7 11 japan supply chain case study

CASE STUDY: Seven-Eleven Japan Co.

Established by Ito Yokado in 1973, Seven-Eleven Japan set up its first store in Koto-ku, Tokyo, in May 1974. The company was first listed on the Tokyo Stock Exchange in October 1979. On September 1, 2005, Seven & iHoldings Co. Ltd., was established as the holding company for Seven-Eleven Japan, Ito-Yokado, and Denny’s Japan. As a result, detailed financial results for Seven-Eleven Japan have not been available since then and are reported only as the convenience store portion of Seven & i Holdings. Seven-Eleven Japan realized a phenomenal growth between 1985 and 2013. During that period, the number of stores in Japan increased from 2,299 to more than 16,000. Globally, the firm had more than 53,000 convenience stores by June 2014 and was the world’s largest chain in terms of retail outlets. Global revenues for Seven & i from convenience store operations were 1,899 billion yen in 2013 with an operating income of 221.7 billion yen. The firm was present in 42 of Japan’s 47 prefectures and planned to open 1,500 stores in Japan in 2014. Customer visits to Seven-Eleven outlets averaged more than 1,000 per store per day in 2013.

Company History and Profile

Both Ito-Yokado and Seven-Eleven Japan were founded by Masatoshi Ito. He started his retail empire after World War II, when he joined his mother and elder brother and began to work in a small clothing store in Tokyo. By 1960, he was in sole control, and the single store had grown into a $3 million company. After a trip to the United States in 1961, Ito became convinced that superstores were the wave of the future. At that time, Japan was still dominated by mom-and-pop stores. Ito’s chain of superstores in the Tokyo area was instantly popular and soon constituted the core of Ito-Yokado’s retail operations.

In 1972, Ito first approached the Southland Corporation about the possibility of opening Seven-Eleven convenience stores in Japan. After rejecting his initial request, Southland agreed in 1973 to a licensing agreement. In exchange for 0.6 percent of total sales, Southland gave Ito exclusive rights throughout Japan. In May 1974, the first Seven-Eleven convenience store opened in Tokyo.

This new concept was an immediate hit in Japan, and Seven-Eleven Japan experienced tremendous growth. By 1979, there were already 591 Seven-Eleven stores in Japan; by 1984, there were 2,001. Rapid growth continued (Table 3-3), resulting in 16,086 stores by 2014.

On October 24, 1990, the Southland Corporation entered into bankruptcy protection. Southland asked for Ito-Yokado’s help, and on March 5, 1991, IYG Holding was formed by Seven-Eleven Japan (48 percent) and Ito- Yokado (52 percent). IYG acquired 70 percent of Southland’s common stock for a total price of $430 million.

In 2005, Seven & i Holdings was established through a stock transfer combining Seven-Eleven Japan, Ito-Yokado, and Denny’s Japan. In 2013, convenience store operations from Seven-Eleven Japan and other subsidiaries in North America and China contributed 37.4 percent of total revenues from operations and 76.1 percent of operating income for the Seven & i Holdings Company (see Table 3-4 for details). The relative performance of convenience stores within Japanese operations was even more dominant. The discrepancy between Tables 3-3 and 3-4 results because Table 3-3 reports sales at both company-owned and franchised stores, whereas Table 3-4 reports revenues for only Seven & i.

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Structure of the Seven-Eleven Japan Supply Chain Case Study

Different ways and risks of a convenience store supply chain.

In order to become responsive, a supply chain for convenience stores can be organized using three main models: the dependence on distribution centers, the direct provision of goods, and the local production of fresh foods. A supply chain that includes distribution centers is effective when it is necessary to provide many stores with a certain amount of products regularly.

As a result, a convenience store is responsive because it guarantees the provision of many facilities with the necessary amount of goods in the most efficient manner. Seven-Eleven Japan uses this system (Chopra 7). Still, risks are in changes in demand.

