Supply Chain Management

SEVEN – ELEVEN SUPPLY CHAIN FRAMEWORK

Submitted to: Submitted by:

Prof. Somonnoy Ghosh PGDM – C | Group - 7

Ojasvi Bhartiya (17DM155)

Pallavi Singh (17DM156)

Rishabh Agarwal (17DM185)
Rishabh Malhotra (17DM186)
Sandeep Bansal (17DM207)
Sanjukta Chakraborty (17DM208)
Supply Chain Framework

A. COMPETITIVE STRATEGY

 The company was able to make high profits due to the economies of scale. Seven-
Eleven served 50-60 stores using a single Distribution Centre (DC).
 The company also started providing services such as Electricity Bill Payment, Insurance
Bill Payment, and Telephone Bill Payment at the store itself, in order to attract more
customers.
 All the stores were visually merchandised and stocked based upon the needs and
wants of the population surrounding the particular store, for customer satisfaction.
 Seven-Eleven also used new and innovative technologies in order to narrow down
their costs. They used scanner terminals through which they were able to reduce the
number of vehicles that visited a store from 70 to 9 in the time span of 32 years.
 The company started manufacturing many products themselves. About 52% of the
products in the stores were manufactured by the company itself, which helped them
to reduce costs related to supplier margins.
 Meal delivery service utilizing Seven-Meal
o Ordering- in store, by phone, by fax, through the internet
o Receiving- in store, at home (delivery)
B. SUPPLY CHAIN STRATEGY

Supply chain strategy can be ascertained majorly on the basis of efficiency and responsiveness
inter alia.

1. Efficiency
a. Fall in the number of vehicles from 70 to 9
b. 7-eleven’s combined delivery system

The above two causes work in tandem with each other in order to determine an improved
efficiency of the company in recent times.

Minimisation of required vehicles to facilitate daily delivery saw a transformation in terms

of efficient service provided to these stores since 1974 to 2006. This reduction came with
increase in frequency of delivery along with reduction of delivery cost.

Combined delivery system was established as one of the major reforms in terms of
improvement in delivery of food items to stores from DCs as all similar products from
various suppliers were concentrated to a single truck. These temperature regulated
control trucks were divided into-

i. Frozen food- delivered 3 to 7 times a week

ii. Chilled foods- 3 times daily
iii. Room-temperature processed foods- once a day
iv. Warm foods- 3 times daily

Thus the quantum of trucks were linked to the volume of sales. It was therefore
responsible for the reduction in the number of vehicles required for delivery to the stores.
All deliveries were made during off-peak hours thereby facilitating easy scanner check for
the products leading to reduction in time spent at each store.

2. Responsiveness

Seven Eleven along with having an optimal efficiency didn’t have a backseat when it came
to responsiveness which is evident from the following facts:-

a. In the end of 2013, Seven-eleven Japan had 171 daily production facilities and 158
DC’s across japan.
b. It had a huge market coverage with 16000 stores in Jan 2014.
c. Adding to the already existing stores, 1500 new stores were opened in the end of
February 2014.
d. Furthermore, Seven-eleven Japan had at least 50 to 60 stores opened in a market
ensuring high density market presence.
e. Each store carried 3000 SKU’s.
f. In order to further enhance its responsiveness, Seven-eleven Japan also launched
Seven Premium Pvt Brand which offered 1035 SKU’s.
Seven-eleven Japan had adopted integrated store information system to ensure that the
relevant information kept on reaching distributors, suppliers and other related parties
increasing responsiveness.

