Seven-Eleven Japan Co. - Supply Chain Drivers

SUPPLY CHAIN MANAGEMENT

CASE STUDY: SEVEN-ELEVEN JAPAN CONVENIENCE STORE CHAIN

Introduction:

This case study discusses the meteorological rise of a convenience store chain, seven-eleven Japan in the Japanese retail store business. We will analyze the factors responsible for the phenomenal success of the company in the retail business, with a supply chain perspective. The main aim of this analysis is to identify the supply chain strategy of the company and underlying combination of its performance drivers which have led to the best balance of efficiency/responsiveness trade-off for the company.

About Company:

Established in 1973, Seven-Eleven Japan set up its first store in Koto-ku, Tokyo, in may 1974. In 2004 it was owned by the Ito-yokado group, which also managed a chain of super markets in japan and owned a majority share in southland, the company managing seven-eleven in the united states.Seven-Eleven japan realized a phenomenal growth between the years of 1985 to 2003. During this period, the number of stores increased from 2299 to 10303. Seven Eleven Japan represented Japan’s largest retailer in terms of operating income and number of stores. In 2004, Seven Eleven accounted for 60 percent of the total net increase in the number of stores among the top 10 convenience store chains in japan . This growth had been very carefully planned , exploiting the core strengths that seven-eleven japan had developed in the areas of information systems and distribution systems.

Competitive Strategy:

To provide high-availability of a variety of reasonable quality products at reasonable prices.

Supply chain Performance Drivers for Seven-Eleven Japan:

Facilities: Focus: High Efficiency with adequate responsiveness.

To ensure efficiency, Seven-Eleven Japan based its fundamental network expansion policy on a market-dominance strategy. Entry into any new market was built around a cluster of 50 to 60 stores supported by a distribution center. Such clustering gave Seven-Eleven Japan a high-density market presence and allowed it to operate an efficient distribution system. This also increased its proximity with customers resulting in increased responsiveness.

Also, processed food and fast-food items were big sellers for the stores. In 2004, processed and fast foods contributed about 60 percent of the total sales at each stores. As of February 2004, Seven-Eleven Japan had 290 dedicated manufacturing plants that only produced fast foods for their stores. This contributed significantly to efficiency.

Inventory: Focus: High efficiency with good responsiveness

Seven Eleven Japan has a distribution system that doesn’t carry any inventory. It has 293 dedicated distribution centers (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 orders, with store managers placing replenishment orders less than 12 hours before they are supplied. This practice makes the seven-eleven inventories very responsive.

Transportation: Focus: High responsiveness with good efficiency

Seven-Eleven has a dedicated transport facility employing trucks to transfer the inventory from suppliers to distribution centers and then from distribution centers to individual stores. This resulted in high responsiveness and good efficiency in transportation.

The key to store delivery is what Seven-Eleven calls the Combined Delivery System. At the distribution center, delivery of like products from different suppliers (for example milk and sandwiches) 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 works on trust and does not require the delivery person to be present when the store personnel scan in the delivery. This has