Seven Eleven Japan (SEJ)

A Case Study

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 Factual Information on Seven Eleven Japan (SEJ)
 Largest convenience store in Japan with market value of $95 B. The third largest
retail company in the world after Wal-Mart and Home Depot.
 Established in 1974.
 In 2000, total sales $18,000 M, profit $620 M.
 Average inventory turnover time 7-8.5 days.
 Stock value increased by 3000 times from 1974 to 2000.
 In 1985, there were 2000 stores in Japan, increasing by 400-500 per year.
 Return on equity 14% over 2000-2004.
 A SEJ store is about the half the size of a US 7-eleven store,
that is about 110 m2.
 Sales:
– Products
» 32.9% Processed food: drinks, noodles, bread and snacks
» 31.6% Fast food: rice ball, box lunch and hamburgers
» 12.0% Fresh food: diary products
» 25.3% Non-food: magazines, ladies stockings and batteries.
– Services: Utility bill paying, installment payments for credit companies, ATMs, photocopying

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 More on SEJ
More factual info:
 Average sales about twice of an average US store
 SKU’s offered in store: Over 3,000 (change by time of day, day of week, season)
 Virtually no storage space
 No food cooking at the stores

Japanese Images of Seven Eleven:

 Convenient
 Cheerful and lively stores
 Many ready made dinner items I buy
 Famous for its great boxed lunch and dinner
 - On weekends, when I was single, I went to buy lunch and dinner

SC strategy:
Micro matching of supply and demand (by location, time of day, day of week, season)

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 Seven Eleven - Number of Stores
1999: 8,027
6000 2004: 10,356
5000

4000

3000 Number of Stores

2000

1000

0
85 86 87 88 89 90 91 92 93 94
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 Seven Eleven - Net Sales (B Yen)
Sales 1,963 B Yen in 2000

1400
1200
1000
800
Net Sales
600
400
200
0
85 86 87 88 89 90 91 92 93 94
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 Seven Eleven - Pre tax Profit (B Yen)

100
90
80
70
60
50 Profit
40
30
20
10
0
85 86 87 88 89 90 91 92 93 94
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 Seven Eleven - Inventory turnover (days)

14
12
10
8
Inventory
6
4
2
0
85 86 87 88 89 90 91 92 93 94
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 Information Strategy
Quick access to up to date information (as opposed to data):
 In 1991, SEJ implemented Integrated Service Digital Network to link stores, headquarter,
DCs and suppliers

 Customer checkout process

– Clerk records the customer’s gender, (estimated) age and purchased items. These Point of Sales
(POS) data are transmitted to database at the headquarters.
» Store hardware: Store computer, POS registers linked to store computer, Graphic Order
Terminals, Scanner terminals for receiving

 Daily use of the data

– Headquarters aggregate the data by region, products and time and pass to suppliers and stores by
next morning. Store managers deduce trend information.
 Weekly use of the data
– Monday morning, the CEO chairs a weekly strategy formulation meeting attended by 100
corporate managers.
– Tuesday morning, strategies are communicated to Operation Field Counselors who arrive in
Tokyo on Monday night.
– Tuesday afternoon, regional elements (e.g. weather, sport events) are factored into the strategy.
Tuesday nights, field counselors return back to their regions.

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 Information Analysis of POS Data
 Analysis of
– Sales for product categories over time
– SKU (stock keeping unit)
– Waste or disposal
– 10 day (or week) sales trend by SKU

 Sales trends for new product

– In the early 1990s, half-prepared fresh noodle sales were going up,
new fresh noodle products were quickly developed

 Sales trend by time and day

– Different sales patterns for different sizes of milk at different times of the day results in
rearrangement of the milks in the fridge. Extreme store micromanagement.
» Let us speculate: Flavored milks are put in front of the pure milks in the evening (or the morning?).

