Seven Eleven
TABLE OF CONTENT 1. EXECUTIVE SUMMARY 2. BACKGROUND 3. REASONS OF CHOOSING THIS ORGANIZATION 4. SCOPE 5. CURRENT SITUATION 6. SUPPLY CHAIN FEATURES 7.ISSUES IDENTIFIED 8. ANALYSIS OF CURRENT SITUATION 9. GAP ANALYSIS 10.RECOMMENDATIONS & IMPLEMENTATION 11.DISCUSSION AND CONCLUSION 12. REFERENCES 13.APPENDICES i. SWOT Analysis ii. GAP Analysis iii. Interviews of two Seven Eleven Stores
Executive Summary Seven-Eleven is a worldwide famous brand in the retail area which provides great convenience for the customers due to its successful performance in Supply Chain Management (SCM). However, Seven-Eleven itself still has been facing a lot of challenge such as its competitors have rushed to copy its operation mode. This report focuses on the SCM of Seven-Eleven and aims to propose potential improvements for its whole supply chain system. Firstly, it introduces the background of this company by collecting data about its current situation and investigating for two stores which are located in Melbourne Australia and identify the issues; then, using the SWOT analysis methodology to analyze its status quo and using the GAP analysis to make sure the existent issues in the system which prevent it perfectly performing. According to the reasonable analysis, the proposed recommendations are as follows: •
Price restructuring
•
Better forecasting methodology
•
Optimizing distribution system
•
Better inventory methodology
•
Widening the customer base
•
Increasing the average of product and the executive items
•
Improving customer loyalty
•
Focus on providing more convenience
•
Company synergy
Finally, the report proposes some suggestions and implementations which aim to make the recommendations could be implemented well in practical level. In conclusion, though Seven-Eleven has led a trend to offer more convenience for customers, it still needs to improve its supply chain and operation mode consistently then keeping its leading position in the market. In our research, there still are some limitations in collecting data due to company’s terms and conditions.
Background 7-Eleven, the world’s largest operator, franchisor and licensor of convenience stores, primarily operates as a franchise, with more than 42400 outlets. Founded in 1927 in Dallas, Texas, 7-Eleven pioneered the convenience store concept during its first years of operation as an ice company when its retail outlets began selling milk, bread and eggs as a convenience to customers. Its stores operate under Seven-Eleven Japan Co. Ltd, which is owned by Seven & I Holdings Co. of Japan. Its stores are currently located in 16 countries, with its largest markets being Japan, the United States, Canada, the Philippines, Hong Kong, Taiwan, Malaysia and Thailand. There are around 38, 432 across all around the globe, the spread can be seen in the figure below.
Figure : Seven Eleven Network 7-Eleven Stores Pty Ltd as a wholly Australian-owned family business operating is independent licensee of 7-Eleven in Australia. In 1977 in Oakleigh, Victoria, there are more than 360 stores in Victoria, NSW and Queensland owned by 7-Eleven,. 7-Eleven Australia services almost 100 million customers annually with sales approaching $1.5 billion. Franchising is a major form of business ownership in Australia. Statistically, over five per cent of all businesses in Australia are involved in a franchising agreement.1 The Franchise Council of Australia lists almost 1,200 registered franchises2 and ten per cent of all medium sized business in Australian (those employing 20-199) is part of a franchise. 7-Eleven opened the first convenience store for profit in Australia and has built up a formidable and culturally diverse team of franchisees. Franchisees buy into existing
franchises because they offer an established market presence, brand identity and existing operational systems. Furthermore, there was a saying--“When you buy a 7-Eleven franchise you buy two things: A globally recognised brand and a business system that works.” The essential concern is efficiency operations management. To supply, it is also particularly vital for high volume retailers such as 7-Eleven. Modern commerce is increasingly using Information and Communications Technology (ICT).
Figure: Attributes of Seven Eleven It follows 3's of servant leadership. Servant Leadership creates a very helpful atmosphere which is environment that promotes growth and innovation. Moreover, its great performance in the operation of supply chain is really very valuable for us to learn.
