Case Analysis

1. 1
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Case Study Analysis
Name Roll Number Name Roll Number
Aswin Palliath EPGP-07-021 Venkata Haritasa
Mamidanna
EPGP-07-091
Chintan Gondalia EPGP-07-028 Vimal Mohan EPGP-07-094
Parag Vilas Kaslikar EPGP-07-061 Yogesh Gopalkrishnan EPGP-07-098
Ranjit Mohan EPGP-07-069

2. 2
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Background and Journey
Mr Masatoshi Ito
founded Ito-Yokado a
small clothing store in
Tokyo
After Second
World War II
Established Seven-Eleven
Japan with licensing
agreement with Southland
Corporation USA
1973
1978
591 Seven Eleven
stores in Japan
1982
Frist company in Japan to introduce
Point of Sales (POS) system
comprising POS cash registers and
terminal control equipment
1983
2001 Seven Eleven
stores in Japan
1987
Services added – First
service – in-store payment
of Tokyo Electric Power bills
Feb
2000
Established an
ecommerce company
7dream.com
2004
Sales @ 2343bn yen
& net income @91.5bn yen
No.of stores @ 10303
Oct
1990
Ito Yokado and Seven Eleven
Japan acquired 70% of
Southlands’s Common stock
for $430mn
Aug 2000
Established meal
delivery co Seven-Meal
Service Co, Ltd
1974
Opened first Seven
Eleven convenience
store in Tokyo

3. 3
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Profile and financials
1979
1984
1990
1997
2004
 Sales – 110bn
 Stores - 801
 Sales – 387bn
 Net Inc – 9bn
 Stores - 2299
 Sales – 932bn
 Stores - 4270
 Sales – 1741bn
 Stores - 7314
 Sales – 2343bn
 Net Inc – 92bn
 Stores - 10303
2,343
2,213
2,1142,0471,964
92
87
83
78
68
20012000
+5%
200420032002
SalesNet Income
5yeartrend(AmtinYenBn)–Seven
ElevenJapan
48%
52%
Business
Summary
Seven Eleven Others
90%
10%
Revenue Operating Income
 Introduced the concept of Convenience
store in Japan
 Included both company owned stores and
3rd party owned franchises
 Followed market dominance strategy in
places it opened the stores
ItoYakodoConsolidated(2004)–
ContributionofSevenEleven
Seven Eleven Japan (amt in Yen)

4. 4
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• Store Presence to ensure that JIT caters
to the local requirement on time
• Complete visibility on SCM metrics on
SKU’S transported
• Understand Local requirements and
stock relevant SKU’S
• Capture the Local market by posing
barriers to competition
• Brand and Distribution effectiveness
• System and Franchisee effectiveness
• Control competition through category
killer
• Continuously evolve orginial items at the
stores catering to local requirements
• Augment store services which help local
requirements
• Lean category models with no more than
5k SKU’S
• Distribution Network Optimization by
following CCD
Area Dominance
Strategy
Emphasis on
Regional
Merchandising
Robust Supply
chain availability
Market Analytics
across local
demographics
Lean Category and
proximity to
distribution center
Influential Factors Potential Benefits
…Factors that influence decisions of opening and closing stores?
Location of stores?

5. 5
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OwnedStoresand
FranchiseesOperating model
Included company owned and third party owned franchises
Franchise commissions accounted for 68% of revenue from operations
Expansion policy on market dominance strategy
Entry into any new market was built around a cluster of 50 to 60 stores supported by a distribution
center (Total numbers 293 dedicated distribution centers for a total of 10303 stores.
Added advantage of clustering is a high density market presence with efficient distribution systems.
Company had stores in about 70% of the prefectures (32 out of 47) and their presence was dense
Only 1 in 100 applicants were awarded franchises

