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7-Eleven Supply Chain
Why is this convenient?
Long trading hours up to 24/7
Located at crowded streets and urban areas
Only an addition to usual grocery stores
High density of stores
Shorter cashier lines

The Association for Convenience & Fuel Retailing
B. Overview of 7-Eleven
Founded 1927 in Texas
Originally trading hours from 7 a.m. to 11 p.m. (since '46)
1958 Ito-Yokado Co. Ltd. (Japan) was incorporated
Today 7-eleven is part of the Seven & i Holdings
Franchise system
46,600 stores (2012, +1 store every 2 min)
48.7 billion US$ revenue (2012, store sales)
2,800 products carried at a store

7-Eleven & I Annual Report 2012
A. What is a convenience store?
Small shop
Everday items like groceries, soft drinks and toiletries
Tobacco, alcohol, newspaper
Money order
Wire transfare
Sometime part of a petrol station
Only 250 sqm

Gablers Wirtschaftslexikon
2. 7-Eleven in Japan
Japan is special for its 7-Eleven history
More than 14,000 stores (largest world wide)
#1 in market share (36%)
Small and medium size stores
18,000 store visitors per day
Offers extra services like ATM, wire transfer, bus tickets

7-Eleven & I Annual Report 2012
3. Business Model
7-Eleven & I Annual Report 2012
5. Strategic Fit
Strategic fit means that the supply chain strategy and the competitive strategy have aligned goals.

Steps to achieve strategic fit:
1. Understanding the customer and the supply chain uncertainty
2. Understanding the supply chain capabilities
3. Achieving strategic fit


5.1 Competitive Strategy
Providing the customers with
convenience, availability and responsiveness.

--> Provide customers with WHAT they need, WHERE they need it, WHEN they need it.

5.2 Understanding the Customer
Strategic Fit
6. Supply Chain Drivers
A. Facilities
B. Inventory
C. Transportation
D. Information
E. Sourcing
F. Pricing

6.1 Supply Chain Strategy
3 logistical drivers
3 cross-functional drivers

7-Eleven is following a High Responsive Strategy


A. Facilities I
Market-dominance strategy
50-60 stores supported by a DC
New openings in existing clusters
--> Limited geographic presence in Japan

Advantages of this strategy:
Distribution efficiency
Higher brand awareness
Improved advertising effectiveness
Prevents competitors‘ entrance into the dominant areas
A. Facilities II
Manufacturing:
Decentralization: 290 dedicated manufacturing plants for fast food

Warehousing and Distribution Center methodology:
Cross-docking facilities

B. Inventory
Standard size of stores changed from 125sqm to 150sqm (2004)
3,000 SKUs per store --> aligned to local preferences
Mix of 7-Eleven brand products (Seven Premium) and manufacturer brand products
Products are only stocked at stores, but at a low level
No warehouses

Product categories:
Beverages, Food items
Magazines, Game software, Music CDs
Other consumer items (e.g. soap)


(= physical locations in the SC network)
(= encompasses all raw materials, work in
process and finished goods)
C. Transportation
Outsourced
Exclusively for the use of 7-Eleven
--> Flexible, fast (off-peak hour delivery)
--> Rapid replenishment cycles

Mode of transportation: trucks

Combined delivery system

(= moving inventory from point to
point in the SC)
D. Information I
(= data & analysis concerning facilities,
inventory, transportation, cost etc)
D. Information II
Pull system:
For food, especially hot and fresh food
Push system:
For Beverages, Tobacco etc.



E. Sourcing
Outsourced
Food items are from 290 dedicated manufacturing plants
Franchise operated stores
Transportation

In-house
7-Eleven store brand products
Company operated stores


--> Increase the SC surplus




(= the choice of who will perform a
particular SC activity)
F. Pricing
Relatively high / reasonable prices due to
High product availability (need for rapid replenishment)
Opening hours (24/7)
Customers are less price sensitive and willing to pay more if its convenient
Stable demand






(= determines the amount to charge
customers in a SC)
10. Sources
7-Eleven & I Annual Report 2012, http://www.7andi.com/dbps_data/_template_/_user_/_SITE_/localhost/_res/ir/library/ar/pdf/2012_all.pdf
7-eleven.com, http://www.7-eleven.com
Anvari, http://www.anvari.net/1CostManagement/SupplyChainExamples/0136115438_ism/Chapter_03/Case_Study_03/Case_ch03.doc
Chopra, Sunil / Meindl, Peter: Supply Chain Management – Strategy, Planning and Operation, Essex, 2013, S.55-77
Gabler Wirtschaftslexikon, http://wirtschaftslexikon.gabler.de/Definition/convenience-store.html
http://de.scribd.com/doc/128243865/7Eleven-Case-SMU
Funding Universe, http://www.fundinguniverse.com/company-histories/7-eleven-inc-history/
Push vs. Pull supply Chain, http://schain24.blogspot.de/2013/04/about-push-pull-view-of-supply-chain.html
Strategic Sourcing, http://itdevinc.com/outsourcing.pdf
The Association for Convenience & Fuel Retailing, http://www.nacsonline.com/Research/Pages/What-is-a-Convenience-Store.aspx
Chopra, S / Meindl, P.
Mission and Vision statement
- Our Mission is to be Your Convenient Neighborhood Store -

