Assignment 3- Supply Chain Management

Made by

• Priyam Mehrotra(2101147)

• Priyansh Singh(2101148)

• Lingeshwaran R(2101149)

• Rahul Datta(2101150)

• Raja Aditya(2101151)
 Integrated
Convenience Information Distribution
History store industry 7-11 Franchise and Contents
Store services Information
system
Questions
System
7-11 COMPANY HISTORY AND PROFILE
 Integrated
Convenience Information Distribution
History store industry 7-11 Franchise and Contents
Store services Information
system
Questions
System

Success
Convenience store industry Development & Execution

• Japan’s convenience store • In 2008, Seven-Eleven was • operating income of

sector gradually consolidated Japan’s leading convenience 165.7 billion yen made
• Top 10 stores account for store operator, accounting it leader of wholesale
90% of the total stores for 34.3% market share market
• Convenience store grew • effective in terms of same- • 7-11 accounted for 60
more faster than store sales. percent of the total net
supermarkets. • Average daily sales at 4 increase in the number
• 7-11 increased share of major convenience store of stores.
convenience store chains totalled 484,000 yens • Growth was carefully
accounting for 41% of planeed, exploiting the
market share core strengths that 7-11
had developed

01 02 03
 Integrated
Convenience Information Distribution
History store industry 7-11 Franchise and Contents
Store services Information
system
Questions
System

Fewer than one of 100 applicants was

The Seven-Eleven Japan network included awarded a franchise
both company-owned stores and third-party-
owned franchises. The franchise owner was required to put a
significant amount of money up front.

Seven-Eleven Japan based its fundamental Seven-Eleven Japan responsibilities:

network expansion policy on a market-
dominance strategy. Entry into any new market Develop supply and merchandise
was built around a cluster of 50 to 60 stores Provide the ordering system
supported by a distribution centre. Pay for the system operation
Supply accounting services

Franchise owner responsibilities:

Adhering to its dominant strategy, Seven-Eleven
Operate and manage store
Japan opened most of its new stores in areas
Hire and pay staff
with existing clusters of stores.
Order supplies
Maintain store appearance

Boost Improved brand awareness

In 1994, 45 percent of total gross profits at a
Increased Enhanced efficiency of store went to Seven-Eleven Japan, and the rest
franchise support services went to the store owner. The responsibilities of
the two parties were as follows.
Improved advertising effectiveness, system
and distribution efficiency
 Integrated
Convenience Information Distribution
History store industry 7-11 Franchise and Contents
Store services Information
system
Questions
System
 Integrated
Convenience Information Distribution
History store industry 7-11 Franchise and Contents
Store services Information
system
Questions
System
 Integrated
Convenience Information Distribution
History store industry 7-11 Franchise and Contents
Store services Information
system
Questions
System

Advanced IT Introduce POS register Install ISDN

7-11 attributed a significant part of its success to In 1982, Seven-Eleven became the first company The two-way, high-speed, online communication
the Total Information System installed in every in Japan to introduce a POS system comprising capability of ISDN enabled Seven-Eleven Japan to
outlet and linked to headquarters, suppliers, POS cash registers and terminal control collect, process, and feed back POS data quickly.
and the 7-11 distribution centers. equipment.

Graphic order Terminal Scanner terminal

The items were recorded and brought up in the order in which
they were arranged on the shelves. When placing an order, the
store manager had access to detailed analysis of POS data
related to the particular item. This included sales analysis of
product categories and SKUs over time.
These scanners read bar codes and recorded inventory. They
were used to receive products coming in from a distribution
center. The scanner terminals were also used when examining
inventory at stores.

Store computer POS Register

This linked to the ISDN network, the POS register, the graphic As soon as a customer purchased an item and paid at the POS
order terminal, and the scanner terminal. It communicated register, the item information was retrieved from the store
among the various input sources, tracked store inventory and computer and the time of sale was automatically recorded. In
sales, placed orders. addition, the cashier recorded the age and sex of the customer.
 Integrated
Convenience Information Distribution
History store industry 7-11 Franchise and Contents
Store services Information
system
Questions
System

Combined Introduction High revenue

Delivery system 7-11 in USA Use of CDC of new items collection

Delivery of like products from
different suppliers was directed into a
single temperature-controlled truck.
All deliveries were made during off-
peak hours.
Stores in the US were replenished
using direct store delivery (DSD) by
some manufacturers, with the
remaining products delivered by
wholesalers
A variety of suppliers sent product to
the CDC throughout the day, where
they were sorted for delivery to stores
at night. Requests from store managers
were sent to the nearest CDC
The goal was to continue to In 2009, revenue in the United States and
increase sales in the fresh-food Canada totaled $16.0 billion with about 63
and fast-food categories with a percent coming from merchandise and the
special focus on hot foods. rest from the sale of gasoline.
 Integrated
Convenience Information Distribution
History store industry 7-11 Franchise and Contents
Store services Information
system
Questions
System

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 can be responsive what are some risks in
each case

Supply chain can become responsive by reducing lead time. this can be done in following ways
1. Real time information flow between suppliers, distributors and store
2. Strong supplier network. Good relationship maintenance with suppliers and distributors
3. Analysis of day-to-day data for each store and each SKU will enable in forecasting and reduction of replenishment time
4. Cross docking is one of the ways to be responsive and reduce inventory cost at the same time
Risk associated for the same is
1. Real time information flow risk: server breakdown or hacking
2. Strong supplier network and good relationship maintenance with suppliers and distributors: 1. Over dependence on one
supplier. Risk due to natural calamities increase if all suppliers lie in close proximity
3. Analysis of day to day data for each store and each SKU: data congestion due to large volume of data from 3000 SKU
*10000 stores
4.Cross docking: Order frequency must match logistics frequency
 Integrated
Convenience Information Distribution
History store industry 7-11 Franchise and Contents
Store services Information
system
Questions
System

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 risk associated with this choice?

