cASE study ... SEVEN ELEVEN JAPAN CO.

Masatoshi Ito Net worth $2.5bn

(forbes)

Todays OBJECTIVES

How can convenience store supply chains be Responsive. Are there risks to this? (Marine Pitto.)

The risks of micro-match supply & demand with rapid replenishment. The case of Seven-Eleven, Japan. (Isaure Leger.)

Seven Eleven, and its choices. Are they in line to support its supply
chain policy? (Florentien Wissels.)

The Seven-Dream Concept. U.S & Japan. (Jessica Ho Chou Yee.) CDCs in the U.S. Pros & Cons. (Chris Baird.) Is it always better to manage your own distribution channel? Pros & Cons. (Jessica Ho Chou Yee & Florentien Wissels.)

Toshifumi Suzuki (President & CEO of Seven-Eleven).

A Brief Introduction.

Seven Eleven is the worlds largest operator, franchisor and licensor of convenience stores in the world. 39, 000 OUTLETS. Operates in 16 countries.

1974 Toyosu Store.

Companies origins traced as far back as 1927 in Dallas, Texas.

Southland Corporation previous owners but ran into financial difficulties (bankruptcy 1990) and asked the Ito Yokado Group for help. IYG subsequently acquired Southland.

Japan more 7-Eleven locations than anywhere else in the world. 12,925, with 1713 in Tokyo alone. RAPID GROWTH. 1974 = First store, 1979 = 591 stores, 2004 = 10300+

By Marine pitto

Responsiveness & Risks.

Small

Large range of services

Everyday items Strategic locations Long shopping hours

Responsiveness & Risks.

Responsiveness Large number of facilities Increase inventory Using fast transportation Information Outsourcing to a third-party Low prices Increasing variety of products

Risks Increase of facility and inventory costs Increase inventory and holding costs Increase costs of transportation Technological dependance The third-party doesnt increase the supply chain profits Prices mustnt be too low > the revenues will not increase Increase uncertainty More difficult to forecast

The risks of micro-match supply & demand with rapid replenishment. The case of Seven-Eleven, Japan

By Isaure Lger

7 Eleven supply chain analysis.

Small capacity of the facilities Facilities are geographically concentrated A strict respect of the cold chain Delivery in little match quantities

An information system for the inventory

Risks associated to this supply chain policy

Items

Risks - High risk of cannibalisation - The brand image policy - Financial risks, real estate in Japan and labour forces

Large number of facilities

-Products visibility Size of the facilities - High knowledge on the merchandising aspect - The store stock might not be enough to serve customers demand. Quantitative and qualitative. A responsive - A malfunctioning of this system. This risk is both quantitative and information system qualitative. A strict respect of the cold chain Deliver in little match quantities - Increase of the replenishment costs (including delivery and receiving costs). - The price bargaining with the suppliers : almost impossible. High financial risk.

Seven-Eleven and its product flow through distribution centers

By Florentien Wissels

Combined delivery system: The key to store delivery

Supplier

Store order
Distribution Center

Frozen

Chilled

Room

Warm

7/11

7/11

7/11

7/11

Advantages of distribution center flow

Flexible
Fast Cost reduction

Direct store delivery

The Seven-dream concept

By jessica ho chou yee

7dream.com

7dream.com concept

Purchase online items Stores used as drop-off and collecting location 92% of Seven Eleven Japans customer prefer to pick up their order in their local store Stores have a high frequency of visit Only exists in Japan

More successful in Japan : why ?

Lot of stores within walking distance from Japanese locations. Distribution system in Japan : dedicated distribution centers Distribution system in US : direct store delivery. (but changing.)

By Christopher Baird.

Old versus New

A More detailed look Japan.

CDCs in the US

2004 (Japan 10,615 stores. USA 5,798) U.S. was using DSD = Direct Store Delivery.

Want to introduce fresh products, CDCs began around 2000.

23 CDCs by 2003. Serving 80% of store network. Fresh food suppliers send their product to the CDC throughout the day, where they are sorted for delivery to stores. (Often at night.) Seven Elevens strategic positioning. >68% sales from nongasoline products. Industry average = 35%.

One of Seven-Elevens ManY DCS

CDCS, AND the pros,

for the franchisee

Better manage the flow of products into the store

Store owners able to consolidate work, so they can spend more time on satisfying customers.

Stores receive fewer deliveries during the day.

Reduces likelihood of stock-out as stock can be replenished daily.

CDCS, and the pros

for the franchisor

Better manage the flow of products into the store

Can create strategic advantage differentiating the firm from competitors.

Increased information & communication between franchisee and franchisor.

Better individual store performance means better financial performance for the parent company.

CDCS, AND the cons.

The state of California is almost the same land-mass as the whole of Japan. Remember Japan 10,615 stores. USA 5,798.

Low density USA means that DSD may be more effective especially if the manufacturer is closer to the store that the DC.

If CDC is damaged it takes out the supply of a huge number of stores . Hurricanes? Fire?

Combined Distribution Systems (CDCs) seem to be having a very positive effect.

USA Inventory Turnover Rate 1992 = 12. USA Inventory Turnover Rate 2003 = 19.

.but still a long way to go to Japans 50!

Is it always better to manage your own distribution channel? Pros & Cons.
By Florentein & jessica.

Distributor replenish convenience stores

Pros Reduce the costs for Seven Eleven Save time : no intermediate

Cons Increased uncertainty: less control Lack of a common culture.