Seven Eleven Japan Supply Chain

Established in 1973, Seven-Eleven Japan open its first store in Koto-ku, Tokyo, in May 1974. In 2004 it was owned by the Ito-yokado group, which also managed a chain of super markets in japan and owned a majority share in southland, the company managing seven-eleven in the United States. Seven-Eleven Japan realized a phenomenal growth between the years of 1985 to 2003. The Competitive strategy of Seven Eleven Japan is to provide High-availability of a variety of reasonable products at reasonable prices. The total of the visits number per year for all the Japanese people is almost 35 times, that means each Japanese go on average 3 times a month to a Seven Eleven Outlet. When it started in Japan the new concept of this store was incredibly famous, everybody liked the concept of Seven Eleven.

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The convenience store supply chain can be responsive if they focus on what the customer wants. 7-eleven knows who is buying which product and at what time, it knows it because the system is really efficient. For each customer the cashier pushes a button with the approximate age, and the cash register the time and the kind of product that the client just bought. Now the system knows who, where and what is sold at any time of the day, the supply chain can be really responsive and offer the good where it is needed. The first online network was established in 1979, so it proves 7-eleven Japan was in front of all others about technologies and supply chain management. Of course they take some risks doing this, because the population can be bored or move. 7-eleven has to be careful about the needs every day, and has to react really quickly to all kind of problems they have to face up. In japan, 7 eleven adopts a strategic fit with the customers; they attempt to know what they need, where they need it and when they need it. Every single person is important in statistics for them; they really care on the demand. The main risk for them is the potentially high cost concerning the transportation. I think when you are a huge industry like 7-eleven in Japan, more than 12 000 retailers; you can’t focus on every single person. Be the biggest company of outlet stores include that you cannot have a micro supply chain. The biggest risk is that you can’t follow the demand, you will be able at the beginning, but after a few time in the market the demand will become huge. It is too much work and if you can’t follow, the customers will go to another retailer. 7-eleven must be able to manage with uncertainty. In order to support its supply chain seven-eleven started to remodel the transportation in their supply chain. The number of trucks was really high, and they could use fewer trucks to do all the transportation work. They have different kind of trucks for different kind of goods (frozen food, warm food …). The supply chain worked hard every day to find a way to optimize the facilities, and it worked. Now the store order in the morning and receive in the afternoon, everything is really flexible. The location of the store is based on where the demand is, so they are not looking to open an outlet everywhere, but where people need it and where they will sell more products. They want to optimize the space where they are located. In less than 10 years they did a lot of progress in technologies, and more in inventory management. Now everything can be controlled on computers, and they know what they need. They work with some companies in order to have the best infrastructure. All the stocks depend on local customer demand, each stores have a different stock. Seven-eleven does not allow direct store delivery in Japan but has all products flow through its distribution center. One distribution center works with 50 to 60 retailers, so each store doesn’t have to keep in a huge amount of goods that they don’t sell. For some years they know what is sold in which store, so it’s easy for them to know which items each store needs. Direct store delivery is more appropriate when the store knows it will sell the product in a short period of time. It also is more appropriate when the store wants the good really quickly, because the customers don’t want to wait too much when they really need something. Seven-eleven is known to sell and have almost everything you need, so it is better not to let shelves empty, it is also not good for the trade reputation if people can see empty space in the store. We can say that all these shelves crowded of stuffs show that the supply chain is really well manage.
Seven eleven used the franchise system in Japan; of course it is much easier to franchise the store because if you have too many stores you cannot handle everything. This system counts over 68 percent of the revenue from operations. It supported Seven Eleven stores to have a high-density market presence. Using the franchise system, Seven Eleven got six advantages of the market dominance strategy. First, it boosted the distribution efficiency because they opened more retailers, so the distribution center could be closer from an important amount of stores. Second, Improved brand awareness, of course more store you have and more famous you will be, so people finding seven eleven stores everywhere thought it was secure and a good brand. Third, increased system efficiency, if we have a lot of people working on the system and using it, of course it increases the efficiency. Fourth, enhanced efficiency of franchise support services, in the market dominance the number of stores is really important, so more you are in and faster your support services increase. Fifth, Improvement of the advertising effectiveness, in Japan in some places we can find a lot of seven eleven, that means there is a lot of advertising because people are using them to buy anything. Sixth, Prevent competitors’ entrance into the dominant area, managers instead of opening their own retail store, they use the seven eleven franchise system because it is much easier to start and to be in the dominant area at the beginning. As we can see now the franchise system is really important for seven eleven Japan, the system is pretty simple. Both parts, the franchise owner and seven eleven Japan, have responsibilities. First the owners have to manage the store and the staff, make orders and maintain the store appearance. In another side Seven eleven Japan manages almost everything in developing the store, orders and accounting. Seven eleven also provide advertising and pay 80 percent of the utility cost. Seven eleven had more than 12 000 stores in Japan. In 2004 the size of the regular store increase from 125 to 150 square meters. The total size of all the seven eleven stores in Japan is about 1 530 square kilometers, it means almost 15 times the Paris’ size. It is huge for a country small like Japan. Seven Eleven Chain offers more and more services every year, besides products. They gradually added a variety of services that customers could obtain at its stores. They started offering other services in 1987; the system was offering you to have to possibility to pay your Tokyo Electric Power bills. Later the people could pay other bills, like gas, insurance, and telephone. This service attracted millions of additional customers every year. Another example that is in 1995 they started to accept payment for mail order purchases. Another huge service that they offer is to have an ATM in the shop; they started offering this in 2004. The ATM project was huge, because they started to install in 75 percent of the retailers, with the goal to achieve 100 percent ATM installation. The 7-dream concept arrives at the right time, because in 2000 the internet is starting to be well used by customers. In Japan people work a lot and really hard, so sometimes that understandable they like to shop on internet, choose what they want and pick it up at their convenience store. The 7-dream concept is really useful, but the delivery system is likely more successful in a country like the United States, where people love to have the product directly deliver at their homes.
Seven eleven in the United States it is the second largest market in the world for seven eleven. Even if at the beginning several 7-eleven were shut down. The number of retail stores grown after 1998, because the distribution structure was completely different from the Japanese system. In fact in the USA we can see that DSD (direct store delivery) are pretty common, it was awkward to see that in Japan. The fresh products obliged 7-eleven to use CDCs (Combined distribution centers), because it was super important to be able to deliver real fresh products like sandwiches, bakery, and bread in time to the stores. At this time Seven Eleven tried to introduce a new concept in the convenience store system, they wanted to be different than a normal gas station.