
<um&er of Stores
$nnual Sales in +illion 7en of Seven6
Eleven in =aan
/
?//
,///
,?//
(///
(?//
Annual Sales (Billion Yen)
$nnual Sales @+illion
7enA
So ho! did 46eleven
manage such henomenal
gro!thB
46Eleven =aan;s Cometitive
Strategy

To rovide high6availa&ility of a
variety of reasona&le 9uality
roducts at reasona&le rices
Strategy & Tactic of Seven
Eleven

Strategy of 46Eleven =aan

'ar"et #ominance

Cluster of stores @?/6./A in small geograhical

area suorted &y a #istri&ution Centre @#CA

Tactic

Com&ination of O!n and Franchisee Stores

In (//5 Franchisee Commissions accounted

for .>: of Total revenue from oerations

+y (//50 the comany had resence in 4/

refectures of =aan

$dvantage of #ominance Strategy

High #istri&ution ECciency

+rand $!areness

System eCciency

Franchisee Suort Services

$dvertising eDectiveness

Entry &arrier for cometitors

Continued

Store Si3e !as ,?/ s9uare metres

$verage inventory at store of 2/// Stoc"

Eeeing Fnits @SEFA0 !ith maG caacity of ?///
SEFs

Emhasis on regional merchandi3ing

8oods includedH

Food Items

+everages

'aga3ines

Soas0 #etergents etc*

8ame0 Soft!are
Continued
Food Items Classifcation

Chilled tem item*

Sand!iches0 s!eets0 mil"

)arm tem item*

+oG lunch0 rice &alls0 fresh &read

Fro3en item

Ice cream0 Ice cu&e etc*

Room tem item

Canned food0 Instant noodles etc*

Convenience at the Store

Payment of +ills
Electricity
Telehone
8as
Insurance Premium

$cceting Installments on &ehalf of credit comanies

Payment for internet shoing

$T's at almost all the stores

'eal #elivery service for aging oulation of =aan

Tic"et Sales0 Photocoying

Pic" u location for arcel delivery*

4dream e6commerce

etc*
Sulie
r
@fro3enA
Sulie
r
@)armA
Sulie
r
@Room
Tem*A
Sulie
r
@ColdA
#C
Stores Stores Stores Stores
Stores Stores Stores Stores
?/6./
stores
Schematic Reresentation of Suly
Chain
Suly Chain #rivers
$nalysis
Competitive Strategy
Supply Chain
Strategy
Efficiency
Responsiveness
Facilities Inventory Transportation
Information
Supply chain structure
Cross Functional Drivers
Sourcing Pricing
Logistical Drivers
Suly Chain #ecision6'a"ing
Frame!or"
Facility
Facilities !ere at ( levels
#istri&ution Centres @#CsA
Stores
#Cs
less in num&er
held no inventory0
served stores in its cluster
Increased ECciency as oosed to Resonsiveness

Stores
'ore in num&er
"et inventory on shelf
Iocated in a&undance and dominated the mar"et
)ere more resonsive than eCcient
Inventory

J #C

<o inventory

Highly eCcient

Poor at resonsiveness

J Stores

Eet #aily Stoc"s

Io! Inventory

)ere eCcient &ut not very resonsive

Transortation

Transortation !as at t!o levels

Kendor to #C @Kendor deliveredA
#C to Store @Seven6Eleven deliveredA

Transortation <et!or" #esign

Each truc" !ould &e stoc"ed at the #C
One truc" !ould deliver sulies to more than one store*

'ode of transortation
Road @Kans &Truc"s !ere usedA

Raid relenishment cycles

High Fre9uency

Provided High resonsiveness as oosed to

eCciency
Information

Information System Comonents

8rahical Order Terminal @8OTA J Stores

Scanner Terminals @STA for inventory chec"ing

Store comuter
Processed information from 8OT 0 ST & POS
)as connected to the net!or"
Trac"ed inventory levels0 laced orders0 maintained store
e9uiment etc*
POS register
Information a&out sale0 customer details li"e age0 seG0 item
of sale etc*
#ata !as relayed to Suliers0 #istri&ution Centres
and the Head9uarters automatically*

Increased &oth eCciency and resonsiveness

Sourcing

Outsourced transortation

From #C to Stores to TransLeet Itd*

Ris" of Fuel Price Fluctuation0 Fleet

'aintenance and Cost of Fleet staD
!as transferred*

The comany increased rofts and

reduced ris"*
Pricing

Seven6Eleven oDered reasona&ly

riced roducts*

Their mar"et dominance allo!ed

ease of access to the customers*

+oth these factors led to sta&le

demand

Thus0 such ricing decision increased

the eCciency of the suly chain*
FS 'ar"et

EGisting system

Store relenishment through #irect Store

#elivery from 'anufacturers

Remaining roducts delivered &y )holesalers

Introducing Com&ined #istri&ution Centre

concet

(2 C#Cs across <orth $merica

Suorted >/: of Store <et!or"

Introducing Fresh Foods li"e in =aan

%,

#iDerent $roaches for Increasing

resonsiveness

Iocal Caacity
$ssem&le on #emand

#ecentrali3ed caacity leads to oorer utili3ation

Iocal Inventory
Centrali3ation of caacity
EGcess inventory and need for eGcess sace

Raid Relinishment

Centrali3ation of caacity and lo! level of inventory

Increased cost of relenishment and receiving
%(

Ris"s associated !ith attemting to

micro6match Suly & #emand

High Cost of Transortation

High Order Costs

%2

$rea #ominance Strategy

Hels in mar"eting

Io!er relenishment cost

Suly channel selection &ased on

temerature

Centrali3ation of caacity

Io! out&ound transortation cost and receiving

cost

Integrated Store Information System

+etter analysis of consumtion data to

accurately meet suly !ith demand

Facilitates sorting of order at #C and receiving at

stores
%5

+enefts of #Cs

Reduces comleGity at store level

Organi3es Store demand at #C

Reduces comleGity and costs for Kendors

to directly deliver at the stores

Reduces delivery cycles to store and hence

receiving cost

)hen #irect Store #eliveryB

Kariety of roducts is less

Order si3e is more @Full Truc" IoadA

#elivery #estinations are fe!

%?

4dream*com6 an e6commerce initiative

In (//5

$rea of FS$ is more than (. times that of =aan

lo!er density of stores and larger distance &et!een
stores

4dream concet !ould &e more successful in =aan

Strong eGisting distri&ution net!or"
High fre9uency of visits &y customers !hich ensures lo!
marginal cost &y not occuying shelf sace for long time
Ftili3e #C to sort deliveries along !ith other store
deliveries
Country No. of
Stores
=aan ,/.,?
FS ?4->
%.

In (//5

Country

$rea of FS$ is more than (. times that of

=aan

lo!er density of stores and larger distance

&et!een stores

EGisting #irect Store #eliveries@#S#A and

)holesaler #eliveries <et!or"
%4

$dvantages
One can contend that a distri&utor &rings much more
value to the ta&le in the Fnited States relative to =aan*
8iven the lo!er density of stores0 a distri&utor is a&le to
aggregate deliveries across many cometing stores*
This allo!s a distri&utor to reach levels of aggregation
that cannot &e achieved &y a single chain such as
Seven6Eleven*

#isadvantage
to having all deliveries done through a distri&utor is that
Seven6Eleven is una&le to eGloit having a large num&er
of stores* In fact0 it may &e argued that going through
the distri&utor has Seven6Eleven su&sidi3e deliveries to
cometing smaller chains that may also &e using the
same distri&utor*
Than" 7ou