Case: SUSHIRO - SUPPLY CHAIN MANAGEMENT

Mr. Koichi Mizutome, the Chairman of the Akindo Sushiro chain 1 sat back in his office and commented “I
want many people to eat delicious sushi.” The entrepreneurial spirit has been embraced since the company
was founded. Sushiro was the largest Kaitenzushi i (conveyor belt sushi) company in sales turnover. It was
Japan’s sole big sushi chain that prepared all dishes within its restaurants without a central kitchen. Sushiro's
dedication to maintaining the freshness of its ingredients was instrumental in achieving the first position in the
food and dining category of the Japan Customer Satisfaction Index in both 2009 and 2011 2. The corporate
philosophy of “Tasty sushi for all. Tasty sushi for the heart.” is distinct about offering a good taste of sushi.

Company Background
Sushiro was established in 1984 as a sushi bar in Higashi-Osaka, Japan. The company quickly expanded to
become the leader of conveyor belt sushi chains in Japan, with a focus on providing high-quality sushi at an
affordable price. Sushiro consistently achieved first place in sales for nine consecutive years since 2012. Its
utilization of fresh ingredients, cost-cutting techniques utilizing information technology, and dedication to
food safety were all credited for its success. The company placed a high priority on keeping its restaurants
clean to uphold the quality of its brand while providing excellent customer service.

Sushiro launched a growth plan in the early 2000s that included establishing additional locations and acquiring
smaller sushi restaurants. By 2010, the company operated over 100 locations throughout Japan. In 2013,
Sushiro opened a store in Taiwan as part of its initial international growth, and it subsequently opened locations
in South Korea, Hong Kong, and Singapore. Sushiro established its first store in Seattle as part of its ongoing
US market expansion in 2020. The business intended to carry on with its global growth, concentrating on
North America and Southeast Asia. Sushiro had more than 600 stores operating in Japan as of the first quarter
of 2022 and more than 60 stores abroad. (Exhibit 1).

Kaiten Sushi Total Management System (KSTMS)

Sushiro's products had an average cost rate of roughly 50%. Its commitment to producing high-quality and
delicious food was the driving force behind this achievement. To maintain this high-cost rate, reducing food
waste is crucial. For the past 20 years, the company has been utilizing information technology in its shop
operations to reduce food loss 3. Sushiro implemented the Kaiten Sushi Total Management System (KSTMS)
to reduce food waste by managing sales trends and customer demand forecasts. The system consisted of
various subsystems, including Ingredient Freshness Management, Customer Order Management System, and
Customer Information Management.

Ingredient Freshness Management: This subsystem was designed to ensure the consistency and quality of
sushi dishes served to customers by monitoring and controlling the flow of sushi dishes on the conveyor belt.
There was a mechanism whereby plates installed with an IC tag ii that had traveled a certain distance down the
revolving lanes would be automatically discarded. For example, a tuna roll dish would be automatically
discarded after 350 meters, which was about 40 minutes. This practice ensured that only fresh products were
constantly flowing into the lanes and allowed kitchen staff to adjust the production plan accordingly. By
analysing more than 1 billion dishes annually through the use of technology, Sushiro was able to accurately
forecast the number of dishes that customers would order within the first 1 and 15 minutes after being seated.

i Kaitenzushi originated in Kansai a little over 50 years ago and has long been a major player in the food and
beverage industry.
ii IC tag has the function of wireless communication by radio wave. The structure is integrated by an integrated circuit

chip and antenna.

This case was written by Prof. Sandy Wong for the sole purpose of class discussion. The author does not intend to illustrate either
effective or ineffective handling of a managerial situation. It may not be transmitted, photocopied, digitized or otherwise reproduced
in any form or by any means without the permission of the author. The contents and data described in the case are based on the case
author’s primary source and publicly available information but have been modified as necessary. The author may have disguised
certain names and other identifying information to protect confidentiality
This information was then used as a reference for loading food items into the lanes, minimizing food waste,
and ensuring the availability of fresh ingredients. The real-time tracking of inventory and automated
replenishment of ingredients allowed Sushiro's restaurants to maintain adequate stock levels of fresh
ingredients while reducing waste from obsolescence (Exhibit 2).