 List of slow moving items

– About half of 3000 SKUs are replaced by new ones every year
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 Facilities Strategy
 Limited storage space at stores which have only 125-150 m2 space
– Frequent and small deliveries to stores
 Deliveries arrive from over 200 plants.
 Products are grouped by the cooling needs
– Combined delivery system: frozen foods, chilled foods, room temperature and hot foods.
– Such product groups are cross-docked at distribution centers (DC). Food DCs store no
inventory.
– A single truck brings a group of products and visits several stores within a geographical region
– Aggregation: No supplier (not even coke!) delivers direct
 The number of truck deliveries per day is reduced by a factor of 7 from 1974 to 2000.
Still, at least 3 fresh food deliveries per day. Goods are received faster with the use of
scanners.
 Have many outlets, at convenient locations, close to where customers can walk
 Focus on some territories, not all: When they locate in a place they blanket (a.k.a.
clustering) the area with stores; stores open in clusters with corresponding DC’s.
– 844 stores in the Tokyo region; Seven Eleven had stores in 32 out of 47 prefectures in 2004. No
stores in Kobe.
– Success rate of franchise application <= 1/100
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 The Present and the Future
 Is food preparation a good idea at 7-eleven locations?
– e.g. Compare microwave heating vs. salad preparation.
 Why SEJ does not allow direct delivery from suppliers to retailers?
 Point out which of the following strategies can also be used in US (or Taiwan)
– Information strategy
– Facilities strategy
 Discuss the differences between the Japanese and US (or Taiwanese) consumers with
regard to
– Frequency and amount of grocery purchase
– Use of credit cards vs. cash for purchase
– 7-eleven inventory turnover rate is 50 in Japan and 19 in the USA.
 7-eleven growing rapidly in the US so it aims to be a web depot in both the US and Japan.
Does this make sense from a supply chain perspective?
– Cost vs. Responsiveness
– Business strategy
 What is the risk of micro-matching strategy?
 No direct deliveries to SEJ, what is the potential risk of this strategy if used in the USA?

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  In today’s competitive business climate, many
professionals are continuously seeking ways to optimize
cost but still assure the highest quality of products and
services. To achieve that requires a lot of effort on
constantly improving and re-evaluating the purchasing
activities of a company, which is also known as Strategic
Sourcing.
 What is Strategic Sourcing?
 Strategic Sourcing is a procurement process that creates
efficiency across all activities within the procurement
cycle to secure the best possible price for a product or
service. The main objectives are to save money and
improve the acquisition process, supplier performance,
and minimize risk. 
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 What is Strategic Sourcing?
 Strategic sourcing focuses on the shared gains in a
collaborative relationship. Strategic partners look for new
innovative ways for your products and services. In turn,
they want your commitment to the long-term strategic
partnership.
 One of the best practices used by many procurement
professionals. No matter the purchasing size, the 7-step
strategic sourcing practice, originally developed by A.T.
Kearney, has been tested and proven effective for
sourcing products and services. The final results could be
cost-saving, greater value-added and time saved.
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 Strategic Sourcing process
 Step 1: Profile The Category
 The first step is to identify the sourcing category or
commodity, including the volumes (quantity, types and
sizes) spent on products and services, current prices and
suppliers, and specification details. Also, don’t forget to
analyze your users – who they are, where they are located
– and departments involved in the supply chain.

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 Strategic Sourcing process
 Step 2: Supply Market Analysis
 Understand your buyer power and category critically to
position the sourcing strategy by performing market
analysis. Then, you determine what strategy approach
better fits with the type of service you’re sourcing.

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 Strategic sourcing Process

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 Strategic Sourcing Process
 Kraljic’s Matrix is seen as one of the most effective ways
to segment the vendor base. This two-by-two matrix is
mapped against two key dimensions: risk and
profitability. Risk demonstrates the likelihood of
unexpected events occurring that may disrupt the
operations. Profitability describes the possibility of
impacting the bottom line of the organization.
 Once you identify the segmentation of a product and
service, you’ll have a clear vision of how the product and
service impact the overall business, then be more
confident about what strategy and partner relationship you
should implement.
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 Strategic Sourcing Process
 Step 3: Develop a Strategic Sourcing Strategy
 It is a critical step in deciding where and how to buy
while minimizing the risk and cost. To get the best of our
supplier pool, you should consider both existing and
potential suppliers. Establish your business’ goal and the
minimum requirements for suppliers, then list the
selection criteria that are most suited to your
requirements, capabilities and resources. A cross-
functional team with critical stakeholders is highly
recommended.