Reasons for choosing the company The future of the convenience store industry is exciting and full of opportunity. 7-Eleven is more than just a convenience store – it is the world's largest convenience retailer. It is a strong brand with its company culture concentrated on dedication, integrity and customer focus. These values, as well as accountability, recognition, people and teamwork, outline the most important principles that 7-Eleven must exemplify in a service-oriented culture. 7Eleven focuses on meeting the needs of convenience-oriented customers by providing a broad selection of fresh, high-quality products and services at everyday fair prices, speedy transactions and a clean, friendly shopping environment. It offers consumers a number of convenient services designed to meet the specific needs of individual neighbourhoods, including automated money orders, automatic teller machines, phone cards and, where available, lottery tickets.
Scope This report aims to do some research in seven-eleven’s supply chain operation, based on the investigation of its two franchisees (located at Bourke Street and King Street in Melbourne respectively which are two of the busiest stores in the city) and the widely search about its status quo on the internet. Through the SWOT and GAP analysis methods to focus on the potential issues which still need to be improved in the future and then propose certain recommendations about optimizing the whole supply chain performance for the company.
Current Situation Industry Browser - Services - Discount, Variety Store
Responding to a changing market place Since its launch in 1977 as the first franchised convenience store in Australia, 7-Eleven has had to keep pace with changing market conditions. In 2006 7-Eleven embarked upon its $22m Project Energise program. The objectives of this long-term strategic plan were to: • Streamline operations making day-to-day store management simpler and more efficient • Update and tailor product mix and store image to continually meet customer demand • Grow business by 12 per cent with franchisee and company profitability growing at the same rate. 7-Eleven uses extensive quantitative and qualitative market research to determine the most suitable areas for new stores and to develop the most lucrative product mix to suit the profile of likely store customers. Through extensive research, 7-Eleven has developed six distinct
profile categories for its stores: main road fuel sites, CBD district, suburban strip, coastal/tourist, central destinations and inner-diverse store groups. Each category has its own particular customer profile, product mix and pricing and layout strategy.
Supply Chain Modern effective supply chains are increasingly integrating ordering, distribution, warehousing, logistics and ICT solutions as part of effective business-to-business (B2B) networks. Over recent years 7-Eleven has used technological innovation to improve the efficiency of its supply chain. 7-Eleven electronic purchasing and distribution model One B2B innovation has been the introduction of a centralised purchasing and ordering system. The system automatically creates store orders based on electronic sales or replenishment records. When stock levels fall below predetermined benchmarks, orders are created and sent electronically to a central distributor who fills the orders for delivery to stores. This centralised ‘back-end’ innovation: • Saves the franchisee time they would have spent checking stock levels, planning orders and contacting suppliers • Saves unloading and administration time for franchisees as well as staffing costs • Reduces the number of weekly deliveries into stores. They fell more than 70% from 110 to 30 • Creates other benefits such as reduced store clutter, fewer delivery vehicles taking valuable car parking spaces and improvements in stock control. Quality management systems An effective supply chain needs to have in-built quality management processes to ensure quality standards are met throughout all stages of production and supply. When 7-Eleven introduced ‘munch’ it was vital that this fresh product range arrived in stores daily, at peak quality levels and with minimal spoilage.
The manufacturers of the ‘ munch’ range must meet Australian quality assurance standards associated with the production of fresh food. As part of operations to support their fresh products, 7-Eleven also established quality benchmarks that they believe are much higher than those set by other comparable Australian Food retailers. To achieve these goals 7-Eleven assembled a specialised quality team to work with suppliers on a daily basis and made a significant number of changes across their system including operational quality targets. • A zero tolerance target of 100 per cent for the critical Slurpee brand. The performance for 2007 was 99.7 per cent • A target 98.5 per cent for Daily Fresh products. In 2007 they achieved 98.9 per cent on a continuous basis • A target of 98.5 per cent for ambient and frozen goods. 2007 Performance was slightly below target, although performance had increased compared with 2006. Inventory management 7-Eleven offer its stores a choice from a set of 5000 stock keeping units. Each store carried on an average about 3000 stock keeping units depending on the local customer demand. There are four categories of food including chilled-temperature items; warm-temperature items; frozen items; and room temperature items. Each category is severed with its special needs in order to keep it fresh. Since, 7-Eleven responds very quickly to order, with store managers placing replenishment orders less than 12 hours before they are supplied. This practice makes 7-Eleven Supply chain very responsive. Hence reduce the inventory holding cost.7-Eleven uses scanner terminal to read bar codes and record inventory. It is an advanced level of inventory management. This allowed a store manager to forecast sales corresponding to each order accurately. Transportation The supplier of each store won't deliver inventory to appropriate shop directly, instead of delivering them to the distribution center, the distribution center then distribute inventory to appropriate store. This can minimize the trucks as well as transportation cost
Changes In 2005 7-Eleven began a sizable project with SAP to go from a completely distributed supply chain to one in which about 90 per cent of stock can now be automatically replenished. This has been a massive change for 7-Eleven because all the sales data can be collected by item from the store system and update SAP with that every three hours. All the other inventory management that’s done by the store in real time via the SAP portal, so 7Eleven has a very accurate perpetual inventory. In 2009 7-Eleven introduced what it calls a ‘virtual supply chain’ to enable it to sell more value-added services. It integrated the POS with software from Touch Networks to enable access to services in areas such as gaming (lottery tickets), transport (bus, tram and train tickets) and financial service.
