7-ELEVEN JAPAN CO.

A CASE STUDY REVIEW

Vatsal Pancholi (2101219)
Yash Mudliar (2101232)
Virag Jhamb (2101224)
Daivik Tandel (2101217)
Tanmay Sharma (2101208)
 Introduction
7-Eleven Japan’s Competitive Strategy

● To provide high-availability of a variety

of reasonable quality products at
reasonable prices.
● Market Dominance
● Cluster of stores (50-60) in small
geographical area supported by a
Distribution Centre (DC)

Market Share in Japan, 2016

 Introduction
Profile
● 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 merchandising
● Goods included:
1. Food Items
2. Beverages
3. Magazines
4. Soaps, Detergents etc.
5. Game, Software
 Introduction
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.
 Introduction
Convenience at Store
● Payment of Bills
1. Electricity
2. Telephone
3. Gas
4. 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.
 Q1. A convenience store chain attempts to be responsive and provide
customers with 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?

Responsiveness model of 7-Eleven-

● Multiple locations
● Rapid replenishment
● Appropriate technology deployment
● Responsive supplier
● Vertical integration SKUs
 General Responsiveness Model

A convenience store supply chain may be more responsive if-

● Appropriate technology deployment : Technology like RFID, barcodes and easy to track
facilities used for increasing the responsiveness.
● Demand planning : Trend projection and demand forecasting using quantitative
techniques and reducing shortages and need of safety stock.
● Proper warehousing and rapid replenishment : JIT has low level of inventory, saves
costs, has proper channel to distribute and store the products across the stores spread all
over globe.
 Q.2 Seven-Eleven 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?
● It 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.
● 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
 Q.3 What has 7-Eleven done in its choice of facility location, inventory
management, transportation, and information infrastructure to
develop capabilities that support its supply chain strategy?

● All manufacturing facilities are centralized to get the maximum benefit of capacity
aggregation
● Highly Responsive operation
● Saturation of areas with stores
● Seven-eleven requires all suppliers to deliver to the DC where products are sorted by
temperature.
● This reduces the outbound transportation cost
● Services like electricity bill payment and seven bank has provided customers a one-stop
store for all their needs.
 Q.4 7-Eleven does not allow direct store delivery in Japan but has all
products flow through its distribution center. What benefit does 7-
Eleven derive from this policy? When is direct store delivery more
appropriate?

Benefits-
● Reduced complexity at store level
● Segregation of food products at DC based on temperature
● Reduced cost of receiving at stores due to less frequent visits
● Each outbound truck makes delivery to multiple retails stores
Direct store delivery is most appropriate when-
● Stores are large
● Varieties of product is less
● Need special handling requirement like alcoholic beverages, TVs
etc
● Nearly full truck load quantities are coming from a supplier to a
store
 Q5 What do you think about the 7dream concept for 7-Eleven Japan?
From a supply chain perspective, is it likely to be more successful in
Japan or the United States? Why?

7dream -
● An e commerce company, established by Seven Eleven Japan in February, 2000.
● Stores served as drop-off and collection points for customers.
● Lower cost alternative to having a package carrier deliver the product at home

It Might be more successful in Japan because:-

● Local convenience stores were popular in japan
● The strong distribution network of seven-eleven(by 1999 It had 8,153 stores in
Japan).
● The high visit frequency of the customer to the stores ensures that packages are not
occupying the store shelf space for a long time.
 Q6 Seven-Eleven is attempting to duplicate the supply chain structure
that has succeeded in Japan and 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 manufacturers.
● A variety of fresh food supplies to CDC throughout the day, sorted at night & by 10:00 the
products were en route to the stores, this enables:
–Reduce inventory storage
–Faster delivery of perishable products
● DSD by manufacturers and wholesaler delivery to stores does not allow seven-eleven to get the
same level of transportation aggregation as it gets in Japan.
● 7-Eleven had 23 CDCs located throughout North America result into larger area between
stores, enables the larger transportation cost with respect to Japan.
● DSD(by manufacturers) accounted for about half the total volume, with the rest coming from
wholesalers resulted in increasing dependency on external suppliers & less control over the
process.
 Q.7 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:
● Cost of storing, maintenance and distribution of inventory would be
less
● Aggregating deliveries across many competing stores can be achieved
using distributor replenish convenience stores
● Stores can have a variety of products that a single chain can’t produce
all alone, but having their own distribution center is a big pro, because
they don’t have to worry about external factor from their suppliers

CONS:
● All the deliveries done through distributor and hence less control of
the company over the process
● Subsidies has to be provided in order to compete with the competitors
with smaller supply chains
● Dependence on external sources to replenish your store will increase