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 Strategic Sourcing Process
 Step 4: Select The Strategic Sourcing Process
 Time to solicit bids! The most common method that many
businesses are using is Request for Proposal (RFP). 
 If you’re not familiar with the term, RFP is a document
that solicits proposals, which is often used through a
bidding process, written by an organization interested in
acquiring a product or service from vendors for their
project. The document outlines the details of product or
service specifications, requirements, pricing breakdown,
legal and financial terms and conditions, and evaluation
criteria.
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 Strategic Sourcing Procss
 Step 5: Negotiate with and Select Suppliers
 Now you may have many suppliers that respond to your
RFP. Your next task is to shortlist the most potential
suppliers, then interview for clarification or asking more
details if needed. The more information you have from
each supplier, the better decision you will make. 
 To do that, you need to form the best possible team that
knows the product or service you want to purchase, which
helps ask the right questions to potential suppliers.

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 Strategic Sourcing Process
 Step 6: Implementation and Integration
 Communicating with suppliers is an integral part of
strategic sourcing. After negotiation, you may have the
decision of what suppliers you want to partner with. Make
sure you notify those successful suppliers that are going
to be involved in the implementation stage. The more
complex your product is, the tighter your cooperation and
partnership should be. It’s critical to integrate suppliers
into your meetings or discussions included in the
implementation stage, making sure they’re up-to-date on
the most recent changes and updates.
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 Strategic Sourcing Process
 Step 7: Benchmarking 
 Many people underestimate this step, but it’s a huge
mistake to skip it. It’s essential to measure the supplier’s
performance over time – starting with benchmarking the
current status of the product, continuously monitoring the
results and ensuring the goal is being achieved. By doing
so, you can quickly identify the problem during the
implementation and notify your supplier to address the
issue with the lowest business impact.

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 Category management
 Another component of strategic procurement is category
management, which involves segmenting the
organization’s spend on goods and services across
different categories, such as IT, HR, office management
and travel and entertainment (T&E). A category manager
may be appointed for each category in order to focus
narrowly on optimizing specific areas of purchasing,
including carrying out market analysis, managing supplier
relationships and ensuring that appropriate purchasing
decisions are made.

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 Strategic procurement technology
 Technology has an important role to play when it comes
to strategic procurement. Companies may take advantage
of solutions covering areas such as spend management,
RFP and RFQ exercises and contract management in
order to increase visibility over the procurement process,
optimize the supplier selection process and manage
supplier relationships more effectively. Technology can
also be leveraged for activities such as running e-auctions,
which require suppliers to compete with each other for
contracts.

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 Strategic procurement technology

Last but not least, companies can strengthen their supplier

relationships and increase the resilience of their supply
chains by adopting early payment solutions such as supply
chain finance and dynamic discounting. Both solutions
enable suppliers to access early payment on their invoices.
Supply chain finance includes payment by a third-party
funder, whereas dynamic discounting involves deploying the
buyer’s excess cash in order to take advantage of early
payment discounts.

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 Three Agile Procurement Strategies
 Take Control Of Your Sourcing With These Three Agile
Procurement Strategies
 Imagine this: Your biggest supplier falls behind on their
deliveries, and you’re suddenly faced with a shortage.
You scramble to find a new supplier, but you can’t find a
suitable replacement in time to meet your deadline. What
do you do?
 This is just one example of how agile procurement can
help your business take control of its supply chain. Agile
procurement is a strategic approach to purchasing that
allows businesses to be more responsive to changes in the
market.
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 Three Agile Procurement Strategies

 Post-pandemic and in the midst of a looming recession,

supply chains remain delicate and easily-disrupted, which
can mean lost profitability. According to Ardent Research,
the number of CPOs prioritizing cost-savings has almost
doubled from 2021 to 2022.

 Let’s take a deeper look at agile procurement and how

implementing it can significantly increase cost and time-
savings for your company.

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 What Is Agile Procurement?
 Agile procurement is a sourcing and procurement strategy
that enables businesses to be more responsive to the ever-
changing market. It’s a way for companies to be more
flexible in order to meet the needs of their customers.