Issues Identified 1. Higher Prices Most of the items’ prices in seven-eleven are much higher than other normal stores. It is limited to attract the customers. So the prices of products need to be decided strategic for enhancing the customers’ base. 2. Untrustworthy Stock Replenishment System The managers of the stores cannot trust with the existing centralized and purchasing order system when they replenish the stocks. Most of them believed that it only relied in "Point of Sale" data and further variable information such as seasonal demand, current promotions and other factors by their own experience. This results in four situations: a) Intuitive ordering system (judge by their experience). b) Waste of time: checking stock level, planning order. c) Further added administrative costs. d) Less accurate of the scale of the ordering then will lead the increaing inventory or stock out. 3. Logistics capabilities of Seven Eleven are not utilized to full extent The Seven Eleven franchise located at Bourke Street and King's Street had different delivery timings. It has the capability of reducing vehicle delivery timings for faster and effective
delivery system. And it is still necessary to improve its planning of the routes and timing for trucks delivery.
4. The complexity in the network of Seven Eleven supply chain There are so many stores, warehouses and various suppliers around the city which makes the network of Seven Eleven is complex. 5. Limited target consumersMost of the consumers were office goers or youngsters. It has been unable to attract other customers largely due to the high prices. It should introduce some strategies to offset this negative situation. 6. Limited Variety of products on shelf and not enough exclusive items. There are less varieties of items on the shelves due to its lean SKUs management, it is helpful for their management of inventory, separated delivery, shelf space management, but disadvantaged for meet customers' various needs. And it still need to increase the exclusive products to keep its competitiveness which other stores cannot copy with. 7. Lack of customer loyalty The customers come to seven-eleven stores mostly because they are in an hurry. They will change to choose another store randomly.
Analysis of Current Situation The SWOT analysis indicates the competiveness and potentiality of seven-eleven in retail business area while it also shows some disadvantages about its performance. The strengths and weaknesses are the internal factors reflecting the current supply chain performance of seven-eleven; while the opportunities and threats are the external environment influence the development of the company. And some of the strengths lead the weaknesses exists, such as effective and efficient management in various items and convenient character of orientation result in the higher prices and less variety of products. This also explains the conflicting objectives of each part of the supply chain. So it is necessary for seven-eleven to consistently pursue the optimization of the whole process for keeping competitive. Meanwhile, some of the opportunities are together with risks but threats also can promote seven-eleven to exploit the potentiality. The specific SWOT analysis is as following table. Strength
Weakness
Worldwide brand image;
Higher prices;
Service-oriented princile: convenience-orientation;
Less variety of items;
Reasonable layout of plants, warehouses and distribution center;
The special characters of commodity;
More complex distribution due to its massive
Classified inventory management;
in wide places；
Speedy transportation;
Inventory replenishment delay;
Quick response to orders;
Bullwhip effect.
Good relationships with suppliers; Consistent innovation of technology and strategies.