If demand decreases unexpectedly, there are many products in a distribution center that should be sold. Direct store delivery is another approach that is used in small local convenience stores that do not belong to chains, and risks are in delays and inability to address demand. The third approach to developing a responsive system is the local production of goods. However, this system is not appropriate for stores where the flow of consumers is extremely high because of the limited capacity related to producing fresh and cooked foods.

Seven-Eleven Japan: Choice of Facility Location, Inventory Management, Transportation, and Information Infrastructure

Facility locations of Seven-Eleven Japan are selected with reference to the principle of market dominance. More new stores appear in those areas where there is a cluster of Seven-Eleven Japan stores to guarantee the effective distribution and rapid provision of products. Inventory management and transportation are based on the work of distribution centers and the provision of many goods. In this context, regional merchandising guarantees a focus on customers’ needs.

The company works to decrease the number of used vehicles, but the increase in productivity is observed (Chopra 7). Organization of the work of stores, suppliers, manufacturers, and distribution centers, and transportation are based on the implemented Total Information System. This network allows for ordering and communicating between store managers and distribution centers.

Distribution Centers and Direct Store Delivery

While using distribution centers in order to control the delivery of products, Seven-Eleven Japan guarantees that all stores will be provided with goods on time, the delivery will be properly scheduled, and customers’ needs will be addressed. It is important to use distribution centers for chains that include many convenience stores because of the necessity to organize deliveries several times a day (Chopra 6-7). Direct store delivery can be selected when a store needs certain products to be provided only a few times a week or when small stores choose to cooperate with local suppliers. In this case, it is almost impossible to address the problem of delays and increasing demands.

Seven-Eleven Supply Chain Structure with the Introduction of Cdcs

The benefits of using combined distribution centers are in possibility to control the whole supply chain and organize it according to the store’s needs, to monitor the amount and quality of goods, and to increase the productivity related to the workload and transportation. Furthermore, combined distribution centers allow for focusing on the particular needs of customers because of the ability to regulate the amount of proposed fresh products, cooked products, or manufactured goods.

However, the disadvantage of such an approach are in the necessity to adapt the distribution system applied in Japan to the requirements of the US market (Chopra 8). It is possible to state that combined distribution centers are more difficult to manage in comparison to centers organized in Japan. Furthermore, combined distribution centers in the context of the US market can be discussed as less appropriate than the direct store delivery system.

Works Cited

Chopra, Sunil. Seven-Eleven Japan Co . Battle Creek: Kellogg School of Management, 2005. Print.

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IvyPanda. (2021, March 22). Structure of the Seven-Eleven Japan Supply Chain. https://ivypanda.com/essays/structure-of-the-seven-eleven-japan-supply-chain/

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7-Eleven Japan Harvard Case Solution & Analysis

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7-Eleven Japan Case Study Solution

Factors Allowing the 7/11 to operate at almost 1 inventory turn in a week for convenience store business, and the similarities in the supply chain between ZARA and 7 Eleven Japan.

The main factors for Seven Eleven Japan (SEJ) to provide almost 1 week of inventory turnover at its convenience stores are provided below:

Freshness Job Strategy:

The executed strategy of SEJ to provide the fresh products displayed at the stores; not only the perishables but other items are also replenished with fresh products and the items offered in the shops are considerably fresher than other convenience stores. This is provided by tracking customer preferences and their changing behavior towards the products, and non-fresh products being destroyed; for example; coffee having a life of not more than 2 hours.

Information systems and the use of OFC’s:

The information system implemented by the 7/11 is very up to date, with two way communication between the store and the HQ, manufacturers, and other areas. Further, beside the store manager; the organization’s operation field counselors (OFC’s) has direct contact and influence which consider the customer preferences of the convenience store. The stock is ordered in small quantities throughout the week, making the store to turn out inventory as soon as possible.

Daily Ordering System and the Supply Chain:

This factor is the main backbone of the organization, with the information system having direct contact with manufacturers about items to be delivered and their specific quantity. There is a daily ordering system in which the corporate manager orders products which are delivered daily, with the manufacturers being on board through the contact with the HQ. This results in low quantities being provided according to the needs daily, making the inventory move out.

