Case Analysis: Seven Eleven Japan

Case Analysis

Submitted By:Chirag Khetan (14DM066)

Dhanendera Khatri (14DM070)
Dhaval Shah (14DM071)
Dhruv Bahl (14DM073)
Hmanshu Katyal (14DM092)
Jatin Dwivedi (14DM100)

Case Analysis: Seven Eleven Japan

INTRODUCTION
Seven Eleven was established by Ito Yokado in 1973. It set up its first store in Koto-ku, Tokyo in
May 1974. 7-11 grew by a huge margin between 1985 and 2009. The number of stores increased
from 2,299 to 12,753 stores. Its annual sales grew from 386 billion yen to 2,785 billion yen. It also
tasted success in globally, with global revenue of 1,968 billion yen in 2009. By 2011 it had 40,000
stores all around the globe. 7-11s ability to integrate and manage its supply chain in a very
efficient manner, enabled it to be a success story. Below are the two key areas where 7-11 stood
out from its competitorso 7-11 developed an extensive franchise network and performed key roles in daily
operations.
o 7-11 was able to exploit its core strength it had developed in the areas ofa. Information System
b. Distribution System

7-11 Japan
Q1. What is 7-11 Japans competitive strategy?
Answer

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

Market Dominance: Opening numerous number of stores in an area in order to capture
the market completely and leaving no space for competitor to open its store. This ensured
that they had high distribution efficiency over others, more brand awareness among the
customers and greater overall system efficiency.
High average number of SKUs (3000) at their convenient stores.
Their whole system (headquarters, suppliers, distribution centers and convenient stores)
was connected via a total information system which ensured to keep everyone in the
chain so that supply could be met with the demand in least possible time, with minimum
wastage and inventory costs were brought down. This led them to have a quick response
time to their distribution network which gave them an edge over their competitors.
Regional merchandising: 7-11 Japan focused on merchandising in the regional areas
according to the local preferences. This added to its competitive edge as each store
carried around 3000 SKUs which catered to local customer demand.
Services such as payment of various bills, selling of tickets, pick up location of parcel
delivery companies, government related services and many more, which resulted in the
increase of footfall at their stores.

Case Analysis: Seven Eleven Japan

Q2. Where is it operating in the spectrum?

Answer:

7-11 Japan operates in the spectrum of High Responsiveness. 7-11 Japan was the first
company to introduce the POS (Point of Sale) system, which consists of the following:
1. POS cash register
2. Terminal control equipment
As soon as the customer purchased an item and paid at the POS register the item
information and time of sale was automatically recorded. The cashier also recorded the
age and sex of the customer. This allowed them to capture the sales pattern of various
areas that they were operating in, because of which they could estimate the quantity of
products they needed to send at the various stores at different time of the day. This
increased the responsiveness which helped in matching supply with demand (through an
effective and efficient distribution system).

Q3. How is 7/11 Japan using drivers of supply chain?

Answer:

Case Analysis: Seven Eleven Japan

Facility

Facilities were at 2 levels

o Distribution Centers (DCs)
o Convenient Stores
Distribution Centers
o Were less in number
o Held no inventory as all the supplies came from the supply centers and DCs were
just transporting them to convenient stores,
o served stores in its cluster
o Increased Efficiency as opposed to Responsiveness
Stores
o More in number
o They analyzed the customer buying patterns to fully utilize the shelf space
o Located in abundance and dominated the market
o Were more responsive than efficient

Inventory

DC
o No inventory was kept at DCs, they were only transporting the products to the
convenient stores
o Highly efficient and responsive
o They increased their inventory turnover period to 50 days which eventually
reduced cost.
Stores
o Kept Daily Stocks
o Low Inventory
o Were efficient but not very responsive

Transportation

Transportation was at two levels

o Vendor to DC (Vendor delivered)
o DC to Store (Seven-Eleven delivered)
Transportation Network Design
o Each truck would be stocked at the DC
o One truck would deliver supplies to more than one store.
Mode of transportation
o Road (Vans &Trucks were used of third party working exclusively for them, Trans
fleet ltd.)
Rapid replenishment cycles

Case Analysis: Seven Eleven Japan

High Frequency
Provided High responsiveness as opposed to efficiency

Information

Information System Components

o Graphical Order Terminal (GOT) @ Stores: Store managers used this device to
place orders. The items were recorded and brought up in the order in which they
were arranged on the shelves.
o Scanner Terminals (ST) for inventory checking
o Store computer
Processed information from GOT , ST & POS
Was connected to the network
Tracked inventory levels, placed orders, maintained store equipment etc.
o POS register
Information about sale, customer details like age, sex, item of sale etc.
o Data was relayed to Suppliers, Distribution Centers and the Headquarters
automatically.
o Increased both efficiency and responsiveness

Sourcing

Outsourced transportation
o From DC to Stores to Transfleet Ltd.

Risk of Fuel Price Fluctuation, Fleet Maintenance and Cost of Fleet staff was transferred.

The company increased profits and reduced risk.

Pricing

Seven-Eleven offered products at affordable prices.

Their market dominance allowed ease of access to the customers.

Both these factors led to stable demand.

Thus, such pricing decision increased the efficiency of the supply chain.