Opportunity
Threat
Introduce new products
Stores’ copy;
Improvement in forecasting of consumers’ demand;
Price-cutting competition;
Broad market share in different countries;
Uncertainty of customers’ demand;
Development of transportation system;
Various policies and cultures in different coun
Innovation each process of the whole supply chain. **See Appendix for more details.**
Gap Analysis The GAP analysis is chose to identify the seven-eleven’s current performance on operation of
supply chain and to find the potential performance which it wants to be achieved in the future. Though it has owned a high level in supply chain management at the business area, there still some aspects need to be improved so that support this corporation keeping the leading position in the retail business area which are full of competition. However, facing the different 'Gaps', it is essential for seven-eleven to plan reseanobly to achieve the expected outcome.The specific analysis are as following table. Current Situation Good responsiveness to customer needs
GAPs Increasingly change in customers’ taste, market trends and industry environment
Complex network of supply chain
Uncertainty of transportation system and changing marketing which make it is hard to control the product yields, inventory, distribution Administration costs high due to its high
Much higher prices of most of the products
Desired Outcome Quick and appropriate responsiveness to customer needs and continuous improvement of customer service Lean and tight network of SC and optimization of SCM
Smart pricing of all the items
quality of service, frequent delivery times for perishable products costs high and etc. The conflict objectives of each point of the supply chain. Supplier relationship Long-term development building which make seven- of relationships with the eleven gains the capabilities suppliers as the fast of marketing and original changing of industry product development environment (Nagayama and Weil 2004). The unreliable information The research and system in forecasting. development of information technology and more invest in the technology area **See Appendix for more details**
Optimization the strategic relationships with the suppliers (manufacturers), expand the original product development to improve the competitiveness More accurate and intelligent of information system
RECOMMENDATIONS 1. PRICE RESTRUCTURING: Australia has very competitive market for retail stores. Recent price wars have led to consequences that are very clear, on the verge of shutting down or liquidation. Even consumer adopt careful spending habits. In Seven Eleven, as expected that the price was reasonably very high due to transportation cost. It makes customers think many times before entering the store. Sometimes, they even prefer to waste hours of their valuable time going to nearby supermarkets rather than shop at Seven Eleven. However, it can be inferred from the interview that replenishments are not done on daily or regular basis. Whenever there are shortages of stocks, it can easily be purchased from nearby C-Store. Hence there is a margin to decrease the profit per item, thereby increasing the sales leading to better turnover. Prices may be restructured in two ways: (1) Comparative lower price to the present price (2) Different price of the products in normal operating hours and a higher pricing during closing period of other retail stores.
2. BETTER FORECASTING METHODOLOGY: The present forecasting methodology is not enough trustworthy and reliable, which has a scope of improvement. Store manager does not takes into account much of POS data because it does not take into considerations variable factors such as season, upcoming new products, promotions , etc. Seven Eleven have relatively smaller store size. So the customer pattern can be easily recorded (age-groups, frequently visiting customers or groups) by the operating storeperson. Later it can be analysed by manager and store-person to understand the causatives of variation in the demand which thereby will result into better forecasting, eliminating intuition or guess-work. 3. OPTIMIZING DISTRIBUTION SYSTEM There are many Seven Eleven franchises located city. They have different delivery timings. It can take advantage of better technology/IT system to reduce its store clutter, reduce total delivery thereby improving effectiveness and cost reduction 4. BETTER INVENTORY MANAGEMENT Seven Eleven store can manage their inventory by taking into consideration "Economic Order Quantity"model. Total inventory cost can be kept at the minimum, if optimum order size is calculated. As it can be observed from the figure that total cost constitutes of ordering cost and inventory carrying cost.
Figure: Inventory Holding and Order cost ( Atrill, P, 2008) 5. WIDENING THE CUSTOMER BASE Seven Eleven has been unable to target customers other than busy people or youngsters. It can give certain discounts to pensions or old people. As a result there will be more circulation of productions leading to increase in its turnover 6. INCREASING THE VARIETY OF PRODUCTS AND THE EXCLUSIVE ITEMS When someone enters Seven Eleven, he buys two things. So by increasing the variety of products, Seven Eleven can attract different types of customers. 7. IMPROVING CUSTOMER LOYALITY It has been observed that most customers purchase when they are really in hurry and have no other option. Seven Eleven should start loyalty card system by which after certain amount of purchases they may get certain amount of discounts or privileges. It would attract customers who are near Seven Eleven and are nearby other stores. It would also help them to study customer purchasing behavior and better forecasting can be made or Bullwhip Effect could be decreased.