Customer Order Management System: This subsystem was initially designed to take customer orders
through intercoms within a store. However, in response to market changes and advancements in technology,
Sushiro updated this subsystem to be more efficient and responsive to customer needs. For example, in 2008,
the company switched to touch panels for customer order management, and in 2016, it introduced a system in
which orders were delivered through dedicated lanes in stores in urban areas. In 2019, Sushiro began
introducing dedicated kitchen lanes to streamline workflows in the kitchen. Customers could place their orders
using the electronic menu on the tablet provided on each table, and the subsystem automatically sent the order
to the kitchen for preparation. As each dish was prepared, it was placed on the Kaiten conveyor belt system
and delivered to the customer's table when it passed by.

Customer Information Management: This subsystem collected and managed data about customer profiles,
such as their order history, preferences, and demographic information. This data was used to identify sales
trends and patterns in customer behavior, which helped the company to better understand and meet its
customers' needs. For example, if the system detected that a particular customer frequently ordered spicy tuna
rolls, Sushiro could use this information to offer them personalized recommendations or promotions for similar
dishes. In addition to these operational improvements, Sushiro also focused on using data and advanced
technology to improve its demand forecasting capabilities. The company forecasted its customer demand
based on historical data stored in the KSTMS such as sales volume, number of customers visiting each
restaurant on different days of the week, etc. to perform statistical and trends analysis.

Sourcing Strategies
Wild fish – In the past, Sushiro primarily sourced wild fish from Japanese trading firms that specialized in
seafood. Nonetheless, the company recognized the need to expand its sourcing globally to ensure a consistent
supply of high-quality fish. To achieve this goal, Sushiro aimed to establish a reputation for quality in Japan
and expand its sourcing relationships with suppliers in other countries. This required the company to navigate
legal issues in certain countries and tailor its procurement strategies to the specific needs of those regions.
Sushiro dispatched merchandisers to regions where it had branches to perform local procurement and source
ingredients that could be used in different countries, including Japan. The company also planned to establish
long-term business agreements with producers to foster more stable business interactions and better customer
service.

In September 2021, for example, the procurement team in Sushiro's Guangzhou branch began sourcing local
ingredients in China. The company also expanded its sourcing to Thailand and other Southeast Asian countries
to increase the number and variety of marine resources. However, due to the rising sea temperature, marine
resources have been gradually moving north. The company continued to explore other countries such as Russia
as potential sources. Despite these efforts, the cost of marine resources continued to rise annually. In addition
to sourcing wild fish, Sushiro also had to contend with a scarcity of farmed fish. To meet this challenge, the
company sought to partner with suppliers who could help increase the farming volume of the types of fish that
it needed.

Farmed fish - Sushiro recognized the declining yields of wild fish catches and the potential for this trend to
continue in the future. In light of this, the company made the strategic decision to focus on expanding its
aquaculture-based production to increase the throughput of marine resource production. Historically, the
industry standard for the production ratio between aquaculture and wild fishing was approximately 50/50.
However, Sushiro's ratio was 35% for aquaculture and 65% for wild fishing. This was primarily due to a
reliance on domestically farmed young yellowtail and seabreams as well as overseas aquaculture, which
mainly consisted of salmon and shrimp.

As the wild fish catch continued to decrease at a faster rate than expected, Sushiro aimed to adjust its ratio to
match the industry standard. In anticipation of major environmental changes, such as climate change, the
company decided to invest in growth in aquaculture businesses and cutting-edge technologies. The company
slowly expanded the ratio of aquaculture in its production and procured aquaculture-raised fish that was safe,
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secure, and boasted a high degree of traceability 4. Sushiro managed the strategic sourcing decision of its fish
sources by dispatching its merchandisers to multiple overseas operations points such as Europe and the Far
East region, to secure sustainable sourcing through signing long-term contracts with multiple reliable suppliers.

Strategic Alliances

To combat the decrease in yields from catching wild fish and the increased cost of marine resources, Sushiro
entered into a joint venture with Takuyo 5, an aquaculture business operator founded in 1951. While initially
focused on pearl aquaculture in Mie prefecture, Takuyo later expanded to Kumamoto and Kagoshima
prefectures and developed advanced fish breeding technologies such as artificial hatching of fish eggs for
seabream, bluefin tuna, and pink tuna.

