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Jagannath University
Department of Marketing

Case Study: Seven-Eleven Japan Co.

Submitted to,
Professor,
Imranul Hoque
Marketing Department
Jagannath University

Submitted by,
Marketing Wizard
Marketing Department
Jagannath University
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Group Profile
SL Name ID No

1. Tanvir Chowdhury Shakil B160204004

2. Fahim Istiaque B160204057

3. Md.Khyrul Islam B170204019

4. Saurov Kumar B170204029

5. Sazzadul Islam B170204051

6. Md.Hedayet Ullah B170204054

7. Md.Aminul Islam B170204068

8. Md.Habibur Rahman B170204094

9. Md.Mosraqul Islam Payel B170204096

10. Md Shah Jahan Ali Sorkar B170204099

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Case Study: Seven-Eleven Japan Co.

Q1. A convenience store chain attempts to be responsive and provide

customers what they need, when they need it,where they need it. What
are some different ways that a convenience store supply chain be
responsive? What are some risk in each case?
Ans:
As responsiveness increases, the convenience store chain is exposed to greater
uncertainty. A convenience store chain can improve responsiveness to this
uncertainty using one of the following strategies, especially for fresh and fast
foods:

Method for Responsiveness Risk of Method

Integrated information systems Incompatible systems, systems not

completely integrated, but
“piecemeal”,
and breakdowns.

Additional capacity (manufacturing, Overinvestment in capacity,

DCs, underutilized
retail stores) capacity

Increased safety inventory Additional inventory carrying costs

Increased number of deliveries Increased transportation costs

Increased product variety and Additional inventory carrying costs

availability

Q2.Seven-Eleven’s supply chain strategy in Japan can be described as attempting

to micro-match supply and demand using rapid replenishment. What are some risks
associated with this choice?
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Ans:
Micro-matching supply and demand using rapid replenishment assumes that each
store will repeat the same demand pattern on a daily basis. The tour bus
phenomenon, where a group of unanticipated customers comes to the store and
buys all of a type of product will cause difficulty for regular customers. During such
an event, the store will likely stock out and customers may visit the next
Seven-Eleven site down the block to make their purchases. Some of this demand
may permanently shift, causing a local ripple; the replenishment may be excessive
at one site and insufficient at an adjacent site for the next cycle. Another possible
issue would result from delays in transportation; although deliveries are scheduled
for off-peak hours, a disruption in traffic flow will result in low service levels for the
next wave of demand.
The risks with this supply choice are:
• High cost of transportation.
• Cost of receiving continuous income of product at the store.
• Risk of having obsolete inventory.
• Lack of extra space.

Q3. What has Seven-Eleven done in its choice of facility location, inventory
management, transportation, and information infrastructure to develop
capabilities that support its supply chain strategy in Japan?
Ans:
Facility location: Seven-Eleven places its stores in “clusters” that are supported
by a single distribution center.
Inventory management: They have dedicated manufacturing plants to produce
fast food, and classify inventory according to 4 separate categories to assist in
transportation. Although related to their information system, they manage
inventory through their graphic order terminal and receive inventory using the
scanner terminal. Their POS register also tracks inventory at a very detailed
level. They also manage deliveries to match demand by time of day (e.g. dinner
items delivered just before dinner time).

Transportation (& distribution): Taking advantage of clustering stores around

DCs allows Seven-Eleven to provide efficient and responsive deliveries to their
stores. They use a “combined delivery system” in which single
temperature-controlled trucks delivery one category of food to multiple stores.
They also make deliveries during off-peak hours (although what is meant by
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“off-peak” is not defined). They also reduce delivery time by using the scanner
terminal. The DCs do not carry inventory, but are really cross docking facilities.

Information: The information is key to each of the above drivers. Information is

used to manage inventory and coordinate deliveries – from manufacturing to DC
to the retail store. The ISDN system consists of four major components: graphic
order terminal, scanner terminal, store computer, and POS register. The system
uses a graphic order terminal to not only track and analyze POS data and place
orders with vendors and the DC, but is also used to determine when to convert
shelf space from slow moving to fast moving items. The scanner terminal
improves the efficiency of the delivery process. The store computer, linked to the
ISDN network, communicates among the various input sources to track inventory,
sales, orders, and so on. Finally, the POS register keeps up to date information

on customer sales and demographic information (gender, age). In summary, the

information system is used to “driver the drivers”, bringing together all the
information necessary to manage facilities, transportation, manufacturing, and
distribution.

Q4. Seven-Eleven does not allow direct store delivery in Japan but has all
products flow through its distribution center. What benefit does Seven-Eleven
derive from this policy? When is direct store delivery more appropriate?
Ans:
The benefits of this policy is coordination, flexibility, responsiveness, and
managing fewer relationships – retail stores do not have to each work with
vendors, but only the DC. Direct store delivery is more appropriate for the
7dream delivery concept. For Seven-Eleven Japan, it seems that direct store
delivery would not be appropriate unless one store, in serving the local
preferences, sold an item with high demand uncertainty that was not sold in any
other stores. It may also be appropriate for an emergency shipment or unique
“one-time” items that are heavy or bulky.

Q5. What do you think about the 7dream concept for SevenEleven Japan? From
a supply chain perspective, is it likely to be more successful in Japan or the
United States? Why?
Ans: The 7dream concept for Seven-Eleven in Japan was established as an
e-commerce company. Convenience stores served as drop-off and collection
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points for Japanese customers. I think this is likely to be more successful in

Japan because the Seven-Eleven store network is not as dense as in the U.S.
Also, it appears that Seven-Eleven Japan attracts a different type of customer.
Although I can only speculate, I would be concerned about the security of
packages in a Seven-Eleven store in

the U.S. preferring a home delivery even if I wasn’t at home. After all, that’s the
appeal of e-commerce.

Q6. Seven-Eleven is attempting to duplicate the supply chain structure that has
succeeded in Japan into the United States with the introduction of CDCs. What
are the pros and cons of this approach? Keep in mind that stores are also
replenished by wholesalers and DSD by manufactures.
Ans:
The “pros” of this approach are illustrated by the success of this concept in
Japan: highly responsive system that has increased its efficiency through the use
of information. They are able to effectively match supply and demand. The cons
of this approach in the U.S. stem from the geographic dispersion of Seveneleven
stores. The fact that stores are not as clustered as in Japan will impede the
responsiveness that is a cornerstone of Seven-Eleven Japan. Because DSD is
also used, there is more coordination required in the U.S. and more relationships
to manage. The CDCs may also be forced into holding some level of inventory
because of the lack of clustering in the U.S., resulting in lower performance than
that in Japan. If the CDCs become more of a distribution center than a cross
docking operation, their strategic advantage is lost, and the investment may not
have been worth it. An additional downside is the outbound costs, which could be
quite high depending on the number of stores served.

Q7. The United States has food service distributors that also replenish
convenience stores. What are the pros and cons to having a distributor replenish
convenience stores versus a company like Seven-Eleven managing its own
distribution function?
Ans:
Pros: The largest benefit of having a distributor replenish the store is that they
don’t have to invest in DCs or trucks to perform this task.
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Cons: The downside is the lack of control and the increased number of
relationships that must be managed at the store level. Responsiveness may also
not be as great. Some store managers will be more adept at managing these
relationships than others, and service levels will not be consistent among the
stores. This also creates more potential problems for upper management in
overseeing the franchises to ensure consistent customer service.