6. 6
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Distribution strategies and how they map to what 7-Eleven employed
There are 2 fundamental distribution strategies in SCM:
1. Direct Shipment Distribution strategies – bypass distribution centers
2. Intermediate inventory storage point strategies
a. Traditional Warehousing with
• Centralized vs Decentralized Management
• Central vs Local facilities
b. Cross Docking
 7 Eleven Japan followed the Combined distribution center (CDC)model that
maps closely to the Cross Docking strategy. These centers functioned as
inventory co-ordination points rather than storage points. Goods arriving at the
center were sorted and transferred to vehicles serving the retailers for delivery as
rapidly as possible
 7 Eleven United States distribution structures, historically, was completely
different from that of Japan. Stores were replenished using the Direct Store
Delivery (DSD) method by some manufacturers while remaining products were
delivered by wholesalers. DSD vs Wholesalers =>50:50
 To introduce “fresh” products, they introduced concept of CDC model

7. 7
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COMBINED DISTRIBUTION SYSTEM
Hot Temperature Items
Rice Balls – 3 times/day delivery
Bread & Box Lunches – 2 times/day
delivery
Room Temperature Items
(Canned Foods, Instant Noodles, Seasonings)
Chilled Temperature Items
(Milk, Sandwiches, Delicatessen Foods)
Frozen Temperature
(Ice Cream, Frozen Foods, Ice Cubes)
Replenishment Time: < 12 hrs.
Daily delivery – Summer
Other days – 3 times a week
4 different type of temperature controlled trucks.
Deliveries made during off-peak hrs.
Vehicles/day reduced from 70 (in 1974) to 11 (in 1994)
293Dedicated Distribution Centers (DC`s)
293Dedicated Distribution Centers (DC`s)
DC`s – not carried any Inventory
290Dedicated Manufacturing Plants

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INVENTORYMANAGEMENTINVENTORY MANAGEMENT
Each store has an option to choose from 5000 SKU; On an average each store
carried about 3000 SKU`s.
Emphasized on regional merchandising to cater for local preferences.
Food Items: Chilled Items (Sandwiches, milk etc.); Warm Items (Box
lunches, rice balls, bread); Frozen Items (Ice Cream, Frozen Foods);
Room-Temperatures Items (Canned food, instant noodles, seasonings)
52% of total store sales accounted to original items

9. 9
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Riskstocurrentsupply
chainstrategy
Supply chain strategy attempts to micro match supply and demand using rapid
replenishment. What are some risks associated with this choice?
Risk of stock out is high in such case if there is a failure in the chain
Dependency on one company for transport can impact the supply
movement in case of any technical issues
Reordering system is dependent on the IT system and hence input at each
stage is critical, any wrong information would lead to wrong ordering
Managing the IT systems become critical as whole system is linked and any
shutdown will impact the ordering system

10. 10
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A typical 7 Eleven ecosystem and information system
Distribution
Plants
Suppliers
Stores
Ordering
Term.
POS
Term.
Scanne
r
Stores
Ordering
Term.
POS
Term.
Scanne
r
Stores
Ordering
Term.
POS
Term.
Scanner
Headoffice
INFORMATION FLOW THROUGH THE
SYSTEM
• Sale data captured in POS
• Data saved in Store computer and
pushed to host
• Analysed data and consumption
pattern sent back to store computer
and from there to Graphic order
terminal
• Order is recorded in portable
graphical order terminal. And once
its docked, store computer sends
order to suppliers and Distribution
• Suppliers deliver at distribution
centre, products are clubbed based
on type of product and location of
delivery
• Trucks deliver the replenishment at
the store with the order tag and goes
away. Order is checked based on tag.
• Scanners are used to confirm the
delivery.
• All these terminals were connected
on an ISDN network
• Total networked solution – Much
ahead of its time.

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Information System – Sale to order and order to sale connectivity
Effective shelf management: each item contributed to sales and margin
Seasonal demand, and fast moving products provided visibility
Stores could adjust merchandizing mix : like popular breakfast were stocked earlier than
the dinner
Consumption patterns identification helped effective utilisation of the store area
Maintaining low levels of wastages in the chain, and therefore high inventory turnover.
POS Data
Customer Age, Sex,
time of sale, amount
paid
ANALYSIS
Data collection till
11.00 PM. Analysis
of the data location
wise item wise etc
Reorder data
identifying slow and
non moving item,
demand trend

