REPORT ON
Case Study: Seven-Eleven Japan Co.
BY: Shashank Chauhan
Contents
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Contents............................................ ................................................... ............. ............ ............. ............. ............ ......1 1 EXECUTIVE SUMMARY ...................................................2 ...................................................2 BACKGROUND: BACKGRO UND: ........... ....................... ....................... ....................... ........................ ....................... ....................... ........................ ................... ....... 3
STERNGTHS & RISKS………………………………………………13 CONCLUSION………………………………………………………14
EXECUTIVE SUMMARY
With the proper utilization of proper supply chain practices Seven-Eleven had realized unique growth in the business.Seven-Eleven have found better ways of developing their CDC as well
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as DSD that is through information knowledge expertise with their business functions to deliver deliver frequent frequent product services of varied items and the engagement engagement assurance assurance given to the customers. The advantage of successful and improved implementation of chain Seven-Eleven effectively tripled the buying power and also accessed new products.. The distribution systems of SevenEleven Eleven were were re-engi re-enginee neered red and the Combin Combined ed Distri Distribut bution ion Centers Centers (CDC) (CDC) have have been been introduced by the company to better manage the flow of products into the stores. With the impl implem emen entat tatio ion n of CDC CDC and and DSD DSD (Door (Door Stor Storee Deli Delive very ry)) center centerss allo allow w smoo smooth thin ing g of distribution operation to the stores and the provision of better quality and better information of supply and deliveries is available and the control of the supply chain is achieved. The implementation of technology POS (Point of Sales) helps to move ahead and give addational boost to the profit of seven-eleven.
BACKGROUND:
Seven-Eleven Japan Company was founded in the year 1973 and had its first store in Tokyo, and by the year 2004, Ito-Yokado group owned the company and thus, managed successful successful supermarkets supermarkets in Japan and that, Seven-Elev Seven-Eleven en had realized unique unique growth growth in the 3
business sector. This report will be focusing and deal with several discussion and case analysis of Seven-Eleven Japan Company within the rising truth of Seven-Eleven as a leading convenience store chain as it can be within Japanese retail business functions. The critical analysis will incur as to how the company does its business operation reflecting their supply chain management as well as upon valuing their logistics into a more effective and reliable perspective. The understanding and execution of supply chain process and outcomes have to be present and supply chain analysis of Seven-Eleven is given more weight and value. The utilization of supply chain strategy of Seven-Eleven and such performance drivers upon the balance nature business responsiveness and the awareness of certain risks involved.
ANALYSIS: According to seven-eleven “ filling in the entire map of Japan is not our priority. Instead, we
look for demand where Seven-Eleven stores already exist, based on our fundamental area dominance strategy of concentrating stores in specific area ”
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Seven Eleven continues to grow during the prolonged 1990s downturn. From 1991 to 2002 the stores increased from 19603 to 42000. As percentage of all retail stores in japan this shows an increase from 1.2% to 3.2%. By 2004 its operating income reaches to 165.7 billion yen, positioned it as a leader not only in convenience store but also in Japan’s retail industry. Extensive franchise network played a key role in the daily operations. With the help of franchise network they: Boosted distribution efficiency Improved brand awareness Increased system efficiency Enhanced efficiency of franchise support services Improved advertising effectiveness Prevent competitors’ entrance into the dominant area
Thus improved franchise networking helps seven-eleven to increase their profit allow it to continue its domination.
