...Sunil Chopra TEACHING NOTE: SEVEN-ELEVEN JAPAN CO. The goal of this case is to illustrate how a firm can be successful by structuring its supply chain to support its supply chain strategy. Once Seven-Eleven Japan decided to provide responsiveness by rapid replenishment, it then structured its facilities, inventory, information, and distribution to support this choice. The case also brings up the question of whether the same approach can work in the United States, especially given the greater distances and lower store density. Questions 1. A CONVENIENCE STORE CHAIN ATTEMPTS TO BE RESPONSIVE AND PROVIDE CUSTOMERS WHAT THEY NEED, WHEN THEY NEED IT, WHERE THEY NEED IT. WHAT ARE SOME DIFFERENT WAYS THAT A CONVENIENCE 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. This is seen at the U.S. fast food restaurant franchise Subway where dinner and lunch sandwiches are assembled on demand. The main risk with this approach is that capacity is decentralized, leading to poorer utilization. Local inventory: Another approach is...
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...CHAPTER THREE Case Questions 1. A convenience store chain attempts to be responsive and provide customers what they need, when they need it, where they need it. What are some different ways that a convenience store supply chain can be responsive? What are some risks in each case? A convenience store can be more responsive by doing exactly what Seven-Eleven Japan is doing; many locations, rapid replenishment, appropriate technology deployment, and an equally responsive supplier (vertical integration for many of their SKUs). The risks associated with this system are the costs coupled with demand uncertainty. If demand patterns change dramatically, or the customer base changes, then Seven-Eleven is left with an operation that is not needed. In Seven-Eleven Japan’s case, multiple operations might be shuttered if an apartment building or large employer shuts down or relocates. 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? Micro-matching supply and demand using rapid replenishment assumes that each store will repeat the same demand pattern on a daily basis. The 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. During such an event, the store will likely stock out and customers may visit the next Seven-Eleven site down the...
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...SUPPLY CHAIN MANAGEMENT SEVEN-ELEVEN JAPAN CASE STUDY 1 1. A convenience store chain attempts to be responsive and provide customers what they need, when they need it, where they need it. What are some different ways that a convenience store supply chain can be responsive? What are some risks in each case? It is very important for a convenience store to be responsive, as they should be as convenient as possible, in order to fulfill their customers needs and preferences. Seven Eleven Japan is exactly fulfilling these criteria and therefore is a great example of a responsive convenient store. They have a lot of stores situated in convenient locations, they carefully track their items offering short replenishment cycles (less than 12 hours), they use highly sufficient and appropriate technologies to enhance forecasting and they have a responsive distribution and supply chain, that is vertically integrated in many of their SKUs. The main risks associated with high responsiveness are higher costs and greater uncertainty. Improving responsiveness (in general) could also include local capacity, inventory and enhancing replenishment, however this could lead to higher uncertainty and higher costs (especially for fresh and fast food), due to increasing capacity and store size to hold inventory (5000 SKUs in Seven Eleven Case). 2. Seven-Eleven’s supply chain strategy in Japan can be described as attempting to micro-match supply and demand using rapid replenishment. What...
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...Supply Chain Management Case study: 7-eleven Japan Co. Name: Chow Lai Ting Student number: 113226 Section 5 Background Seven-Eleven Japan was established in 1973 with its first store opened in Tokyo. It is considered an outstanding and well-known enterprise in Japan. The rapid growth of Seven-Eleven is also remarkable. In 1985 to 2007, its number of store had drastically increased from 2,299 to 12,034. The annual sales increased from 386 billion to 91.5 billion. Additionally, the company’s return on equity averaged around 14 percent between 2000 and 2004. Seven-eleven is not only the largest convenient store but also the largest retailer with its number of store and operation income in Japan. The reason why Seven-eleven is such successful is its competitive strategy, which is providing a high-availability of product that the customer find it convenient to shop. Thanks to its market dominant strategy and franchise system adapted, and its drivers make the best balance to the trade-off between efficiency and responsiveness, Seven-eleven has considerably become the most successful retail store. Problems The problem of Seven-eleven supply chain is that it replies too much on the transportation to make replenishment every day. The store would not have enough inventories if there is any accidents happen since the storage unit in store is very little. The risks associated with the system that Seven-eleven uses are costly with demand uncertainty. When the demand patterns...
