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
Sole Control, Single Store had grown into a $3 million company 1st Seven Eleven convenience store opened in Tokyo Southland corporation entered bankruptcy protection

1960

1972

1974

1979-84

1990

1991

Approached Southland Corporation

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

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
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

Facility Location

Capability Development
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

Inventory Management & Information Infrastructure

Capability Development
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

Transportation

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

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.

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.