7 Eleven+Case+Study

MIS1006100: 7-Eleven Case Study:7-Eleven Case Study Case Study By: Andrew Lavadera Meghan Williams Rory Kotter

Introduction: Seven-Eleven Japan (SEJ) is the leading convenience store in Japan with over 12,000 stores and annual profits of over $30 Billion. Under Chairman and CEO Toshifumi Suzuki, SEJ has positioned itself as a company “that responds to change” (5). SEJ established an information system focused on the convenience retail business as an operating company, committed to responding to changes in expectations and demands from customers accordingly and without delay. Mr. Suzuki stresses "breakthrough thinking" not to be constrained by the past (5). Seven- Eleven Japan will continue to always tackle new challenges and create innovative approaches to the convenience store business through their foundation of immediate response. It is important to distinguish between American and Japanese cultural views of convenience stores in order to understand between their significance. While most U.S. consumers view convenience stores as simple mini-marts used for late night visits or save time while filling gas, Japan's consumers have a completely different take on convenience stores called konbini (3). Konbini play an integral part in the daily life for everyone from housewives, salaryman and students. These stores hold a positive image among consumers and warrant a degree of loyalty among market segments. The most imperative aspect of the Japanese business mold is their ability to gather data about their consumers and transform it into information. The key to SEJ’s success is their ability for tight integration among partners to share information through their highly evolved data-rich supply chain management (SCM) (1).

Data-Rich Supply Chain Management: Seven-Eleven Japan created a solid information system to discover timely and thorough trends in market demands, and an intelligent process to turn this collected data into valuable information for product replenishment and creation. SEJ also pioneered a highly efficient logistics system to support the replenishment of products to the very small shelf space allotted in the compact metropolises of Japan. SEJ is characterized as a major innovator in convenience store operations; however this is not to imply the company preformed radical business process reengineering (6). This continuous improvement is referred to as Total Quality Management, but referred to as kaizen in Japanese (1). These innovations were in fact a sequential series of small changes and improvements, an example of Total Quality Management, which have been sustained since development in the early 90’s and have had significant impact on the business processes (2). SEJ went through a readjustment period during The Lost Decade of Japan. Their answer to continued success in a suffering economy was towards a shift to consumer-focused orientation based upon detailed analysis of information technology (4). In 1991, SEJ created the $200 million Fourth Generation Total Information System for its stores to discover who their customers are and what they want as well as to create a sophisticated product-tracking system (6). SEJ started using an Integrated Service Digital Network (ISDN) to link their retail stores with their headquarters (1). This integrated networked

allowed retail stories to directly access the host computer and central database containing all the collected data and analyses. This essential data is gathered during every single transaction throughout the day. At checkout, the clerks at every franchise must input a customer’s gender and estimated age before scanning the bar codes of their items (1). This data is passed on to the central database via the ISDN. This tracking system is simultaneously processed by the store computer system that controls all the inventory monitoring systems in the store. The store and corporate managers both read the same data to analyze immediately towards their responsibilities. HQ managers aggregate the data by region, products and time, and send it to all stores and suppliers by the early morning the following day (1). Store managers need to review the information by hourly sales trends and stock-out rates by customer groups (1). As a result of its information system, SEJ holds an extensive knowledge of its market’s shifts in demand. This is the daily cycle of the information gathering at SEJ. Example of customer profiles tracked by Seven-Eleven

