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Title of the Case: Seven Eleven Japan Course Title: Production-Operations Management Course Code: MSC 301 Section: 01

Group Members

Name Tarique Imam 10104061 MD. TanvirInzamamulHoque RafiulKarim 10104080

ID

Signature

10104077

Jahran Ahmed 10304062 Musad Al Shihab 10304100

RamisaChowdhury10304097

Introduction: Opening its first store in downtown Tokyo in May 1974, the Seven Eleven Japan (SEJ) has revolutionized the concept of retail store chain by using distinguishable supply chain and merchandising concept and most importantly the use of POS data and sophisticated information system. Seven Eleven Japan was founded in 1973 under a licensing agreement between Ito Yokado Co. Ltd. and The Southland Corporation. It is the worlds largest convenience store chain which is operating in more than 15,500 stores worldwide; out of which 6,900 stores are located in Japan. SEJs net profit was $550 million in 1997 and it had highest average sales per store per day among SEJ, Daiei Convenience System and Family-mart. SEJ started its business using the expertise of The Southland Corporation in managing convenience store. To increase the efficiency of distribution system SEJ has their own method which is called D ominant Opening which refers opening new stores in targeted areas and each outlet has a sales zone of 0.6 mile radius of the store. SEJs inventory turn is 55 per year compared to 6.7 at Wal-Mart. Most of the customers of SEJ are male and they fall between the age group 10-29. The most sold products of SEJ are processed foods such as drinks, noodles, bread and snacks; fast foods such as onigiri, bento and hamburgers; fresh foods such as milk and dairy products and non-food items such as magazines, ladies stockings and stationary. SEJ emphasizes on selling fresh products and for this reason they change the products of gondola (shelves) three times a day. The managers of SEJ try to make sure that the customers of SEJ are not bored of purchasing the same product and therefore, they replaces almost 1400 stock keeping units (SKU) out of 2800 SKUs every year. They incurred a huge expense in introducing their integrated system. The system has gone through the evolution from its very beginning in 1979 to 1991. The system not only digitalized the company but also it enables the company to create, store, retrieve and edit all the necessary data for the company. The most appreciable feature of this information system is to create, maintain and analyze POS data and to facilitate the jobs of the managers of the company thus increasing the sale of SEJ. So far this well-organized database is the prime catalyst behind the tremendous success of SEJ making it one of the largest convenience stores of the world. In words, freshness, efficient inventory management, quick lead time, unique supply chain, integrated information system, continuous product development and diverse store layout are the terms that can be used as substitute of Seven Eleven Japan.

Managing operation globally: Seven Eleven Japan is the Worlds largest convenience store chain in the industry. It was established in November 1973 under an area licensing agreement between Ito-Yokado Co. Ltd. Japans leading supermarket chain and the southland corporation that operates Seven-Eleven in the United States. It has more than 15,500 stores worldwide. SEJ has maintained the top position for 20 years since it opened its first store in downtown Tokyo in May 1974. in 1997 SEJs total sales including franchise stores were about $16 billion withrecord net profits of $550 billion, making it the largest retail chain in Japan. Its average inventoryturn is 55 per year. Their stock price started at 100 in 1980 and close to 8,000 in 1997. From the very beginning they successfully manage their operations globally. To do this they do sometasks. They are discussed below. Firstly, behind their success customer plays an important role. Within 500 metres from the stores 48% of their customers live. A monthly customer visits certain stores and purchases product 600 to 700 on average. Secondly, SEJ has its own method of selecting new stores called the Dominant Opening. They create a critical mass in those areas. Within a 500 meter radius of those store is the sales zone of each store. The ultimate goal is to have that sales zone cover all of a specific area with minimum overlap. For example there are 3000 stores in metropolitan area while there are no stores at all in Osaka and Kobe. This is another reason of success of SEJ globally. Third reason behind their success is maintain the freshness of the product. For an example many Japanese workers and students buy bento at retail stores for lunch. Bentos are delivered three times a day and are color coded by the delivery time. Of all the perishables handled at SEJ, coffee has the shortest internal shelf life one hour. After that coffee is thrown away. This freshness extends to imply the timely accommodation of changing needs and tastes of customers. Old items are constantly retired, giving shelf space to new items because they try to make sure customers do not get tired of the same offering.

Lastly the layout of the store is another reason behind their success globally. This layout of the store is pre-determined up to the category. Each column is dedicated to a specific category or categories.

Strategy SEJ adapted to retain the maximum product quality: SEJ adapted the brilliant and innovative idea of Freshness. It means paying special attention to the freshness of the product. People most importantly come up to SEJ for buying Bento. It is the main source of revenue for SEJ and it creates customer loyalty and brand recognition. It keeps perishables for half the period of regular store. When franchisees purchases their products , they enlist them with some corresponding charts and labels so that they know what time to keep the product up to and how to use it appropriately. Secondly, items are constantly changing so that customers dont get bored with the regular stuff all the time. They also change products as they observe decline in sales in compare to other stores. About 2,800 stock keeping units, half of them are replaced every year. Thirdly, due to their outstanding reputation in Freshness, SEJ dominates in fast food sales. Because of their reputation due to freshness, their profit margin is considerably higher than other competitors (nearly 30%). A similar freshness concept applies to magazines also. They perish off magazines in two-three days. That is why they enjoy 10% share of magazine sales in Japan.