8. FOCUS ON PROVIDING MORE CONVENIENCE Seven Eleven is convenient store, and should be always looking forward to providing customers with faster, simpler and better services by the utilization of new technologies. It would help them to attract more customers. 9. COMPANY SYNERGY There should be effective communication within the organization. Weekly meetings can help to understand customers needs in better way thereby creating an environment of innovation, so that customers expectation can be met
IMPLEMENTATION 1. Internet payment system Seven Eleven could develop internet payment system of items through their website, or mobile phone applications so that customers on the move with minimum hassle can enjoy the best service with minimum time lag. Investment is required however it is such a big brand, this will increase its market. a. Different internet payment providers could be identified. b. Selected c. Integrated in Seven Eleven Purchasing system 2. Discounts cards for old people and pensions will further increase its market. It may reduce profit per item however turnover will increase as there will be more sale. a. Advertise and create awareness among people that Seven Eleven is for everyone, young, old and that they care for the people. b. Work out the discount levels keeping in mind pensioner budget but still keeping profit. Price should attract them. c.Maybe start on trial basis on few stores d. If successful, Seven Eleven could use it on large scale. 3. Loyalty cards can easily be implemented as its costs nothing to the company and it will certainly help in bringing more customers and it would also allow to study customer behavior. 4. Smart Pricing: Products can easily be priced smartly as per the demand and supply. Looking at this competitive market, it can lower its price a bit in day-time. However at night time when it has its monopoly, it could increase the price. a.Identify the competitors store nearby, b. Compare price
c. Should change price the products relatively in day and increase the price when the competitors store are closed
5. Forecasting system: Better forecasting system is required. Franchise do not trust the current system, it needs to be discussed and better technology needs to be employed. a. Identify the forecasting methods or technology available in the market. b. Compare them and Select one of them. c. Educate the method to the franchise. d. Integrate and start working. 6. It is easily feasible for optimizing its inventory in the warehouse. Its about management, it will not cost them anything.
Discussion and Conclusion 1.Limitations Our study was limited due to limited availability of data and information, there are large number of Seven Eleven's around the Melbourne CBD, the transportation routes can be optimized. 2.Directions for improvement From our studies of Seven Eleven ( Australia), it was found that there was further scope of improvement in terms of convenience and increasing customer base. Most importantly more research and study is required for obtaining a trustworthy and reliable forecasting method as can be inferred from Seven Eleven(Bourke Street). The Seven eleven still needs to work on the strategy as the people do not prefer to buy goods, prefer wasting long time instead of getting the goods nearby. 3.Lessons learnt Seven Eleven from our studies, seemed like small business centre who are aware of the issues presented in the report however are not able to act on the individual level, because of company's terms and conditions.
Conclusion
Because of Seven Eleven's brand impact and wide spread use of convenience stores, our group chose 7-eleven as the object of study. Convenience is the most obvious benefit of Seven Eleven stores which attracts millions of people, although the prices of products are far from being competitive.
In terms of supply chain, according to analyses, the supply chain of Seven Eleven through the SWOT analysis and GAP analysis, the most significant benefits of Seven Eleven are the innovations and the unique business model. The innovations are that Product content, supporting supply chains and sales processes operate all at the same time. Seven Eleven stores compute the demands of customers detailed and whenever necessary so that it can improve the efficiency and reduce the cost ultimately. Seven Eleven is successful until now, needs to further innovate, improve and step with the consumers and the popularity.
Reference: 1.
Seven-Eleven.
Viewed
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August
2011,
eleven.com/AboutUs/tabid/73/Default.aspx>. 2. Seven-Eleven Franchise Program. Viewed on 9 August 2011. . 3. Lohman, T 2010. Supply chain helps keep 7-Eleven open 24/7. Viewed on 9 August 2011. . 4. Andrey 2011, Supply Chain Management: Case Study 1 Seven-Eleven Japan Co., viewed on 9 August 2011. . 5. Matsuo, H., & Ogawa, S. (2007). Innovating innovation: The case of seven-eleven japan. International Commerce Review: ECR Journal, 7(2), 105-105-114, viewed on 15 August 2011, .