Total sales of products (bill (billion yen) 2,128.70
2,358.80
2002 2003
2,228.20
2004
Fiscal year ending in February
2000 (billion yen)
2004(billion yen)
ANALYSIS
(in (% INCREASE)
BILLION YEN) 5
Net sales Revenue Ordinary income Net Income
1,964 327.0 140.2 68.2
2343.2 445.4 168.9 91.5
19.31% 36.21% 20.47% 34.16%
Number of stores
8,153 (in 2000)
10,303(in 2004)
26.38%
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Numberof Stores tores 12000 10,303
10000
9,690
8000 6000 4000 2000 0
15 69
9,060 8,602 8,153 7,732 7,314 6,875 6,373 5,905 5,475 5,058 4,629 4,270 3,954 3,653 3,304 2,964 2,651 2,299 2,001 1,643 1,306 1,040 591801 199375
Number of Stores
With the leading domination in the market Seven-Eleven in 2004 change the standard size of new stores from 125 square meters to 150 square meters. Seven-Eleven starts too emphasized more on regional merchandising to attract the local preferences in terms of food items, beverages, magazines etc. This helps them to increase the sales:
ITEMS
2002
(Sales
Processed Foods Fast Foods Fresh Foods Non Foods Total
billion yen) 681.5 642.2 264.9 540.2 2,128.7
in
2004(Sales in billion
ANAL AN ALYS YSIS IS
yen) 725.4 704.4 305.0 624.0 2,358.8
INCREASE) 6.45% 9.69% 15.14% 15.52% 10.81%
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(%
Ther Thereaf eafte terr seve seven n eleve eleven n join join hand handss with with NEC. NEC. This This help helpss them them to desi design gn with with bett better er information system that was ISDN enabled with e-commerce. NEC develops graphic order terminals, scanner terminals, store computer and pos register. With the help of graphic order terminal implementation seven eleven equipped itself with better visibility and networking. With combined delivery system they have reduced the delivery time, reduced number of vehicles. They have managed the vechiles in such a way that in : 8
Vehicles in 1974
Vehicles in 1994
ANALYSIS Decrease
70
(% )
Cost
saving in transport 84.28%
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AnnualSales (Bill (BillionYen) 2500 2,343.20 2,213.20 2,114.00 2,046.60
2000
1,963.90 1,848.10 1,740 1,609
1500
1,477.10 1,392.30 1,281.90 1,194.90
Annual Sales (Billion (Bill ion Yen)
1,081.80
1000
931.9 780.3 686.3
500
0
0.7 4.8
599.1 521.9 453.6 386.7 319 256.5 202.1 153.6 109.8 72.5 17.439.8
197419761978198019821984198619881990199219941996199820002002
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Supply Chain Strategy by Seven-Eleven Seven-Eleven Competitive Strategy 10
Supply Chain Strategy
Efficiency
Supply Chain Structure
Effectiveness
Logistical Drivers
Facilities
Inventory
Transportatio
Information
Sourcing
Pricing
Cross-Functional Cross-Functional Driver
In short we can say that Seven-Eleven have done the following:
Store assessment that increased productivity of inventories and store space within consumer interface
Optimized time and cost in with the help of Seven-Eleven replenishment system
Efficient promotion in maximizing total system efficiency of trade and consumer promotion
Prod Produc uctt intr introd oduc ucti tion on refle reflect ct effec effecti tive vene ness ss of new new prod produc uctt deve develo lopm pmen entt and and introduction activities
STRENGTHS & RISKS Strengths:
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DSD (Direct store delivery) and CDC (Combined distribution centre) makes seven eleven networking strong.
Combined distribution system saves time.
Seven Eleven effectively does Micro matching of demand and supply.
Seven Eleven have various Franchises which also help in stronger branding.
Implementation of IT like connecting through ISDN, wide screen graphic display helps in smoothning of flow of information.
Seven Eleven have very effective store management and transportation system.
Risk:
Dedicated employees needed as there is a hard work for the inventory movement.
Improving ability means reducing constraints is t he biggest risk.
As seven eleven had drastically reduced the vehicles they don’t have any backup plans. If the vehicle .
breaks down the system of delivery breaks down.
Seven eleven is connected through IT systems if IT system breaks down their whole system breaks down which is the biggest risk in their networking.
CONCLUSION:
Thus we realize that by integrating the supply chain certain constraints of business can be minimized and customer service levels can be improved through executing information
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technology systems. Thus, with the help of models like CDC and DSD incorporate better, more more valu valuab able le supp supply ly chai chain n netw networ ork k expe expect ctin ing g soli solid d stor storee chai chain n grou ground nd.. More Moreov over, er, adaptation of IT implementation incurs a substantial use for Seven-Eleven. The company in its busin business ess servic services es can requir requiree precis precisee infras infrastru tructu cture re within within their their distri distribut bution ion centers centers enabling effective information flows and streamline supply logistics. Thus right logistics and collaboration upon providing imperative business operation benefits considering the majority of customers worldwide.
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