ASSALAMUALIKUM

Welcome To Our

CASE STUDY Presentation

Presented to

Honorable TeacherDr. Mohammad Khaled Afzal

Prepared by

Zobaira Kabir Chowdhury

Farzana Afroz Piya Sabera Sharmin Mahmuda Mazumdar Sanjida Akter

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Overview of 7Eleven Japan

•Founded by Masatoshi Ito, post world war ll

•By 1960 the single store had grown into a $3 million

Co.

•In 1961 realized that superstores were the wave of

the future

•In 1972 approached the Southland corporation about

the possibility of opening 7eleven convenience store

•In 1974 first 7eleven convenience store opened in

Tokyo

Company profileCompany Name: Seven-Eleven Japan Co.,Ltd.Head Office: 8-8, Nibancho, Chiyoda-ku,Tokyo 102-8455, JapanChairman and C.E.O.: Toshifumi SuzukiPresident and C.O.O.: Ryuichi IsakaDate of Establishment: November 20, 1973Capital: 17,200 million yenNumber of Employees: 6,070(as of February 28, 2013) Total Store Sale in Japan: 3,508,444 millions yen Revenue from operations: 617,559 millions yen Operating Income: 186,760 millions yen Ordinary Income: 194,104 millions yen Net Income: 112,446 millions yen Number of Stores in Japan: 15,072

MissionAt 7eleven we are on a mission to make life a

little easier for our guests.

VisionOur vision is to be the best retailer of

convenience.

Goods or Products include

•Food Items•Beverages•Magazines

•Consumer Products•Game, Software

Food Items Classification:

Chilled Temp. items-Sandwiches,Sweets,milk Warm Temp. items-Lunch Box, Rice Balls, Fresh Bread Frozen items-ice-cream, ice-cube etc. Room Temp. items-Canned food, instant noodles

Convenience at the Store

Payment of bills-Electricity, Telephone, Gas, Insurance premium Payment of installments on behalf of credit companies Payments for internet shopping ATM’s at almost all the stores Ticket sales, photocopying Pick up location for parcel delivery 7-dream e-commerce

Original Product Development Framework

StoresDaily orders from 14005 stores

Seven eleven Japan

Temperature-separated Distribution CentersDaily deliveries from distribution centers149 sites

Daily Food Production Facilities169 sites(of which, 156 are dedicated sites

)T

Supply Chain Decision Making Framework

Competitive Strategy

Transportation

Supply Chain Strategy

PricingSourcingInformation

InventoryFacility

ResponsivenessEfficiencySupply Chain Spectrum

FacilityFacility classified into two sector

Distribution Centers(DCs) Stores

•Less in number•Served stores in its cluster

•More in number•Keep inventory in shelf

InventoryInventories kept in…

DCs Stores

•No inventory•Highly efficient•Poor at responsiveness

•Kept daily stocks•Low inventory•Efficient but not very responsive

Transportation

Transportation at 2 levels•Vendor to DC ( Vendor derived)•DC to Store (7eleven derived)

Mode of TransportationRoad ( using Vans & Trucks )

Reasons behind-Rapid replacement cyclesHigh frequencyProvided high responsiveness as opposed to efficiency

InformationInformation system components: Head Quarter

POS register Graphic Order Scanner Terminal Terminal

Store Computer

Manufactures, Suppliers etc.

Sourcing

-

Outsourced transportation-Risk of fuel price fluctuation -The Company increased profits and reduced risk

Pricing

-7eleven offered reasonably priced products-Their market dominance allowed ease of access to the customers-Such pricing decision increased the efficiency of the supply chain

Q.1 A convenience store chain can be responsive and provide customers what they need, when they need it, where they need it. What are some different ways that a convenient store supply chain can be responsive? What are some risks in each case?

As responsiveness increases, the convenience store chain is exposed to greater uncertainty. A convenience store chain can improve responsiveness to this uncertainty using one of the following strategies, especially for fresh and fast foods:

Local capacity: The convenience store chain can provide local cooking capacity at the stores and assemble foods almost on demand. Inventory would be stored as raw material. The main risk with this approach is that capacity is decentralized, leading to poorer utilization.

Local inventory: Another approach is to have all inventory available at the store at all times. This allows for the centralization of cooking capacity. The main risk is obsolete inventory and the need for extra space.

Rapid replenishment: Another approach is to set up rapid replenishment and supply the stores what they need and when they need it. This allows for centralization of cooking capacity, low levels of inventory, but increases the cost of replenishment and receiving.

Q.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 its supply choice?

The risks with this supply choice are high cost of transportation which includes gas, vehicle, staff, also the cost of receiving continuous incomes of products at the store, the risk of having obsolete inventory and lack of extra space.

Q.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 choices made by Seven-Eleven are structured to lower its transportation and receiving costs. For example, its area dominance strategy of opening at least 50-60 stores in an area helps with marketing but also lowers the cost of replenishment.

All manufacturing facilities are centralized to get the maximum benefit of capacity aggregation and also lower the inbound transportation cost from the manufacturer to the distribution center (DC).

Seven-Eleven also requires all suppliers to deliver to the DC where products are sorted by temperature. This reduces the outbound transportation cost because of aggregation of deliveries across multiple suppliers. It also lowers the receiving cost.

The information infrastructure is set up to allow store managers to place orders based on analysis of consumption data. The information infrastructure also facilitates the sorting of an order at the DC and receiving of the order at the store. The key point to emphasize here is that most decisions by Seven-Eleven are structured to aggregate transportation and receiving to make both cheaper.

Q.4 7eleven does not allow direct store delivery in Japan but has all products flow through its distribution center. What benefit does 7eleven derive from this policy? When is direct store delivery more appropriate?

DCs was introduced by 7eleven , so that it always had fresh products i.e., offer short replenishment cycle times. It also allowed careful tracking of sales.

The store manager used a graphic order terminal to place an order so it was immediately transmitted to the supplier as well as the DC. The supplier receives order from all 7eleven stores and started production to fill the orders. The supplier then sent the orders by truck to the DCs.

When the company wants to achieve cost efficiency then DSD is better, in this situation manufacturers are responsible for their goods and also stores need not to maintain a distribution system.

Direct store delivery (DSD) would lower the utilization of the outbound trucks from the Seven-Eleven DC. It would also increase the receiving costs at the stores because of the increased deliveries.

Thus, Seven-Eleven forces all suppliers to come in through the DC. DSD is most appropriate when stores are large and nearly-full truck load quantities are coming from a supplier to a store.

Q.5 What do you think about the 7dream concept for 7eleven Japan? From a supply chain perspective, is it likely to be more successful in Japan or the United States? Why?

7 dream is an e-commerce company of 7eleven Japan which allowed 7eleven store customers to pick up their online purchases at the local convenience store rather than have home delivery.

We believed 7dream will be more popular in Japan. Because:-

•Store density is higher than that in U.S.•Americans do not mind leaving the products delivered directly to their home .

Q.6 7eleven is attempting to duplicate the supply chain structure that has succeeded in Japan 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.

Pros:

Ensure Fresh supply of items Operational efficiency

Cons:

Wholesalers may have issues because of these distribution centers Manufacturers may prefer direct store delivery as they have more control here

Q.7 The United States has food service distribution that also replenish convenience stores. What are the pros and cons to having a distributor replenish convenience stores versus a company like 7eleven managing its own distribution function?Pros:

Managing the distribution system is entirely the distributor’s headache and not 7eleven’s May be cost effective

Cons:

Less control over replenishment cycles and or quality of items May not be as responsive as having own distribution function