Make lifes easier
Wherever, whenever
Guest treatment
Availability of the right products at the right time

- Our Vision Is to Be the Best Retailer of Convenience -





Supply Chain Performance
+ Reduce vehicle number
1974: 70 vehicles <-> 2006: 9 vehicles
+ Faster Replenishment by working on trust
+ React flexible to trends/forecasts
+ Better Communication to own suppliers
+ Quality guarantee
+ Reliability






7. 7-Eleven in USA 
About 7.149 stores (5.500 franchised)
1,350 further stores in 2013
33.4 billion US$ total store sales
Approx. 160 sqm sales floor space
Many not traditionally available convenience store products
Gasoline station at more than 2,400 stores
Fluctuation during the 1980s
Growing since 1998





7-eleven.com
7-Eleven & I Annual Report 2012
fundinguniverse.com

7. 7-Eleven in USA 
Reasons for the problems in the 1980s
7-eleven.com
7-Eleven & I Annual Report 2012
[19]
[19]
Reasons for the problems in the 1980s
+ Acquisition costs
+ Administration costs
+ Expanding





- Control
- Dependency
- Bullwhip-Effect
- Store density
- Competition




Reasons for the problems in the 1980s
7-Eleven.com
Chopra, S / Meindl, P.
Chopra, S / Meindl, P.
- Costs of IT-systems
- Infrastructure costs
Responsiveness Efficiency
Responsiveness Efficiency
Responsiveness Efficiency
Responsiveness Efficiency
Chopra, S. / Meindl, P.
7-eleven.com
http://de.scribd.com/doc/128243865/7Eleven-Case-SMU
7-Eleven & I Annual Report 2012
[21]
[21]
[21]
[22]
[23]
[23]
Chopra, S / Meindl, P.
Chopra, S / Meindl, P.
Chopra, S / Meindl, P.
Chopra, S / Meindl, P.

7-Eleven & I Annual Report 2012


Strategic Sourcing
Chopra, S. / Meindl, P.

[24]
[25]
[25]
Remodeling of 7-Eleven USA
Strong contracts with third-parties
Non-perishable goods
Direct Store Delivery
Fresh foods
Third-party vendors
Independently-owned bakeries and commissaries
Daily deliveries
Introduction of a retail information system

Supply Chain Drivers of 7-Eleven USA
Facilities

Combined Distribution Center Concept
Cross-docking facilities
Driving time from the CDC´s to the stores is about 90 minutes
Serving 200 stores on average
Short replenishment cycles of time-sensitive and perishable goods


Responsiveness Efficiency
Supply Chain Drivers of 7-Eleven USA
Inventory

Low inventory concept
about 2,500 different items
Many not traditionally available products
Mix of original 7-Eleven brand products and manufacturer brand products
Many products are developed especially for 7-Eleven stores
Preparation of hot food in stores (Local capacity)



Responsiveness Efficiency
Supply Chain Drivers of 7-Eleven USA
Transportation

Daily Delivery of fresh products via CDC´s
Reduce outbound transportation cost
Direct store delivery
Partnering with local companies
Off-peak hours delivery
Transportation system insures high efficiency




Responsiveness Efficiency
Supply Chain Drivers of 7-Eleven USA
Information

Retail information system
Graphical Order Terminal (in stores)
Scanner Terminal
POS Register
Store Computer
Trend Analysis
Push Processes for Beverages, Tobacco etc.
Pull Processes for Food





Responsiveness Efficiency

Chopra, S. / Meindl, P.