6. Kei Nagayama and Peter Weil 2004, Seven Eleven Japan: Reinventing the Retail Business Model, CISR WP No. 338 and MIT Sloan WP No. 4485-04, viewed on 16 August 2011, http://210.212.115.113:81/AK.Dey/OperationsMgmt/OM_Cases/7_Eleven/Case%2520Seven%2520Eleve n%2520Japan%2520cisrwp338.pdf
7. Supply chain helps keep Seven-Eleven open 24/7. Viewed on 20 August. . 8. Seven-Eleven Brand System. Viewed on 20 August. . 9. Seven-Eleven Wikupedia. Viewed on 20 August. . 10. Atril, McLaney, Harvey & Jenner, 2008, Accounting 4: An Introduction, 4th Edition, Pearson , Australia
APPENDICES A. SWOT Analysis STRENGTHS 1.Worldwide brand image: 7-11 has long retailing history and stores spread around the globe, so it has strong worldwide brand image. 2.Service-oriented principle: 7-11's econvenience-orientation is 24-hours service. Some special products are unlike to other stores: munch range; mobile recharge, sim & phones; money gram; treats; your top up shop; news, mags & enterainment; stationery & gifts; limited store range; accepted cards; slurpee; game cards; atm; refreshment; 7-eleven fuel; transport; personal care & cleaning; auto & car care. The target customers are businessman and young people.
3.Reasonable layout of plants, warehouses and distribution center: 7-11 has its own suppliers and manufacturers. Also, it has own warehouse and transportation in different region. In other words, it has own particular supply chain. 4.Classified inventory management: In warehouse, 7-11 separates different items to different areas. It can control the items' temperature which is necessary.
5.Speedy transportation: 7-11 has own transportation department which is based on regions. All delivery happen in the evening which avoid the rush hour. Thus, the transportation fee can be saved.
6.Quick response to orders: By using POS system, each 7-11 store can contribute warehouse and customers and develop a complete supply chain. When the item is sold, computer can send this information to warehouse and background computer. So, the suppliers can understand the level of inventory. 7.Good relationships with suppliers: Good relationship is a part of success. 7-11 always devote to improve the relationship with suppliers. 8.Consistent innovation of technology and strategies: 7-11 likes to develop its own products. In Australia, the popular products are 1 dollar coffee and slurpee which are 7-11
own products. At the same time, it innovate constantly and quickly improve sale strategies to attract more customers.
WEAKNESSES 1.Higher prices: It is well known that the prices of 7-11's items are higher than supermarkets, because the cost of transportation and warehouse and labour are higher. 7-11's sales volume is lower than supermarkets, so it must increase the price to ensure profitability. 2.Less variety of items: Australian 7-11 just has more than 100 items in each store which is not compared to supermarkets. 3.The special characters of commodity: Some special items are not sold well. Sometimes, they are close to expired date or over the date, how to control their quality and quantity is a big problem, especially about perishable products. 4.More complex distribution due to its massive stores located in wide places: There are many stores in melbourne, how to choose the route is the most important factor in reducing the fee. 5.Inventory replenishment delay: 7-11 has fixed delivery time, if some products sell out, warehouse can not deliver them timely. 6.Bullwhip effect: 7-11 is affected by bullwhip effect, because it has massive stores which increase the difficulty of control. Bullwhip effect is occurred frequently which cause to cargo backlog.
OPPORTUNITIES 1.Introduce new products: Introduce new ways of obtaining a more competitive edge and of differentiating its providing: 2.Improvement in forecasting of consumers’ demand: Because the consumers' demand is changing all the time, there is no one method to forecast. The only thing 7-11 can do is to improve the forecasting method and minimize mistakes. 3.Broad market share in different countries: 7-11's stores are currently located in 16 countries which is not a big number. It has a chance to operate new store in new countries which can increase the market share. 4.Development of transportation system: 7-11's current transportation system is not optimization. The selection of route and deliver time can be improved to reduce the costs and stock out. 5.Innovation of each process of the whole supply chain: In each process of the whole supply chain, there are some minor defects. How to solve these defects to achieve optimization is one opportunity for 7-11.