Main Similarities of Supply Chain between ZARA and the SEJ

Small Batch Productions:

Zara considering SEJ has also a very low inventory turnover, they create smaller quantities to assess the demand and the success of its sales. This is similar to the SEJ as they also order quantities which are low and according to the demand. This makes the inventory turnover rate considerable less for both organizations.

Central Distribution Center:

Like SEJ, ZARA has a strong IT system backing its distribution. All clothes produced are shipped to Spain, and then distributed. SEJ also has a similar model, which implies not having different distributors for every product, and using the Supplier Distribution Center (SDC) for the distribution to the stores.

Quick Response to the Demand:

Another similarity is the variable quantities being supplied, as required by the needs of the current times. ZARA also has this chain in line with 1000 new designs being made every month, looking at customer requirements and then ordering as per need.

Three key features of 7-Dream.com’s e-business, the risks and rewards of the e-business model, bottlenecks, weaknesses, and suggestions for improvement for the Seven Eleven Japan.

Three key features of the 7-Dream.com’s e-business are provided below:

• New Company with renowned partners of the Japanese Market; NRI, SONY, MITSUI, JTB, and KINOTROPE. Providing many products for the consumers at one stop, ranging from Convenience goods to travel network.
• Online business Company, with no physical shop and distributed through partners personal supply chains.
• Items collected from different venues, as requested by the Customer on his convenience in 2-3 days.

The risk and rewards of this business model:

The organization is new with no previous or past coordinated work experience, which might create management issues for all the organizations in this venture. Further, the organization which will fail to be successful will tarnish the image of all partners, even though with one glitch from any partner involved. The online store will only provide the consumers with dissatisfaction as no physical appearance or showroom is available, the trusting part of the Japanese consumer takes time. The orders might have problems if a consumer wants items of more than 1 partner, what will be the destination to collect up; who is going to complete the order.

Very low costs in comparison to their competing online sales companies. Range of items being available to shop from, increasing the customer inflow to the 7-Dream Website.

The delivery system is very high, as not much inconvenience will be provided to all the companies, as distributions can be maintained at their own leisure.

Some of the partners are competing in different environments, this will create a problem on the intellectual property and strategies being taken by the other organizations.

Bottlenecks:

Combined offers cannot be provided, as all the companies are different. Consumer will feel a sense of one company, which might create awareness problems for separate entities of the partners.

Combined focus in place, rather than separate entity perception.

Suggestions for improvement:

Using an SDC as the SEJ is implemented in its own convenience stores for the distribution which will unify the products from all partners, and provide problems for delivery. Though this will add costs for the 7-Dream organization.

Q.8 Seven Eleven US Model; introduction of the CDC’s and its pros and cons, and pros and cons for having a distributor replenishing stock to the 7/11 inbound distribution.

The duplication model, being put in place by the SEJ in the US market has certain pros and cons attached, which are as follows:

Pros of CDC:

The pros relate to the success of Seven Eleven in Japan, the company used the SDC program to support the sales and the distribution channels. As this model has been in place from the 1990’s in the Japanese industry, the Seven Eleven has high experience of this model which will create an ease in its use in the new market.

Another pro for using this system is to manage the items in the convenience stores, using different manufacturers and retailers to provide for the replenishing stock provided with the usage of different trucks being in and out with protocols to follow. The CDC system will ensure that stock provided will be up to the quantity required with less hassle as possible. The SEJ’s SDC in Japan has a truck time per store of not more than 1.5 Minutes to supply all items.

Cons of CDC:

The cons of using the SDC is that the motto of Seven Eleven to provide for the fresh food might not uphold due to the first manufacturers providing the foods and items at the CDC and then shipping to the stores, which will take time till stock being kept on the shelf. Another con is the added costs which will be attached to the CDC as the transportation will add to the tight revenue margins of the organization.

