Seven-Eleven Japan Co.

Rohan Raj Mishra

IIFM
Supply Chain Drivers Analysis
for

Outline
History & Profile
Strategy & Tactic of Seven Eleven
Food Items Classification
Convenience at the Store
Schematic Representation of the Supply Chain
Supply Chain Framework
Supply Chain Drivers Analysis
Case Questions Discussion

History and Profile
Founded by Masatoshi Ito post 2
nd
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.
In 1990, Southland Corporation entered into bankruptcy
protection.
In 1991, IYG acquired 70% of Southlands common stock.

Number of Stores of
Seven-Eleven in Japan
0
2000
4000
6000
8000
10000
12000
1
9
7
4
1
9
7
5
1
9
7
6
1
9
7
7
1
9
7
8
1
9
7
9
1
9
8
0
1
9
8
1
1
9
8
2
1
9
8
3
1
9
8
4
1
9
8
5
1
9
8
6
1
9
8
7
1
9
8
8
1
9
8
9
1
9
9
0
1
9
9
1
1
9
9
2
1
9
9
3
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
7
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
Number of Stores
Number of Stores
Annual Sales in Billion Yen of Seven-
Eleven in Japan
0
500
1000
1500
2000
2500
1
9
7
4
1
9
7
5
1
9
7
6
1
9
7
7
1
9
7
8
1
9
7
9
1
9
8
0
1
9
8
1
1
9
8
2
1
9
8
3
1
9
8
4
1
9
8
5
1
9
8
6
1
9
8
7
1
9
8
8
1
9
8
9
1
9
9
0
1
9
9
1
1
9
9
2
1
9
9
3
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
7
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
Annual Sales (Billion Yen)
Annual Sales (Billion Yen)
So how did 7-eleven manage
such phenomenal growth?
7-Eleven Japans Competitive Strategy
To provide high-availability of a variety of
reasonable quality products at reasonable
prices
Strategy & Tactic of Seven Eleven
Strategy of 7-Eleven Japan
Market Dominance
Cluster of stores (50-60) in small geographical area
supported by a Distribution Centre (DC)
Tactic
Combination of Own and Franchisee Stores
In 2004 Franchisee Commissions accounted for 68% of
Total revenue from operations
By 2004, the company had presence in 70 prefectures
of Japan
Advantage of Dominance Strategy
High Distribution Efficiency
Brand Awareness
System efficiency
Franchisee Support Services
Advertising effectiveness
Entry barrier for competitors
Continued
Store Size was 150 square metres
Average inventory at store of 3000 Stock Keeping
Units (SKU), with max capacity of 5000 SKUs
Emphasis on regional merchandizing
Goods included:
Food Items
Beverages
Magazines
Soaps, Detergents etc.
Game, Software
Continued
Food Items Classification
Chilled temp item.
Sandwiches, sweets, milk
Warm temp item.
Box lunch, rice balls, fresh bread
Frozen item
Ice cream, Ice cube etc.
Room temp item
Canned food, Instant noodles etc.
Convenience at the Store
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
etc.
Supplier
(frozen)
Supplier
(Warm)
Supplier
(Room
Temp.)
Supplier
(Cold)
DC
Stores Stores Stores Stores
Stores Stores Stores Stores
50-60
stores
Schematic Representation of Supply
Chain
Supply Chain Drivers Analysis
Competitive Strategy
Supply Chain
Strategy
Efficiency
Responsiveness
Facilities I nventory Transportation
I nformation
Supply chain structure
Cross Functional Drivers
Sourcing Pricing
Logistical Drivers
Supply Chain Decision-Making
Framework
Facility
Facilities were at 2 levels
Distribution Centres (DCs)
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
@ DC
No inventory
Highly efficient
Poor at responsiveness
@ 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) @ 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.
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

Q1
Different Approaches for Increasing
responsiveness
Local Capacity
Local Inventory
Rapid Replinishment
Q2
Risks associated with attempting to micro-
match Supply & Demand
High Cost of Transportation
High Order Costs
Q3
Supply Chain Drivers have already been
discussed
Q4
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
When Direct Store Delivery?
Variety of products is less
Order size is more
Delivery Destinations are few.
Q5
7dream.com- an e-commerce initiative
In 2004



Area of USA is more than 26 times that of Japan
7dream concept would be more successful in
Japan
Country No. of Stores
Japan 10615
US 5798
Thank You