Supply Chain Drivers of 7-Eleven USA
Sourcing

Mix of own company operated stores and Franchising
Converting directly operating stores to franchise-operated stores
Focus on core business
Outsourcing of distribution and food processing businesses
Strong and tight contracts with third-parties
Partners with greater expertise and scale


-> Increase of supply chain surplus




7-Eleven & I Annual Report 2012
Strategic Sourcing
Supply Chain Drivers of 7-Eleven USA
Pricing

Convenience instead of the price is the main selling point
Core Business of 7-Eleven
Market analysis & consumer data allows 7-Eleven to set reasonable prices
24/7 Concept leverages higher prices
Promotions (buy one, get one free)


--> Profit maximization





7-Eleven USA Conclusion
7-Eleven USA is operating more efficient instead of responsive in comparison to Japan






8. 7 Dream Concept
E-commerce company
Established in 2000, Feb.
Goal: Exploit existing distribution system
Stores: drop-off & collection points, easily accessible
Intention: build on consumers preference

>> To serve the needs of our communities <<












Table of contents
1. Introduction to 7-Eleven
2. 7-Eleven in Japan
3. Business Model
4. SC Challenges
5. Strategic Fit
6. Supply Chain Drivers
7. 7-Eleven in the USA
8. 7 Dream Concept
9. Conclusion
10. Sources

1. Introduction to 7-Eleven
A. What is a convenience store?
B. Overview of 7-Eleven.

5.1 Value Chain
5.4 Supply Chain Drivers
Reasons for the problems in the 1980s
Different distribution structure than in Japan
Direct store delivery by manufactures and wholesalers
Lack of strong contracts/third parties
Supply/Wholesaler deliver also other convenience stores
No own product developments
Excess of inventory
Amount of inventory was three times higher than in Japan
Higher competition





Remodeling of 7-Eleven USA
Concentration on core business
Focus on a small, strategically vital set of capabilities
Outsourcing of distribution and food processing
Concept of Combined Distribution System (CDC)
Reinforcing fresh & hot food product developments



http://de.scribd.com/doc/128243865/7Eleven-Case-SMU


7-Eleven & I Annual Report 2012
Chopra, S. / Meindl, P.
Chopra, S. / Meindl, P.

Push vs. Pull supply Chain
7-Eleven & I Annual Report 2012
4. SC Challenges 
Small store sizes
Short replenishment cycles
High responsiveness
High costs for the complete supply chain
Many stores in small areas
Bullwhip-effect
Competitive and supply chain strategy fit together






Anvari
Background
Based on a survey by eSBook 92% of customers prefer picking up their online purchases

--> Extremely successful


[10]
Supply Chain: Push or Pull ?
Extensive integrated store information system to match supply to demand
Adjusting merchandising mix according to consuption patterns throughout the day


Cultural Characteristics
Individualistic society
Car-oriented society
Long distances and cheap fuel
Prefer home delivery
Tend to go to grocery shops (no frequent stops at a convenience store)


Collective society
Common usage of public transport
Prefer picking up their online purchases at their local convenience store
Frequent convenience store visits

Cultural Characteristics
Low store density
Greater store size
Increase transportation cost
More in-store preparation
Become more competitive, sales in the fresh-food sector


High store density
Small store size
High visit frequency ensure not occupying valuable store shelf space
Online deliveries exploits existing distribution network
Deeper & stable supplier

The integration of physical not virtual stores reflects japanese, not american preferences!


Would the 7-Eleven concept be successful in Germany?



Group Discussion
Germans are used to traditional supermarkets
Many alternatives with 24 hour operations
Higher prices
Do not carry nearly the selection of goods that are found in supermarkets
Concept is appropriate for high density urban areas
Difficult to duplicate the collective spirit that affects Seven-Eleven Japan

7-Eleven in Germany
7-Eleven works in a highly competitive market
Ancillary services makes shops attractive
Density of shops is the key for success
Different cultures and markets
Providing the customer with convenience


9. Conclusion
5.3 Understanding the SC Capabilities
Changing merchandise mix during a day
Handle a large variety of products
Quick responds to orders
High service level
--> Providing the customer with convenience, availability and responsiveness

Chopra, S / Meindl, P.
Chopra, S / Meindl, P.
Chopra, S / Meindl, P.
7-Eleven.com
7-Eleven.com
Chopra, S / Meindl, P.
How responsive do we have to be?
Chopra, S. / Meindl, P.
http://de.scribd.com/doc/128243865/7Eleven-Case-SMU


Graphic: http://media.transformanceadvisors.com/misc-website/bullwhip-01.png
Chopra, S / Meindl, P.

- Thank heaven for 7-Eleven -
Different distribution structure than in Japan
Direct store delivery by manufactures and wholesalers
Lack of strong contracts/third parties
Supply/Wholesaler deliver also other convenience stores
No own product developments
Excess of inventory
Amount of inventory was three times higher than in Japan
Higher competition





Net sales: 49.550.827US$
Cost of sales: 38.007.098US$
Chopra, S / Meindl, P.
7-Eleven.com
7-Eleven Annual Report 2012
Full transcript