By partnering with Takuyo, Sushiro aimed to secure a stable supply of marine resources for their sushi dishes.
This joint venture allowed Sushiro to tap into Takuyo's expertise in aquaculture and advanced fish breeding
technologies, which could potentially reduce the cost of sourcing fish and improve the quality and freshness
of their ingredients.

Sushiro also collaborated with Owase Bussan Co., Ltd 6., one of its long-term suppliers, to expand and stably
supply farmed fish for its menu offerings. Owase Bussan which had over 20 years of experience in the
aquaculture of yellowtail and other fish species, was committed to developing and implementing advanced
aquaculture technologies while also prioritizing the prevention of marine pollution caused by fish food. To
ensure high-quality and safe fish products, Owase Bussan used environmentally friendly fish pellets that were
nutritionally controlled. The company also provided effective feeding by carefully adjusting the size and
amount of feed, as well as the feeding pace, based on the growth of the fish 7.

COVID-19

The outbreak of the COVID-19 pandemic had a substantial impact on the global supply chain, with many
industries experiencing disruptions and challenges. The food industry, in particular, faced various issues,
including rising costs of procurement and instability in the supply of raw ingredients. Sushiro, being a
prominent player in the sushi industry, had also been significantly affected by the pandemic.

The closure of borders and quarantine measures implemented by various countries to curb the spread of the
virus resulted in disruptions in the supply chain of seafood products, affecting both the quantity and quality of
the seafood available for procurement. This situation had led to a significant increase in the cost of
procurement of marine resources, with some products experiencing price hikes of up to 50%. Further, there
had been delays in the delivery of seafood products due to restrictions on transportation and logistical
challenges.

To counteract the impact of COVID-19 on its supply chain, Sushiro implemented a strategy to establish a
consistent demand for raw ingredients by purchasing them at fixed prices throughout 2021, rather than relying
on market prices. The company believed that its significant annual fish consumption could stabilize the cost
of procurement. The partnership between Sushiro and Takuyo focused on the development of new seeds and
saplings using innovative genome editing technologies. While aquaculture companies often opted for species
that were easier to farm and less risky, this partnership created seasoned saplings that could grow quickly and
with less risk.

Sushiro further collaborated with its suppliers to establish more efficient and effective supply chain
management systems. By sharing information using VMI on inventory levels, delivery schedules, and demand
forecasts, Sushiro and its suppliers have been working closely together to optimize their procurement
processes and minimize any potential disruptions. The company recently prioritized the development of a
more robust supply chain by investing in advanced technologies like artificial intelligence and blockchain.
These technologies were implemented to improve the visibility and transparency of the supply chain. Artificial
intelligence has been utilized to optimize inventory management, demand forecasting, and route optimization,
ensuring efficient and timely delivery of ingredients to Sushiro's restaurants. Blockchain technology, on the
other hand, has been employed to create a secure and tamper-proof record of every transaction, providing a
transparent and traceable view of the entire supply chain, from sourcing to distribution.
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Exhibit 1

Numbers of Stores in Japan & Overseas Markets

FY2021/9 FY2022/Q1
JAPAN
Suburban model 564 573
Urban model 31 33
Takeout model 15 20
Total 610 626

OVERSEAS
Standard model 58 62
Takeout model 1 2
59 64

Compiled by the author based on content from Food & Life Companies https://www.food-and-life.co.jp/.

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Exhibit 2

The Kaitenzushi in Sushiro. Source: Photo taken by the author

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References

1
https://www.akindo-sushiro.co.jp/en/
2
https://www.campaignlive.co.uk/article/important-global-ad-stories-week/1401686
3
https://food-and-life.co.jp/en/sustainability/sushisystem/
4
https://food-and-life.co.jp/en/sustainability/
5 https://www.food-and-life.co.jp/en/sustainability/tcfd/

6 https://www.owasebussan.net/

7 https://www.food-and-life.co.jp/sustainability/ansin/