 Put simply, agile procurement is all about being able to

move quickly and make decisions on the fly. It’s about
being able to adapt as new information comes in and
reacting quickly to changes in the market. This can be
done by implementing certain tools and processes, such as
contract management software, supplier management
software and RFQs/ RFIs.
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 Agile Procurement
Agile procurement is often discussed in opposition to
traditional procurement. Traditional procurement tends to be
a much slower process, where lots of time is taken in each
procurement stage. Decisions aren’t hurried, and oftentimes
have to go through the hands of numerous people in
numerous departments before being approved.
 Agile procurement oftentimes takes multiple procurement
steps and deals with them simultaneously. For instance,
supplier onboarding and RFP responses often happen
concurrently. Contract negotiations may also happen
during the supplier sourcing process.
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 Agile Procurement
 Setting the Right Objectives and Goals for Agile Procurement

 When implementing agile procurement into your procurement

processes, setting the right objectives and goals is imperative. What
is your company looking to achieve with this new way of working?

 Agile procurement is not about cutting corners or taking short-cuts.

It’s about being able to move quickly and effectively in order to get
the best results for your business.
 Your goals should directly reflect areas in your procurement
process that need improvement.

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 Agile procurement
 Questions you may want to consider:

 What are our biggest challenges when it comes to

procurement?
 What are our biggest pain points in the supply chain?
 What areas of procurement would benefit from being
more agile?
 What can we do to improve communication between
buyers and suppliers?
 How can we speed up the process of getting new products
to market?
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 c
 There are several different theories behind agile
procurement strategies that can be used in your business.
These three are the most commonly used approaches:
 1)Planning for the Unknown. This type of strategy is used
when you don’t know what you’re going to need or when
you’re not sure what the supplier landscape looks like. In
this case, you’ll want to have a well-defined plan that
outlines what product/service you’re looking for and how
you’ll go about finding it. You’ll also want to be prepared
to make quick decisions when you find the right supplier.

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 Three Different Agile Procurement
Strategies
2)Fast and Furious/Just-in-Time. This option is great when
you need to get something quickly, but it’s not a long-term
solution. This type of strategy relies on suppliers who are
able to meet your deadlines and who have a proven track
record of success. You’ll also need robust systems in place
so you can make quick decisions and get the products or
services you need delivered on time.

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 Three Different Agile Procurement
Strategies
3)Slow and Steady. The preferred option for long-term
sourcing and supplier relationships. With this approach,
you’ll want to take your time to build a relationship with
each supplier and develop a clear understanding of their
capabilities. This will help ensure that you select the right
supplier for your business and that you’re able to get the
best value for your money.

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 Agile Procurement
 Implementing an Agile Procurement Approach in Your
Organization

 It can be hard to know where to start with implementing

an agile procurement approach in your organization, but
there are lots of tools out there to help. The most
important part is to set up the right system that connects
all your stakeholders and makes it easy for them to
collaborate.

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 Agile procurement
 Start by creating a strategic framework that outlines the key steps in
your procurement process. This will give you a clear roadmap for
taking action, as well as helping you identify potential risks and
opportunities.
 Next, look into tools and software that integrate supplier
management, onboarding and procurement. It helps automate
processes like supplier onboarding, purchasing and analytics. Plus,
it’s simple for all stakeholders to use, so it makes it easier for
everyone to collaborate smoothly on large-scale projects.

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 Common Challenges Faced With Implementing an
Agile Procurement Strategy
 While there are many benefits to agile procurement
strategies, there are some common challenges you should
be aware of.

 The implementation of an agile procurement strategy can

be a daunting task. This is because it involves changing
the way your procurement team works and how they
interact with suppliers. You may also need to make
adjustments to your systems and processes, which can be
time consuming.

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 Common Challenges Faced With Implementing an
Agile Procurement Strategy
 You’ll also need to consider the cost associated with implementing
an agile procurement strategy. New tools, systems and processes
may require upfront investments in order for them to be effective.

 One of the most challenging aspects of implementing agility into

your procurement strategy is ensuring that suppliers are on board.
To ensure a successful implementation, it’s important that both
buyers and suppliers understand what is expected from them during
the process and are committed to making a transition to agile
procurement work.

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