THREATS 1.Stores' copy: Competing convenience stores’ copy of its forecasting, inventory management and supply chain management 2.Price-cutting competition: Due to the high cost, 7-11 is difficult to compare with each supermarket. As of now, 7-11 is a loser in price-cutting competition. 3.Uncertainty of customers’ demand: Because the uncertainty of customers' demand, bullwhip effect always affect 7-11's stores. 4.Various policies and cultures in different countries: Different country has different policy and culture and taste. How to coincide with these things is a big threat. For example, 7-11 provides transportation tickets in Australia.
B. GAP Analysis
Gap 1 The consistent and perfect fulfillment of the customers’ demand is always the pursuit of seven-eleven stores. However, it is difficult to response to the consumers’ need effectively and quickly because of the uncertainty of customers’ taste, marketing trends and the development of industry. In specifically, the new products would be emerged in the convenience stores each year as the marketing changes, factories’ products innovation or other reasons. And meanwhile there would be also some products removed from the shelves as some of the suppliers bankrupted. How to identify which of product is the public need and to deal with the withdrawing of certain suppliers is a gap for seven-eleven’s performance in responsiveness to customers’ needs. Gap 2 The operation character of seven-eleven results in the complexity of its supply chain network. The complex net of seven-eleven stores, warehouses, suppliers spread around a city leads the control of each process of supply chain much difficult. Especially the transportation system of a city such as the routes, peak hours, transportation rules and so on also makes it is hard to delivery at the right time. This also causes the managers of stores cannot completely trust the delivery time which will make them reduce the lead time, then the inventory would be increased. The ordering system then will reflect the transportation system in some extent. Marketing changes is a valuable factor to be paid attention. How to decide the yield of certain products as the consistently changing in consumers’ tastes and marketing trends is still a gap for the whole supply chain to control the distribution and inventory. Gap 3 Most of the products in seven-eleven are much more expensive than normal supermarkets. Certainly it is due to its higher quality of service and higher costs on the administration. It is still necessary for optimizing the operation of supply chain to reduce the whole costs and then with smart pricing to get a preferred system. Take King St. seven-eleven store in Melbourne for an example, by avoiding the rush hour delivery to reduce the costs on transportation. And the delivery separated by categories, just like the magazines delivery weekly, food and drinks delivery on Monday and Friday. These strategies reduce the cost somehow but still need to exploit more methods to optimize the whole performance. And seven-eleven also need to utilize the smart pricing strategy to attract more potential customers. For example, decrease some products’ price by exploiting certain suppliers. The preferred seven-eleven store should have a much balanced prices of its items. Gap 4 Seven-eleven is experiencing a more competitive environment today, though it had conducted a good relationship with its suppliers. It still needs more exclusive products to gain the competitiveness which should keep the long-term relationships with existent suppliers and exploit the new suppliers. However, with the uncertain industry environment and more competitors emerges, it is difficult to realize this. Just like during the financial crisis, maybe some important suppliers would be bankrupted with no signals. Gap 5
The application of POS system in seven-eleven obviously improves the effectiveness and efficiency of the whole supply chain. According to the investigation of two stores in Melbourne, the system is helpful for ordering, but it is still cannot be completely depended on. The managers need to forecast the scale of ordering in different seasons or specific festivals by their own experience which exists less accuracy. The gap for getting a more accurate and intelligent system is the limits of information technology. So it is necessary for the company to invest more in the research and development of technology. It is also the way for seven-eleven to keep competitiveness and vitality.
Under the old supply chain system, every store would order from an agreed-upon list of suppliers and all the stock would be delivered directly to the store. The stores then sent the invoices to 7-Eleven headquarters(HQ) for payment. Under the new system, 7-Eleven HQ generates store orders, which are reviewed by the stores via an SAP portal so that adjustments can be made. The consolidated orders then run through a centralised supply chain.
C. Investigation of two seven-eleven stores in Melbourne (1) Seven-elven (Bourke Street, Melbourne-3000) Interview with shift manager Q1. How many products and what kinds? There are many products which mainly includes daily needed items, some fast food items ( for people on-the-go), drinks etc. 2. Wh Q2. What kinds of customers come in store? a. Day - Office going people and youngsters mainly b. Evening- Office returning people and youngsters mainly c. Night- Nearby apartments residents.