12. 12
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INFORMATION INFRASTRUCTURE
GRAPHIC ORDER TERMINAL:
INFORMATION
INFRASTRUCTURE
SCANNERTERMINAL:
POS REGISTER
STORE COMPUTERS
Used by Store owner / manager to place orders.
Directly placed orders while walking down the aisle
Had access to POS data while placing order
Used for :
Recording bar codes and recorded inventory.
Receiving product from distribution center.
They are linked to ISDNnetwork, POSRegister, Graphic
Order Terminal.
Tracked store inventory; Placed Orders; Provided detailed
analysis of POS Data; Regulated store eqpt.
Records Sales during purchasing of a customer and paid at POS register.
Transmits POSdata online to host computer

13. 13
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Different ways a convenient store supply chain can be responsive and risk associated
for the same.
•
Different Responsive Ways Associated Risks
Focus on who is buying the product
,understand what are the products
required for the customers, where they
need it and when it is sold
Tracking the customer and their
requirements will be very difficult when the
stores are extended across geography.
Use of Information Technology High investment.
Integrating all the stores, Back
office,supplier,distributor and
transportation networks for rapid
replenishment
Huge CAPEX required.
Address the customer issues on priority Decrease in resolution of calls leads the
customer to move /switch to another
similar products.
Adapt to change in requirements so
that the customers don’t get bored .
High cost may be involved in making the
changes.

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Different ways a convenient store supply chain can be responsive and risk associated
for the same.
•Different Responsive Ways Associated Risks
Establishing an efficient transportation
process
High cost involved in the transportation.
Optimization in transportation reduce the
number of vehicles ,but a break down of
the same results in delay in delivery.
Manage the demand Uncertainty The demand monitoring of individual
customers for each product will be
extremely difficult in long run. This result in
the customers to move to another retailer.
Optimize the outlet space and open the
stores only in those regions where
there is a demand.
Inventory will be out of stock if there
unexpected increase in demand(If outlet
space is small)
Inventory pileup will happen if there is a
decrease in demand (If outlet space is
large)

15. 15
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… 7 Dream Concept and Its success in USA
Tightly coupled
logistics
How is success
defined in US &
Japan
Brand Awareness
Local Products with
cost effective price
Robust Logistics
Store Density
for Pick up
SMEs
Value Adds
High Store
Density
• Enhanced
Revenues
• More services
to customers
• Drive Savings
and Reduced
Inventory costs
• More Agile
transactions
Tight Sourcing
Better Spend
Management
Local assortments
More Flexible
through in store
pick ups

16. 16
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7 Eleven in USA vs Japan
• Principle of Direct store delivery
• Low transportation cost, administrative cost since
the deliveries done by the suppliers
• Issue s with timely delivery and replenishment
tracking may lead to higher safety stock in the
systems.
• Cultural difference, stores and suppliers preferred
direct delivery.
• Cost would have been prohibitive with central
distribution, and US had low cost competition
already present.
• Larger store area and sparsely located stores and
supplier would made it expensive for central
distribution.
• Still central distribution maintained as CDC for
fresh food, to ensure quality
• Wastages in the chain were high, so profitability of
SC was less and so was inventory turnover
• No direct delivery here, all order replenishments were
routed through central distribution channels
• 7-Eleven were pioneers in convenience stores chain in
japan.
• The expansion was designed, so as to have suppliers,
distribution centers and stores close by. This would
make transportation efficient and low cost
• The overall wastages in the chain were less, therefore
supply chain profitability was high
• Inventory turnover was also high

17. 17
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3rd party Distributor vs own Distribution function – Pros and Cons
• Having their own distribution function gives 7 Eleven much more finer control of
operations and gives them the ability to change and adapt to business needs
quicker.
• However, the cross docking strategy followed involves a lot of initial investment and
ongoing costs and needs to be highly efficient to be of good use which are factors
that 7 Eleven would want to eventually address from a long term outlook.
• A strategic partnership with distributors like McLane would give them advantages of
scale, cost and expertise. Such an arrangement would bring synergies between the
specific and agile operation needs of 7 Eleven and the scale and expertise that
McLane offers.
• Their focus should be on leveraging the strengths of both entities to provide logistics
solutions for the current and future demands. The logistics framework can be
designed and driven by 7 Eleven based on their business while McLane can focus
on its effective operationalization on ground