The next part of the Pros and cons will relate to the Distributor replenishing stock rather than the Distribution of the Management of Seven Eleven.

PROS and CONS:

The pros for the distributor replenishing stock is the time savings and more quantities with fixed schedules which will help the store managers to create a schedule upon their ease of the replenishment of the stock.

The con for using the distributor is that, the POS and GOT implemented by SEJ of minimum quantities as required basis will not be effected as the distributor will just be the supplier and this might lead to some items being overstocked and others being under stocked.

Q.9 the differences between Seven Eleven Japan and Inditex (ZARA) strategies; defining the return on assets, commenting on the decentralized versus vertical integration.

Differences in Strategies:

• Timing and the freshness of the product:

This strategy looks similar to both organizations as low stock and customized quantities, but the supply of both the products use different strategies as 7/11 has perishables which are of daily occurrences rather than the monthly stock strategy by ZARA.

• The IN HOUSE Distribution strategy:

As provided in the above questions, all the manufacturing of ZARA has to be supplied to SPAIN and then distributed in other areas. This is different to the 7/11 as the products of the convenience stores are mostly general in nature with no in-house refinery or plant. It cannot be applied to 7/11 organizations due to the nature of the business.

• Different Product Development Teams:

ZARA has different product development teams working separately, however SEJ has made use of the OFC’s and area managers which are required to fly to the HQ every week for evaluation and new instructions . They have to work together to improve and to assist the overall organization, which is entirely different in ZARA with separate teams working in isolation to others.

• Vertical Integration (VI) and Decentralization strategy:

Zara uses the VI model of acquiring its manufacturers and the retailers creating one seamless flow of activities, on the other hand SEJ uses decentralization with different CDC’s and store managers and OFCs responsible for their own units.

This creates differences in the strategies, but due to the different nature of businesses; they are both successful and centralized strategy will not be sufficient for 7/11.

The Return on Assets formula is Net income divided by the Total Assets. In consideration to the Seven Eleven Japan and the Inditex (Zara), the ROA of SEJ must be lower than the INDITEX. The reason is because of the nature of business . ZARA works in apparel industry with higher margins as compared to SEJ which works in the convenience market with lower margins on the products being sold, making the ROA lower as more resources are used in the generation of income for SEJ.

Q.10 Critical Assets of 7/11 Japan, Inditex (ZARA), and the role of product innovation for both organizations.

Critical Assets of 7/11 Japan :

• Information system, with double loop connecting the Head Quarters of SEJ with Stores, SDC, Manufacturers, and retailers with 2-way communication.
• An Operational design supporting the quick and responsiveness of different convenience stores throughout Japan and neighboring areas.
• Logistics and Delivery Channels.
• A Brand Name.

Critical Assets of Inditex (ZARA):

• Vertical Integration Model creating a Seamless flow.
• Intellectual property: BRAND NAME

We will be considering the Role of product innovation for both the Businesses.

When we consider the product innovation for the SEJ’s current business model and the critical assets. The product innovation will not affect the model or the chain as the products are provided through the Manufacturers to SDC and then they are provided to the retail stores.

The only effect, which can occur is the time period of the available product which might change. The organization has already other perishable products such as coffee which has 2 hour shelf life, SEJ will not change and can provide for the new product with ease.

The product innovation at ZARA will be directed because of the changes in the consumers’ tastes, and that can be a negative impact on the organizational model as the whole system is one flow. The HQ is based in Spain with all the powers. The organization will be affected as the current model will need to be re-thought to best assist the organizational needs and profitability...............

