Case Study

Presented By
Nyein Wai
Deepti Khatry
Seven-Eleven Japan Co.
Founder - Masatoshi Ito
Established by Ito Yokado in 1973
More than 53,000 stores by June 2014
The world’s largest chain in terms of
retail outlets
Customer visit – more than 1000 per
store per day in 2013
Time Line

1972 1974 1991

First approach First 7-11 store in IYG holding formed (7-11 48% & Ito-
Southland Koto-ku, Tokyo Yokado 52%), acquired 70% of
Corporation Southland commond stock worth
$430 million
Seven & i Holding
Southland entered Co. Ltd established
Southland agreed a into bankruptcy (7-11 + Ito-Yokado +
licensing protection Denny's Japan)
1973 1990 2005
 2013
Others

Convenience Top 5
Stores 2004 Convenience
Store Chains
Market in
Others
Japan

Top 10
Convenience
Store Chains
 700000
647000

600000

484000
500000
Average 400000
Daily Sales
per Store 300000

200000

100000

0
Seven-Eleven Other four major stores
 Franchise System

Develop supply and merchandise Operate and manage store

Provide the ordering system Hire and pay staff
Pay for the system operation Order supplies
Supply accounting services Maintain store appearance
Provide advertising Provide customer service
Install and remodel facilities GROSS PROFIT SHARE
Pay 80% of utility costs
Seven-Eleven
Franchise 45%
Owner
55%
 Bill payment
Accept installments on behalf of credit
companies
Internet shopping payment
Meal delivery
Services Ticket sales
Photocopying
Pick up for parcel delivery
7 dream e-commerce
Electronic money (Nanaco)
A convenience store chain attempts to be responsive and provide customers
with 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?

Question (1)
Ways Many locations
Rapid replenishment,
Appropriate technology deployment
Equally responsive supplier

Risks Costs coupled with demand uncertainty

Seven-Eleven’s 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?

Question (2)
 Each store will repeat the same demand pattern on a
Risks daily basis
Unanticipated demand will cause difficulty for regular
customers
May permanently shift, causing a local ripple
Delays in transportation issue
a disruption in traffic flow will result in low service
levels for the next wave of demand
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?

Question (3)
 Facilities

Distribution Less in number

Centers Held no inventory
Served stores in its cluster
Increased Efficiency as opposed to Responsiveness

Distribution More in number

Centers Kept inventory on shelf
Located in abundance and dominated the market
Were more responsive than efficient
 Inventory

Distribution No inventory
Centers Highly efficient
Poor at responsiveness

Distribution Kept Daily Stocks

Centers Low Inventory
Efficient but not very responsive
 Transportation
Vendor to DC
2 Level
DC to Store

Design Each truck would be stocked at the DC

One truck deliver supplies to more than one store.
Mode of transportation – Road
Rapid replenishment cycles
High Frequency
Provided High responsiveness as opposed to
efficiency
 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
 Pricing

Seven-Eleven offered reasonably priced products.

Their market dominance allowed ease of access to the
customers.
Both these factors led to stable demand
Pricing decision increased the efficiency of the supply
chain.
Seven-Eleven does not allow direct store delivery in Japan but has all
products flow though its distribution center. What benefit does Seven-Eleven
derive from this policy? When is direct store delivery more appropriate?

Question (4)
 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
Proper product assortment as per required temperature at DC thus
reducing perishability
Reduction in number of vehicle required for daily delivery at each store
Reduction in delivery costs
Rapid delivery of variety of fresh foods thus making the chain
responsive Rapid and reliable delivery to distribution trucks through
dedicated DC
 Direct Store Delivery

Demand from retailer is high enough to require FTL

When lead time is critical
Manufacturers and retailers in close proximity
Variety of products is less
Order size is more
Delivery Destinations are few
What do you think about the 7dream concept for Seven-Eleven in Japan?
From a supply chain perspective, is it likely to be more successful in Japan or
the United States? Why?

Question (5)
7-Dream Concept

E-commerce platform
Utilize existing
distribution network
Increased
Responsiveness
Economical
High Density Network
Distribution
 Japan or U.S

Number of store in Japan = 10,615

Number of stores in US = 5,798
More convenient in Japan to pick delivery from any store because of
number of stores
Transportation cost will increase in US as there is different
distribution structure and consumer prefer home delivery
Store density area ratio is higher in Japan than in US, thus making it
inconvenient for US customers to pick up from stores
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.

Question (6)

Reduced cost
Improved aggregation
Focus on Important tasks.
Increase in responsiveness
Increase in variety of fresh products
Reduction in stock out
Increase in distribution network and
support to stores
Reduction in lead time for Fresh
products
CDCs
Outsourcing cost
Lack of control
Delivery Fluctuations
Product assortment will occur at
store thus increase in time Increase
in Labour cost
High coordination is required
between DSD, Wholesalers and CDC
Increase in cost for CD
The United States has food service distributors 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?

Question (7)
 Self Distribution
Center

Backward integration Extra effort to build supplier

Scope for future expansion network
Control over SC MIS maintenance
Reduction in replenishment time High risk
Reduction in dependency
 Outsource

No effort to build supplier network Increase in dependency

No data maintenance No control over supply chain
Low cost Increase in lead time
Risk sharing Forward integration chances by
outsourcing part
 Conclusion

Faster Replenishment method

Improve supply chain integration
DSD is not always the best strategy
7dream concept works better in Japan than in US
Only employ CDC’S if store density is high enough
Improve monitoring for outsourcing operations