This presentation discusses the supply chain drivers and associated trade-offs for each. The case has been picked up from Pearson\'s SCM book authored by Peter Meindl and Sunil Chopra

1. Seven-Eleven Japan Co. Rohan Raj Mishra IIFM Supply Chain Drivers Analysis for

2. Outline History & Profile Strategy & Tactic of Seven Eleven Food Items Classification Convenience at the Store Schematic Representation of the Supply Chain Supply Chain Framework Supply Chain Drivers Analysis Case Questions Discussion

3. History and Profile Founded by Masatoshi Ito post 2ndWorld War. By 1960, the single store had grown into a $3 million company. In 1961, realized that superstores were the wave of the future. In 1972, approached Southland Corporation . In 1973, Southland agreed to a licensing agreement. In 1974, first 7-11 convenience store opened in Tokyo. In 1990, Southland Corporation entered into bankruptcy protection. In 1991, IYG acquired 70% of Southland’s common stock.

4. Number of Stores ofSeven-Eleven in Japan

5. Annual Sales in Billion Yen of Seven-Eleven in Japan

6. So how did 7-eleven manage such phenomenal growth?

7. 7-Eleven Japan’s Competitive Strategy To provide high-availability of a variety of reasonable quality products at reasonable prices

8. Strategy & Tactic of Seven Eleven Strategy of 7-Eleven Japan Market Dominance Cluster of stores (50-60) in small geographical area supported by a Distribution Centre (DC) Tactic Combination of Own and Franchisee Stores In 2004 Franchisee Commissions accounted for 68% of Total revenue from operations By 2004, the company had presence in 70 prefectures of Japan

9. Advantage of Dominance Strategy High Distribution Efficiency Brand Awareness System efficiency Franchisee Support Services Advertising effectiveness Entry barrier for competitors Continued

10. Store Size was 150 square metres Average inventory at store of 3000 Stock Keeping Units (SKU), with max capacity of 5000 SKUs Emphasis on regional merchandizing Goods included: Food Items Beverages Magazines Soaps, Detergents etc. Game, Software Continued

11. Food Items Classification Chilled temp item. Sandwiches, sweets, milk Warm temp item. Box lunch, rice balls, fresh bread Frozen item Ice cream, Ice cube etc. Room temp item Canned food, Instant noodles etc.

12. Convenience at the Store Payment of Bills Electricity Telephone Gas Insurance Premium Accepting Installments on behalf of credit companies Payment for internet shopping ATMs at almost all the stores Meal Delivery service for aging population of Japan Ticket Sales, Photocopying Pick up location for parcel delivery. 7dream e-commerce etc.

13. Supplier (frozen) Supplier (Warm) Supplier (Room Temp.) Supplier (Cold) DC Stores Stores Stores Stores 50-60 stores Stores Stores Stores Stores Schematic Representation of Supply Chain

14. Supply Chain Drivers Analysis

15. Supply Chain Decision-Making Framework

16. Facility Facilities were at 2 levels Distribution Centres (DCs) Stores DCs less in number held no inventory, served stores in its cluster Increased Efficiency as opposed to Responsiveness Stores More in number kept inventory on shelf Located in abundance and dominated the market Were more responsive than efficient

17. Inventory @ DC No inventory Highly efficient Poor at responsiveness @ Stores Kept Daily Stocks Low Inventory Were efficient but not very responsive

18. Transportation Transportation was at two levels Vendor to DC (Vendor delivered) DC to Store (Seven-Eleven delivered) Transportation Network Design Each truck would be stocked at the DC One truck would deliver supplies to more than one store. Mode of transportation Road (Vans &Trucks were used) Rapid replenishment cycles High Frequency Provided High responsiveness as opposed to efficiency

19. Information Information System Components Graphical Order Terminal (GOT) @ Stores Scanner Terminals (ST) for inventory checking Store computer Processed information from GOT , ST & POS Was connected to the network Tracked inventory levels, placed orders, maintained store equipment etc. POS register Information about sale, customer details like age, sex, item of sale etc. Data was relayed to Suppliers, Distribution Centres and the Headquarters automatically. Increased both efficiency and responsiveness

20. Sourcing Outsourced transportation 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.

21. Pricing Seven-Eleven offered reasonably priced products. 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.

22. US Market Existing system Store replenishment through Direct Store Delivery from Manufacturers Remaining products delivered by Wholesalers Introducing Combined Distribution Centre concept 23 CDCs across North America Supported 80% of Store Network Introducing Fresh Foods like in Japan

23. Q1 Different Approaches for Increasing responsiveness Local Capacity Local Inventory Rapid Replinishment

24. Q2 Risks associated with attempting to micro-match Supply & Demand High Cost of Transportation High Order Costs

25. Q3 Supply Chain Drivers have already been discussed

26. Q4 Benefits of DCs Reduces complexity at store level Organizes Store demand at DC Reduces complexity and costs for Vendors to directly deliver at the stores When Direct Store Delivery? Variety of products is less Order size is more Delivery Destinations are few.

27. Q5 7dream.com- an e-commerce initiative In 2004 Area of USA is more than 26 times that of Japan 7dream concept would be more successful in Japan

28. Thank You