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Seven-Eleven Japan: A Case Study in Supply Chain Management

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Case study on 7 eleven store

This document provides a case study on 7-Eleven's supply chain strategies in Japan and their efforts to duplicate this model in the United States. It discusses 7-Eleven's rapid replenishment approach in Japan, the benefits of centralized distribution centers and not allowing direct store delivery. It also analyzes the potential pros and cons of 7-Eleven managing its own distribution versus using distributors in the US, and whether the 7Dream delivery concept could be more successful in Japan or the US. Read less

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• 1. 7-ELEVEN STORE CASE STUDY GROUP MEMBERS AKANKSHA SOLIWAL (1402007) ANKUR JAIN (1402019) CHETAN KUMAR DHIWARE (1402043) KIRAN KUMAR MAHTO B (1402078)
• 2. 1. INCREASING RESPONSIVENESS OF A CONVENIENCE STORE CHAIN 1) Appropriate technology deployment : Technologies like RFID can be employed to create a responsive supplier Risk : costs coupled with demand uncertainty 2) Demand planning: trend projections and forecasting by analyzing past sales, trends and seasonality Risk: high error / quality of data 3) Proper distribution and warehouse model: 7-eleven has dedicated warehouse for every 50 store Risk : high capital investment 4) Rapid replenishment : this allows for low levels of inventory by following JIT Risk: high replenishment cost
• 3. 2. 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? • Tour bus phenomenon - where a group of unanticipated customers comes to the store and buys all of a type of product will cause difficulty for regular customers • High cost of transportation • Risk of Stock out • Shifting of customers
• 4. 3. 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? • All manufacturing facilities are centralized to get the maximum benefit of capacity aggregation • Highly Responsive operation • Saturation of areas with stores • Seven-eleven requires all suppliers to deliver to the DC where products are sorted by temperature. This reduces the outbound transportation cost • Services like electricity bill payment and seven bank has provided customers a one-stop store for all their needs.
• 5. 4. SEVEN-ELEVEN DOES NOT ALLOW DIRECT STORE DELIVERY IN JAPAN, WITH ALL PRODUCTS FLOWING THROUGH ITS DISTRIBUTION CENTER. WHAT BENEFIT DOES SEVEN-ELEVEN DERIVE FROM THIS POLICY? WHEN IS DIRECT STORE DELIVERY MORE APPROPRIATE? BENEFITS • Reduced complexity at store level • Segregation of food products at the DC based on temperature • Reduced cost of receiving at stores due to less frequent visits • Each outbound truck made deliveries to multiple retail stores Direct store delivery is most appropriate when - • Stores are large • Varieties of product is less • Need special handling requirements like alcoholic beverages, televisions etc. • Nearly-full truck load quantities are coming from a supplier to a store
• 6. 5. WHAT DO YOU THINK ABOUT THE 7DREAM CONCEPT FOR SEVEN-ELEVEN JAPAN? FROM A SUPPLY CHAIN PERSPECTIVE, IS IT LIKELY TO BE MORE SUCCESSFUL IN JAPAN OR THE UNITED STATES? WHY? • Local convenience store is popular in Japan • Lower cost alternative to having a package carrier deliver the product at home Might be more successful in japan because- • The existing distribution network of seven-eleven • Frequency of visits by customers. The high visit frequency ensures that packages are not occupying valuable store shelf space for a long time • Frequent visits ensure that the marginal cost to the customer of picking up at a Japanese seven-eleven is small
• 7. 6. SEVEN-ELEVEN IS ATTEMPTING TO DUPLICATE THEIR SUCCESSFUL JAPANESE SUPPLY CHAIN STRUCTURE 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. • Reduced inventory storage • Faster delivery of perishable goods. • Larger distance between stores • Seven-eleven stores are getting both direct store deliveries as well as wholesaler deliveries • Setting up its own Distribution channels does not allow seven-eleven to get the same level of transportation aggregation as it gets in japan
• 8. 7. THE UNITED STATES HAS FOOD SERVICE DISTRIBUTORS LIKE MCLANE 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? Pros • Distributor is able to aggregate deliveries across many competing stores • Reduction in cost of storing, maintenance and distribution of inventory Cons • All deliveries done through a distributor. Thus seven-eleven has less control • Subsidies has to be provided in order to compete with the competitors with smaller supply chain.
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