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...Seven Eleven Case Study Questions 3, 4 and 6 Question 3 What has Seven Eleven done in its choice of facility location, inventory management, transportation and information infrastructure to develop capabilities to support its supply chain strategy in Japan? In order to support it’s supply chain strategy in Japan, Seven Eleven has developed a number of capabilities to ease the movement of inventory to and from its distribution center and around it’s entire supply chain network. One method in particular that Seven Eleven has implicated is its cluster location strategy. This is where an average of 50 to 60 stores along side a distribution center are located within a region of demand in Japan. This approach provides Seven Eleven with a centralized strategy to its supply chain; meaning an effective distribution network is formed across the company as the stores and distribution center are located within close proximity to each other allowing for a reduction in transportation times and cost. Another strategy Seven Eleven has implicated to support its supply chain strategy is its effective use of a combined delivery system. This enables the company to distribute products in a more efficiently manner across the supply chain network, as products that fall into similar temperature categories can be transported together and to several store at one given time. Seven Eleven’s investment in inventory management and information Infrastructure has also aided improvements to...
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...Case Study #4 (7/11 Japan) A convenience store chain attempts to be responsive and provide customers what they need, when they need it, where they need it. What are some different ways that a convenience store supply chain can be responsive? What are some risks in each case? -A convenience store can be responsive in a few different ways in order to meet customer needs and wants. The store can conduct customer surveys in order to get a direct response on what the store is lacking or what customers prefer. They could do a store analysis also which would show them customer purchase patterns so they can pinpoint the hot items and when they should be in stock. In both cases the risk is that you could get the wrong information and stock your store wrong, or you could end up only tailoring to one customer’s needs, which might not be the same needs as the majority of your customers. 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? -Rapid replenishment as a strategy for supply and demand runs a few risk which are: customers will discontinue use of a product, the product will remain on the shelf until the shelf life is exceeded or you might not have what the customer needs/wants at the time of need because you are consistently replenishing other products from other customers. By the time the product that the customer wanted arrives in the store...
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...Supply Chain Management Case Study 1 Seven-Eleven Japan Co. Background Seven-Eleven is a famous convenience store. And it is set up its first store in Tokyo in May 1974, it was found by Masatoshi Ito, the company was first listed on the Tokyo Stock Exchange in October 1979 It had increased its share of the convenience shore market since it opened. It success is greatly contributed to its careful planning, and its information system as well as distribution system. Q1 A convenience store chain attempts to be responsive and provide customers what they need, when they need it, where they need it. What are some different ways that a convenience store supply chain can be responsive? What are some risk in each case? Q3. 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? Facility location Seven-Eleven Japan based on its fundamental network expansion policy to increase efficiency to customers. Seven-Eleven opened the majority of its new stores in areas with existing cluster of stores. There are so many stores in a particular area. Around 50 to 60 stores are supported by only one distribution centre(DC), and this DC keep no inventory. This strategy can lower the inventory handling cost, and to develop capabilities that support its supply chain strategy in Japan. Inventory management Seven-Eleven offer its stores a choice from...
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...CASE: SEVEN ELEVEN JAPAN Executive Summary I Executive Summary The goal of this case is to analyze how a firm can be successful by structuring its supply chain to support its supply chain strategy. Once Seven-Eleven Japan decided to provide responsiveness by rapid replenishment, it then structured its facilities, inventory, information, and distribution to support this choice. The case also brings up the question of whether the same approach can work in the United States, especially given the greater distances and lower store density. Table of Contents II I Table of Contents Executive Summary ................................................................................................................. I II List of Abbreviations......................................................................................................... III 1 Seven-Eleven Japan Co........................................................................................................ 1 1.1 History and Profile ........................................................................................................... 1 1.2 Framework of further discussions .................................................................................... 1 2 Discussion ............................................................................................................................ 1 2.1 Supply Chain Responsiveness ..................................................................