The weekly cycle information gathering analysis operates with Mr. Suzuki holding a business meeting of 100 corporate managers to review the previous week’s performance and develop strategies for the upcoming week (1). Quality control data is analyzed by a computerized decision support system that conducts “what-if” and “goal-seeking” analysis (4). Products that do not meet the strict quality requirements are immediately removed from the supply chain. On Tuesday morning, the conclusions and findings of the previous day are communicated to Operation Field Counselors to develop regional strategies for the week (1). Using the collected data centrally and locally, SEJ is capable of making cast decisions such as replenishment, merchandising, layouts and new product development. The daily and weekly cycles create a complimentary system in micro and macro decision-making. The weekly cycle creates planning system at a tactical level for developing trends in the market place. However, it may fail to capture ever shifting demands of the store and local settings. The daily cycle can focus on the individual consumer and make adjustments immediately. The two cycles are designed to reduce risk of managing a supply chain and respond to any changes in consumer demands. Inventory Structure: The Fifth Generation Total Information System adopted in 1998 went even further by adopting a just-in-time approach to reduce cost of keeping inventory and spoilage (2). SEJ introduced a new system to combine store-level product tracking in the supply-chain level system by using new client applications, satellite and Internet communications (4). As a result of its new information system, SEJ hold valuable information on its market to maximize sales with limited shelf space and enhance its inventory structure. Each store manager is capable of using the information system for its self-improvement by accessing data on sales trends, purchase patterns, customer profiles, and local environment and store characteristics. SEJ created a Joint Delivery Program to reduce the average number of deliveries to each store from 70 per day in 1974 to less than 10 per day at the present time (1). Product groups that require the same temperature zone are cross-docked at a single distributor and delivered in groups by geographical region (1). Trucks follow a strict route schedule that allows only a 10-minute error of margin (1). The truck may not spend more than a minute and half at each store and is in constant communication to facilitate emergency situations between store and HQ managers (1). The investment into such an in depth logistics system is imperative in order to take advantage of the data-rich decision processes of the company. SEJ also created a time-distribution system to change the product mix (4). Store managers walk throughout their stores carrying a tracking device to check stock levels and sales trends in order to place

orders via the ISDN to HQ (4). These orders are transferred to wholesalers, manufacturers, and for use in logistics. Typical orders for fast and fresh food items are placed three times a day, magazines once a day, and processed food items three times a week (4). SEJ knows that consumer’s needs in the morning are completely different in the evening, and distributes the most appropriate items at the different times of the day.

Overview of Seven-Eleven Japan, and it's s upply chain management techniques .

Conclusion: Seven-Eleven Japan worked to improve its supply-chain, inventory systems, and consumeroriented focus over the past 26 years by continuously developing their information systems. From 1977 to 2000, daily sales per store jumped from $3,660 to $6,810, average inventory turnover time from 25.5 to 8.4 days, and gross margin jumped from 24% to 30% (1). Supply-chain management is a strategic choice by corporate managers in order to meet the Japanese environment and consumer needs. SEJ created a tight feedback loop from local stores to supply lines. Market signals are immediately realized and responded to in the supply chain. By focusing on the consumers and responding to change, the datarich supply chain management is the most suitable approach for efficiency and customer value. Seven-Eleven Japan commercial.

References: 1.) Harrison, Terry P., Hau Leung Lee, and John J. Neale. The Practice of Supply Chain Management Where Theory and Application Converge. Springer, 2005. Print. 2.) "History | Seven-Eleven Japan." Seven-Eleven Co., Ltd. Web. 3 Mar. 2010. . 3.) "Konbini: Japan's All-In-One Convenience Store." Japan Consumer Marketing Research Institute (2009). Case Studies. 2009. Web. 3 Mar. 2010. . 4.) Lazaris, Chris, Eleni Mpismpiki, and Mina Moraiti. Information Systems Management - Case Studies. Athens University of Economics and Business, 05 Feb. 2007. Web. 3 Mar. 2010. . 5.) "Message from Chairman and President | Seven-Eleven Japan." Seven-Eleven Co., Ltd. Web. 3 Mar. 2010. . 6.) Sparks, L. (2000), “Seven-Eleven Japan and the Southland Corporation: a marriage of convenience”, International Marketing Review, Vol. 17 No. 4/5, pp. 401-15.

Discussion Questions:

1.) Is Seven-Eleven Japan successful in its pursuit to be a company “that responds to change?” Why or why not? 2.) What are the advantages of data-rich supply chain management? 3.) Since information systems are easily mimicked, how does Seven-Eleven Japan differentiate itself from competitors?