C. Supply Chain Performance Drivers for Seven-Eleven Japan

1. Facilities:
Emphasis: High Efficiency with adequate responsiveness. To ensure efficiency, Seven-
Eleven Japan based its policy of network expansion on a ‘market-dominance strategy’.
Entry into any new market was built around a cluster of 50 to 60 stores supported by a
distribution centre. Such clustering gave Seven-Eleven Japan a high-density market
presence and allowed it to operate an efficient distribution system while also increasing
its proximity with customers resulting in increased responsiveness.
Also, processed food and fast-food items were big sellers for the stores and contributing
to about 60 percent of the total sales at each stores. By February 2004, Seven-Eleven
Japan had 290 dedicated manufacturing plants that only produced fast foods for their
stores. This contributed significantly to efficiency.
2. Inventory:
Emphasis: High efficiency with good responsiveness. Seven Eleven Japan has a
distribution system that doesn't carry any inventory. It has 293 dedicated distribution
centres (DCs) that merely transfer inventory from supplier trucks to Seven-Eleven
distribution trucks. This accounts for high efficiency in inventory operations.
Also, as Seven-Eleven Japan replenishes its stores with breakfast items in the morning,
lunch items in the afternoon, and dinner items at night, the available product variety
changes by time of day. Seven-eleven responds very quickly to replenishment orders,
by placing orders less than 12 hours before they are supplied. This practice makes the
seven-eleven inventories very responsive.
3. Transportation:
Emphasis: High responsiveness with good efficiency. Seven-Eleven had a dedicated
transport facility to transfer the inventory from suppliers to distribution centres and
then from distribution centres to individual stores. The key to store delivery is the
‘Combined Delivery System’. At the distribution centre, delivery of like products from
different suppliers is directed into a single temperature controlled truck. There are four
categories of temperature controlled trucks: frozen foods, chilled foods, room
temperature processed foods, and hot foods. Each such truck makes deliveries to more
than one retail store. The number of store per truck depends on the sales volume. All
deliveries are made during off-peak hours and are received using the scanner terminals.
The system does not require the delivery person to be present during the scanning of
delivery due to trust system, hence, cutting down on the time spent at each store during
delivery. It enabled Seven-Eleven to reduce the number of vehicles required daily for
 delivery service to each store, even though the delivery frequency of each item is quite
high.

4. Information: Emphasis: High responsiveness with good efficiency. Seven-Eleven Japan

attributes a significant part of its success to a wide-ranging store information system
installed in every outlet and linked both to suppliers and the Seven-Eleven distribution
centres. Seven-eleven has a dedicated ISDN installed, linking more than 5000 stores.
The two way, high speed on-line communication capability of ISDN enabled Seven
Eleven to collect, process, and to feed back POS data quickly.
The hardware at a store is as follows: 1. Graphic order terminals for placing orders
linked to the store computer. 2. Scanner terminals to scan deliveries from the
distribution centre. 3. A store computer that links to the ISDN network 4. POS registers
linked to the store computer. The Store Computer is linked to the ISDN network, the
POS register, the graphic order terminal and the scanner terminal. It communicates
between the various input sources, tracks store inventory and sales, places orders,
provides detailed analysis of POS data and maintains and regulates store equipment. All
sales data collected by 11 p.m. is organized and ready for analysis by next morning. The
data is analysed on a companywide, district, and store basis .The analysed and updated
data is sent back to the Seven Eleven stores via the ISDN. The main objective of the
analysis is to improve the ordering process. A major benefit of the information system
is that it has allowed Seven Eleven stores to better match supply with demand and to
adjust the merchandising mix on the shelves according to consumption patterns in the
course of the day. This results in high responsiveness and efficiency of the entire supply
chain.
5. Sourcing
Emphasis: High Efficiency. Seven-Eleven outsourced the transportation to Transfleet
Limited that transferred inventory from supplier truck to Seven-Eleven distribution
trucks. This allowed Seven-Eleven to avoid the risk of price fluctuation, maintenance of
the vehicle’s fleet and cost of fleet staff.
6. Pricing
Emphasis: High Efficiency with good responsiveness. Seven-Eleven offered products
that were reasonably priced. It was complimented by their market dominance strategy
that allowed ease of access to the customers. Both these factors led to an increment to
the efficiency of supply chain.

It is concluded that the supply chain strategy of seven-eleven is that of achieving

efficiency with adequate stress on responsiveness.