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...Supply Chain Management Case: Seven-Eleven Japan Co. 1 Responsiveness * In general, a convenience store supply chain has three ways of being responsive: 1.1 In-Store Capacity * Integrating cooking equipment inside the stores will match supply and demand for warm dishes. The process of cooking and assembling the food will be moved after the customer order arrives (i.e. pull process) reacting directly to consumers demand. This shift implies a decentralization of the supply chain hence, requiring higher costs and poorer utilization (i.e. efficiency loss). Furthermore, training costs incur since employees at the stores need to run the machines. 1.2 Local Inventory Keeping stock holdings high at the store also is a way of being responsive and offering a high service level. Although this allows for the centralization of cooking equipment, extra space is needed and the efficiency of the supply chain is contingent on the correct forecast of demand thus, creating idle inventory or even wasted inventory if the products are perishable when demand deviates from the inventory level. 1.3 Rapid Replenishment This approach is used by Seven-Eleven. High delivery frequency sets a high responsiveness at the store but increases delivery costs. Furthermore, it keeps the absolute number of inventory items needed to run the store low (i.e. stores are can be smaller than if local inventory was build up), even though the store capacity usage is high. Rapid replenishment also leads to...
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...SEVEN-ELEVEN JAPAN CO. CASE ANALYSIS What is the future outlook for Seven Eleven Stores in USA? Seven-Eleven is part of an international chain of convenient stores. 7-Eleven, primarily operating as a franchise, is the world's largest operator, franchisor and licensor of convenience stores, with more than 46,000 outlets. The Seven-Eleven business model consists of five key elements: * A differentiated merchandising strategy; * Utilization of 7-Eleven’s retail information system & Managed distribution; * Providing a convenient shopping environment; and * A unique franchise model. Let us have a brief look over 7-Eleven stores in US and Japan: Seven-Eleven Japan: * High density market presence with 50-60 stores supported by distribution centre. * Limited geographical presence * Emphasized regional merchandizing * Processed and fast foods contributed to most of its sales * Products like food and beverages, magazines and consumer items such as soaps and detergents * Services offered like payment of electricity bills, telephone, gas bills, meal delivery services, 7 dream e-commerce, electronic money offering and many * Advanced information technology helped store to analyse store data every day morning and helps in having valuable shelf life * Information system installed in every outlet and linked to HQ, Suppliers and 7-eleven distribution centres. Uses ISDN to collect, process and feedback POS data quickly * Delivery frequency...
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...1. What has Seven-Eleven done in its choices of facility locations, inventory management, transportation, and information infrastructure to develop capabilities that support its supply chain strategy in Japan? Seven-Eleven has two levels of facility locations, one is distribution center, and another is retailer store. Distribution center is a platform to collect and allocate the order from supplier to retail store. Limited number of distribution center supports the near cluster stores. Distribution center focus on efficiency rather than responsiveness to transmit product. Seven-Eleven tends to open the stores in a dense network. It opened the majority of its new stores in areas with existing clusters of stores. Dense stores can maintain a high responsive level to the market. Besides, it also can reduce delivery cost. For instance, the trucks do not need to replenish stocks in dispersed locations. This makes the supply chain be more effective owning to the faster and convenience transportation route. In view of the inventory management, Seven-Eleven keeps no stock in distribution center and limited inventory in retailer stores. Supplier will immediately deliver stock to distribution center if receive store order. Store only keep daily inventory and place the product in particular time to response customer buying behavior. For example, breakfast, newspaper and fresh food will be placed in the shelves on the morning. The popular dinner box is placed in the evening...