Risk associated:
1. Over dependency on information systems- as we are rapidly matching supply with demand we are getting responsive but we
are increasing uncertainty at the same time which may cause heavily in the future if demand of certain products decreases
suddenly.

2. Any calamity on supplier end would lead to stock out situation in seven eleven because of absence of inventory in supply
chain. Most of it’s stores lies in Japan which is very prone to natural calamities like earthquake, tsunami in the recent past.

3. No warehouse- Cannot take advantage of Seasonal sales and must rely on very accurate forecasting techniques which
requires heavy investment and continuous monitoring of sales of all SKU’s. No extra space available

4. High cost of transportation as we are going more towards pull approach. 7-11 replenishes inventory 3 times a day which
requires heavy investment on logistics side.
 Integrated
Convenience Information Distribution
History store industry 7-11 Franchise and Contents
Store services Information
system
Questions
System

Q 3. What has seven eleven done in its choices of facility location inventory information infrastructure to develop
capabilities that support its supply chain strategy in Japan?

1. Facility location: Entry into any new market was buit around a cluster of 50-60 stores supported by a distribution center. It
gave 7-11 high density market presence and allowed it to operate efficiently. It also served as an effective deterrent to
competition.

2. Inventory management : no inventory because of cross docking, real time information flow to reduce stock out, micro
match between supply and demand helping in increased responsiveness and reduce lead time.

3. Transportation: dedicated vehicle for each category, delivery during off-peak hours, applying milk runs for collecting
supplies from multiple customer so as to reduce logistics cost, delivery using scanner terminals, allocation of stores per
truck dependent on sales volume.

4. Information structure: graphic order terminal, scanner terminal, store computer linked to ISDN network, POS register
linked to store computer. With this we can get sales analysis of SKU over time, sales trends, future predictions and effective
ordering of products from distribution center.
 Integrated
Convenience Information Distribution
History store industry 7-11 Franchise and Contents
Store services Information
system
Questions
System

Q4. Seven eleven does not allow direct store delivery in Japan with all products flowing through its distribution centre.
What benefits does seven eleven derive from its policy? When is direct store delivery more appropriate?

Benefits of current system

1. Proper product assortment as per required temperature at DC thus reducing perishability
2. Reduction in number of vehicles required for daily delivery at each store (1974,70 vehicles visited each store every day in
1994 only 11 were necessary)
3. Reduction in delivery costs. Rapid delivery of variety of fresh foods thus making the chain responsive
4. Rapid and reliable delivery to distribution trucks through dedicated DC. Appropriate direct store delivery
5. Demand from retailer is high enough to require FTL. When lead time is critical
6. Manufacturers and retailers in close proximity
DSD is useful when we have-

7. Easily damaged large items

8. Products with a short shelf life
9. High variety, low value products
10. Items requiring special handling
11. Complex products that require training
 Integrated
Convenience Information Distribution
History store industry 7-11 Franchise and Contents
Store services Information
system
Questions
System

Q5. What do you think about the 7 dream concept for 7-eleven Japan? From a supply chain prospective, is it likely to be
more successful in Japan or the United States? Why?

The 7 dream concept of Seven Eleven Japan is a good idea since it facilitates online ordering by customers via internet enabling
them to place orders and organize for goods pick up at their own appropriate time or convenience.
A survey by eSBook discovered that 92 percent of its customers preferred to pick up their online purchases at the local
convenience store, rather than have them delivered to their homes.

It is likely to succeed in Japan from a supply perspective because of the delocalized stores and the fact that customers
frequently visit stores of their convenience to pick up their online purchases. The United States also uses direct store deliveries
method. In the US online purchase companies focus more on last mile delivery as stores are not much close to people except for
metropolitan cities.
 Integrated
Convenience Information Distribution
History store industry 7-11 Franchise and Contents
Store services Information
system
Questions
System

Q6. 7-Eleven is attempting to duplicate the supply chain structure that has succeeded in Japan into the United States with
the introduction of CDC’s. What are the pros and cons of this approach? Keep in mind that stores are also replenished by
wholesalers and DSD by manufactures?

This approach has many pros and cons as outlined below;

Pros
1. Consolidation of deliveries.
2. Cost effectiveness. Close accessibility to a variety of goods by the customers as they can access easily a variety of
commodities in combined distribution centres. Minimal cost involved in customer movement.
3. Increased frequency of products delivery to various distribution centres enhancing the matching of customer demands by
the Company with high responsiveness.
Cons
4. Reducing the holding cost and less time spent in the case of un-combined distribution centres.
5. Matching delivery schedules for all the customers could be a problem. Probably many customers will prefer direct store
delivery for their convenience decreasing the activity of CDCs. Direct service delivery already serves half volume of
customer deliveries.
6. Increasing the wages of staff by sorting for delivery to stores at every night.
 Integrated
Convenience Information Distribution
History store industry 7-11 Franchise and Contents
Store services Information
system
Questions
System

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?

Pros
1. Having a distributor replenish convenience stores means that they do not have to invest anything in distribution centers,
fleet, personnel.
2. Proximity of distributors to distribution convenience stores added value as they very well understand customer demands.
3. Outsourcing encourages specialization hence quality.
4. The company will be able to focus on her core business.
5. On-time delivery, fulfilling customer demand and maintaining quality in food service can be achieved by distributor
replenishes convenience stores which can leads to Seven-Eleven company growth.

Cons
6. An additional cost for the company for outsourcing the service.
7. Lack of control and responsiveness, because there is no direct link between the company and the convenience stores and
customers.
8. The level of service consistency cannot be fully monitored by the company.
Thank You