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7-eleven case study

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on 19 November 2014

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Transcript of 7-eleven case study

7-eleven japan co.
case study

History and Profile
The company was first listed on the Tokyo Stock Exchange in October 1979.
In 1990, Southland Corporation entered into bankruptcy protection.
In 1991, IYG holding acquired 70% of Southland’s common stock.
Between 1985 and 1994, the number of stores increased from 2,299 to 5,523; sales increased from 386 billion Yen to 1,282 billion Yen; Net income increased from 9 billion Yen to 46 billion Yen.
In 1994, Seven-Eleven Japan ranked first among Japanese retailers in terms of ordinary profit.
Same year, customer visits to Seven-Eleven outlets totaled 1.8 billion, which translates to every person in Japan visiting a Seven-Eleven on average 15 times a year!

History and Profile
2000February Establishment of e-commerce company, 7dream.com
2003August Total number of stores reached 10,000.
2005February 7-Eleven, Inc., became a subsidiary of Seven-Eleven Japan. ATMs installed at Seven-Eleven stores reached 10,000.
In 2012 their total sales were 3500 billion yens.
As of June 2013 7-Eleven has 15,504 stores in Japan alone.
total no. of stores
What made them so successful ???
total sales
7-eleven supply chain
Introduction
7-Eleven is part of an international chain of convenience stores.

 7-Eleven is the world's largest operator, franchisor, and licensor of convenience stores with more than 50,000 outlets.

7-Eleven branded stores under parent company Seven & I Holdings Co. are located in 16 countries with its largest markets being Japan (15,000), the United States (8,200), Thailand (6,800), Canada, the Philippines, Hong Kong, Taiwan, and Malaysia.

7-Eleven Japan runs all 7-Eleven franchises worldwide and is headquartered in Tokyo, Japan.

7-ELEVEN JAPAN CO.
strategy
Customer checkout process . Clerk records the customer’s gender, (estimated) age and purchased items. These Point of Sales (POS) data are transmitted to database at the headquarters.

Daily use of the data

Headquarters aggregate the data by region, products and time and pass to suppliers and stores by next morning. Store managers deduce trend information.

Preventing entry by competitors.

Combination of Own and Franchisee Stores. gross profits shares (45% SEJ; 55% store)

strategy
Area/Market Dominance Strategy and it’s advantages were:

High Distribution Efficiency.

Brand Awareness.

System efficiency.

Franchisee Support Services.

Advertising effectiveness.

Entry barrier for competitors.

Obviously Their SCM!!!!
7-Eleven Japan’s Competitive Strategies
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.

7-Eleven Japan’s Competitive Strategies
To provide high-availability of a variety of reasonable quality products at reasonable price.

Cluster of stores (50-60) in small geographical area supported by a Distribution Centre (DC)

Commitment to customers and friendly service. Greater familiarity with customers .

Outsourcing policy and ability to manage suppliers relationship.

First mover advantage

Area/Market Dominance Strategy:


The market leader is dominant in its industry. It has substantial market share and extensive distribution arrangements. It is typically the industry leader in developing innovative new products and business methods.
it has the most flexibility in crafting strategy. However it is in a very visible position and can be the target of competitive threats and government anti-combines actions.
Store information and contents
Store size = 150m2, 3000 items.

Average inventory at store of 3000 Stock Keeping Units (SKU), with max capacity of 5000 SKUs.
Products include:

Food Items.

Beverages.

Magazines.

Soaps, Detergents etc.

Game, Software.

Seasonal items.
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: The company said that 7dream.com shoppers will be able to browse through over 100,000 items, including music, flowers, and photo supplies, place their orders online, and then go to their local 24-hour 7-Eleven stores to pay for and collect their purchases.
Supply Chain Drivers Analysis
Supply Chain Decision-Making Framework
Facility
Facilities were at 2 levels:
1) Distribution Centres (DCs)
2)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
1) DC
- No inventory.
- Highly efficient.
- Poor at responsiveness.
2) 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) at 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.

7-Eleven’s Distribution System
convenience at the store
7-Eleven’s Distribution System
The major objective was to carefully track sales of items & offer short replenishment cycle times.
When a store placed an order , it was immediately transmitted to the supplier as well as to the distribution center.
Key to store delivery was what 7-eleven called combine delivery system.
The distribution system enabled 7-eleven to reduce no of vehicles required for daily delivery service to each store , even though delivery frequency was high.

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.
7 eleven convenience store applied Different Approaches for Increasing responsiveness:
-- Local Capacity.
-- Local Inventory.
-- Rapid Replenishment.
7 eleven faced Risks associated with attempting to micro-match Supply & Demand :
1) High Cost of Transportation.
2) High Order Costs
Benefits of DCs:
-- Reduces complexity at store level
-- Organizes Store demand at DC
-- Reduces complexity and costs for Vendors to directly deliver at the stores.

direct store delivery is more appropriate when:
-- Variety of products is less
-- Order size is more
--Delivery Destinations are few



micro-match of supply and demand:
changing the merchandise mix by the (location, time of day, day of week, and season).
Full transcript