Last thing they adapted is the store of the layout. Each column of shelves is known as Gondola. They kept the most demanding products such as noodles at the furthest gondola from the entrance in order to capture customer attention when they enter into the store and observing their most favorite products up in front of them.

Maximizing the value by using integrated information system:

From its beginning, Seven-Eleven Japan had pursued to simplify its operations by using advanced information technology. In 1979, SEJ set up their own information system to facilitate the store managers store managers in placing their orders from their in store pcs which are connected to HQs host computer of SEJ. After that, they introduced one way POS system in

1982 followed by the set up of a two-way interaction system with the use of ISDN in 1991 which enables the store managers to access in the central database of SEJ. With the store computer the POS register, GOT, EOS and ISDN link are attached. Each store contains two registers, one is the main register and the other is the sub register which contains all the price information. For this reason, whenever a bar code is read by a scanner, the product information is retrieved quickly from the storage server. This is the basic architecture of the integrated information system of SEJ. This total information system is installed in the pcs of upstream and downstream members so that the information can be readily passed all over the supply chain. This quick information sharing system helps SEJ to reduce the bullwhip effect in the supply chain as much as possible. Moreover, the integrated information system will help the managers of SEJ to meet the two basic questions of inventory management; one is when to order the products and the other is how much to order. The use of information system benefits the company in efficient inventory management and increasing their inventory turnover. Another advantage of using integrated information system is to make sure that value is added in every step either by changing in forms of the product or by changing in location. The system facilitates the lead time and ensures that right product is available in the right time in the right place to upsurge customer convenience as well as satisfaction.

Managing the delivery schedule of different products using POS data:

For any convenience store, point of sale (POS) data is most important factor to boost up the profitability of the company. POS data enables the company managers to understand the purchase trends of the customer. POS data helps the managers of SEJ to forecast the demand as accurately as possible and using the POS data they can follow both qualitative and quantitative methods of forecasting which resulting to the efficient scheduling of product delivery in the retail ends. Moreover, by using POS data store employees are well equipped with relevant information and they can serve customers in a better way which increases the level of customer satisfaction. Most importantly, by using the POS data the delivery schedule of different products can be easily managed. Analyzing the POS data managers of SEJ can easily sort out which product customers will demand and when they will demand. For example, in SEJ stores plum onigiri begins to sell after tuna onigiri is sold out. From this POS data the store managers of SEJ can easily identify

that tuna onigiri has a higher demand among the customers than plum onigiri and so that theyll order more tuna onigiri and less plum onigiri. The clerks of SEJ notes down the gender and age (approximate) of the customers which enables the managers to differentiate between the purchase patterns of the male and female customers as well as to analyze the purchase trend of the different age groups. Every day between 7 AM to 8.30 AM, it is experienced that 350 ml packages are purchased by people on their way to work, between 11.30 AM and 1 PM,500 ml packages are bought by the high school students along with sandwiches and during evening, housewives buy 1 litter packages. Therefore, using this POS data the trucks will be scheduled to deliver 350 ml packages before 7 AM, 500 ml packages and sandwiches before 11.30 AM and 1 litter packages before evening in all the stores of SEJ. It would be difficult for SEJ to operate in 1200 square feet stores and delivering the right product in the right time without having proper POS data. Furthermore, POS data helps the managers to determine replenishment lead time, improve the quality of the existing products and develop ideas for new products. In words, for this type of convenience store POS data is the heart of the sales.

Recommendation & Conclusion: It has been 40 years, SEJ is providing the convenience to the customers and making huge margin. The average floor area of SEJ is 1,200 square feet. This space constraint may cost the company to lose its potential customers. The opportunity cost of losing customers can be substantially high. For any competitive company it is obligatory to ensure product availability, however, by stocking products its costly to increase the service level. Another major drawback of SEJ is it has its own designated wholesalers, which solely distribute the products. It requires too many trucks coming to load and unload products every day. In addition trucks always come up with fewer loads which reduce the efficiency. It reduces efficiency in the transportation system. As SEJ has many stores situated, they have to make deliveries to many stores around the country which in turns makes the On Time Delivery system inefficient. SEJ always need delivery of small lot size but Japanese distributors are used to deliver large lot sizes. Hence the traditional supply chain system of Japan should be altered because of SEJ, which doesnt make any sense. Finally, it is high time SEJ should expand as it is successful in Japan and now they should concentrate more on their global operation. They can start their business in China, India,

Brazil and other emerging markets; however being locally responsive will be the most important factor in that case.