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...Course: Logistics and Supply Chain Management Prof. Dr. Stephan M. Wagner Seven-Eleven Japan Co. 1) Demand uncertainty – Demand uncertainty means your business has difficulty accurately predicting customer demand in the future. This poses a significant challenge because it makes inventory hard to control and manage. Using technology to monitor sales over time can help offset demand that fluctuates from one period to the next. In the Seven Eleven case the company implied demand uncertainty can be categorized as high, due to the nature of the customer needs and product properties. Customer needs: customer is usually in a hurry making an urgency-buy, he has a low tolerance for response time, requires high product availability & high service level. The range of quantity demanded can also be high due to unexpected events, e.g. super ball game increasing the demand for beer, chips and commercial. These customer needs causes a high implied demand uncertainty. Products properties: middle range of products (3000SKUs) 60% of total sales at each store are processed and fast foods, 50% changes in the course of a year due to seasonal demand & new products. Local preferences are important and vary, different consumption patterns throughout the day, stores have limited shelf space and little buffer inventory (limited store size) Seven Eleven supply uncertainty is medium to high. Supply uncertainty is increased due to: high diversity of products,...
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...1 i CASE STUDY ~ SEVEN-ELEVEN JAPAN CO. Established 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. In 2004 it was owned by the Ito-Yokado group, which also managed a chain of supermarkets in Japan and owned a majority share in Southland, the company managing SevenEleven in the United States. Seven-Eleven Japan realized a phenomenal growth between the years of 1985 and 2003. During that period, the number of stores increased from 2,299 to 10,303; annual sales increased from 386 billion to 2,343 billion yen; and net income increased from 9 billion to 91.5 billion yen. Additionally, the company's return on equity (ROE) averaged around 14 percent between 2000 and 2004. In 2004, Seven-Eleven Japan represented Japan's largest retailer in terms of operating income and number of stores. Customer visits to Seven-Eleven outlets totaled 3.6 billion that year, averaging almost 30 visits to a SevenEleven annually for every person in Japan. 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...
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...Seven-Eleven Japan Co. Established 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. In 2004 it was owned by the Ito-Yokado group, which also managed a chain of supermarkets 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 and 2003. During that period, the number of stores increased from 2,299 to 10,303, annual sales increased from 386 billion to 2,343 billion yen, and net income increased from 9 billion to 91.5 billion yen. The Seven-Eleven Japan Franchise System Seven-Eleven Japan developed an extensive franchise network and performs a key role in the daily operations of this network. The Seven-Eleven Japan network includes both company-owned stores and third-party-owned franchises. In 2004 franchise commissions accounted for over 68 percent of revenue from operations. 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 centre. Such clustering gave Seven-Eleven Japan a high density market presence and allowed it to operate an efficient distribution system. Seven-Eleven Japan, in its 1994 annual report, listed the following six advantages of the market-dominance strategy: ...
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...CENTER FOR INFORMATION SYSTEMS RESEARCH Sloan School of Management Massachusetts Institute of Technology Cambridge Massachusetts 7-ELEVEN Japan Co., Ltd.: Reinventing the Retail Business Model Kei Nagayama and Peter Weill January 2004 CISR WP No. 338 and MIT Sloan WP No. 4485-04 2004 Massachusetts Institute of Technology. All rights reserved. Research Article: a completed research article drawing on one or more CISR research projects that presents management frameworks, findings and recommendations. Research Summary: a summary of a research project with preliminary findings. Research Briefings: a collection of short executive summaries of key findings from research projects. Case Study: an in-depth description of a firm’s approach to an IT management issue (intended for MBA and executive education). Technical Research Report: a traditional academically rigorous research paper with detailed methodology, analysis, findings and references. About the Center for Information Systems Research CISRMISSION CISR was founded in 1974 and has a strong track record of practice based research on the management of information technology. As we enter the twenty-first century, CISR’s mission is to perform practical empirical research on how firms generate business value from IT. CISR disseminates this research via electronic research...
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