Q3. Who are your suppliers? We have mainly 4 suppliers: (a) C-Store ( Seven Eleven's own distribution Centre )Seven Eleven own warehouse, where products are stocked. Daily needed items are ordered from here such chocolate, perfume, coffee-cups, drinks, etc.; (b) Chips- Smiths; (c) Icecream; (d) Milk-Supplier. Q4. When do they order for stock, how do they order and who orders? Manager orders for the stock. There is different ordering system for different products. CStore: Orders are made on every Sunday at 5 pm based on the historical data, forecast is made
according to perceived demand, promotions, historical data, etc.; Chips: Depends; Ice-cream : Depends; Milk-Supplier: Depends.
Q5. What are supplier delivery timings? For C-Store, delivery is done on every Monday evening.
Q6. Does he think that this method of their ordering can be improved and how? We have very good ordering system. Its good.
Q7. Does the demand varies during different seasons and how do they manage? Yes, demands varies much at different seasons and times. When the items are not sold such as drinks, it keeps lying on the store until it is sold. If the items are sold quicker than expected, than we go by ourselves to C-Store at Preston and purchase the items. Q8. What happens when the product is nearing the expiry date? If the product is nearing the expiry date, we mark the item as “ REDUCED TO CLEAR”. It is done with consultation with the store manager.
Q9. What happens if the product is expired? If the product is not sold, we mark them as “BAD MERCHANDISE”, we get our money back
Q10. How do they store their products? In a cool, small ware-house attached to Seven Eleven Store.
Q11. What do they do when they run out of stock? Do they place something else on that shelf and which product do they put? If something’s, we run out of stock, we are very quick on replenishing it by purchasing at the same time from C-Store at Preston
Q12. How can they think that they can improve their profit?
By keeping the store clean, friendly-service, fast service and informing the customers about latest promotions.
Q13. What kinds of products sells most and which ones least? Name atleast 5 each. Most: Smokes, Drinks, Chocolates, Slurpy, Milk Least: Washing Powder, Soaps, Grocery.
Q14. Why don’t you remove the least selling products? It helps in generating new customers and retaining some. It is required.
Q15. What does he think about exclusive products that are there in 7/11? Such as ONE DOLLAR COFFEE, it brings the customers inside the store, it gives us the opportunity to sell them more products.
Q16. Are there any other services that you provide? a) b
Metcard; Money-Transfer; ATM; Tats lotto; Mobile Recharges.
Q17. Do you rely on Point of Sale data to order stocks?
We do not consider much of POS data while ordering our stocks. It has led to confusion in the past. We also look in to factors such as seasonal demand, past experiences, promotions, etc. Q18. Any Suggestions that can improve the business? Do you think that there is margin to decrease the price considering some of the products that you sell have nearly double the price of that of Coles or Safeway? Our primary objective is give our customers a fast and good service. We are also open 24 hours a day. Since we are the only players some of these times, we would like to improve our profit. Else, I think the best practice is going on.
(2) Seven-eleven (King Street, Melbourne) INFERENCE FROM THE INTERVIEW (a) They have delivery for three times per week which are Monday's, Tuesday's and Friday's evening. It can avoid the rush hour which may reduce the time and cost. On Monday and
Friday, the supplier deliver many drinks, milk, sandwiches, fresh fruit which are sold well. On Tuesday, they just supply newspaper and magazine. When some items are close to be stock out, the manage will order them and they will come in this three days. Using this methods, the manager can effectively control the quantity of each item and the phenomenon of stock out is difficult to happen. It is notable that in public holiday, there is no delivery. The stock out is easy to happen in these days. (b) According to expired items, they have own method. They will scan the items and then return them to the suppliers. If the item is fruit or other fast food, they all need to be scan and thrown away. When the item almost expires, the staff will decrease the price to try to sell. It is a good sales promotion. (c) 7-11 has more than 100 items in each store. Drinks, pie, chips and slurpee are sold well and 1 dollar coffee is best-sell which shows two things:1, the target of customers are young people and business man; 2, the price is an important fact of people's choice. The unsalable items are living items because they have higher price than supermarket, although it depend on location.
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Wed5.30pm Leon Class Group C 3 - 7-Eleven • •
Group Report Peer Evaluation Seven Eleven
