Supply chain process involves very complex design of information, material, and finance flow within the network of customers, suppliers, manufacturers and distributors. To be able to manage and control the flow is the essence of successful and competitive supply chain management. (Lee, Hau L, 2000, pp. 31)
The assignment is intended to provide detailed discussion and analysis of Seven-Eleven's supply chain strategy in Japan with particular reference to facility location, inventory management, transportation and IT. But at first I would like to provide general intro into history of Seven-Eleven Japan Co (SEJ).
Established back in 1973, the company has spread its stores within most parts of Japan reaching 591 stores by 1979, 2001 stores in 1984, 12037 stores by 2007. (Chopra & Meindl, 2010. p. 78) Coming onto the deal of financial data, then daily sales per store changed from Â¥366,000 in 1977, to Â¥681,000 in 2000, almost doubled in 20 years, inventory turnover time improved from 25.5 to 8.4 days, while the average gross margin changed from 24.0% to 30.0% (Whang, 2004, pp. 204).
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One may ask as what was the reason of such an improvement throughout the years? Let's review the supply chain process adopted by Seven Eleven Japan Co.
Being logistics driver for supply chain, means physical location for storage, assembly or fabrication of products/services (Chopra & Meindl, 2010. p. 59). This logistical driver has an enormous impact on performance of supply chain.
Taking that into account Seven Eleven Japan Co (SEJ) has established its location strategy called "Dominant Opening Strategy" (DOS) as off selecting regional markets and opening its stores in small proximity of each other, covering "48% of SEJ's customers live within 500 meters from the stores, and 63% within 1,000 meters." (Whang, 2004, pp.205). Such a strategy has been worked out to improve the transportation/distribution network and decrease costs of those taken into consideration density of each SEJ stores and establishing one distribution center for every 50-60 stores in a region (Chopra & Meindl, 2010. p. 79). Though the tight location and favorability of SEJ stores they are covering only 32 out of 47 prefectures within Japan, not intending to fill in the map of the country and distribution centers have been established in a manner to satisfy requirements/demand of small sized, 125 -150 square meters (Chopra & Meindl, 2010. p. 80), stores several times on daily basis. The special program called Joint Delivery by SEJ has provided flexibility and access to suppliers to operate Supplier Distribution Centers (SDC) where products with same temperature zones are being shelved and then transported to relevant stores due to limited storage capacities of stores. The program has improved daily truckload deliveries to different regional stores from 70 in 1974, 12 in 1990 and 10 in 2004 (Whang, 2004, pp.205).
As has been mentioned in the previous paragraph the usual size of SEJ stores in Japan does not exceed 125-150 sqm, thus limiting the item inventory to 3000-5000 SKU per store & allowing quick turn around of inventory between 7 - 8.4 days (Whang, 2004, pp.200).
Food inventory in SEJ stores have been divided by categories as "1. chilled temperature items; 2. warm temperature items;3. frozen items and 4. room temperature items", which has helped to identify the best sellers and trends in processed food market, as per POS data, achieving 60% of sales at each store in 2004 (Chopra & Meindl, 2010. p. 80).
Point of Sale (POS) data installation has helped SEJ store managers to identify best seller SKUs, both on seasonal, weekly and daily basis, thus allowing them to plan properly and provide supplies for required demand. Also the items that move slower from the shelves can be dropped and replaced by new one and as per article Data-Rich Supply Chain Management: The Case Of Seven Eleven Japan almost good half of 3000SKU capacity are being replaced by new products each year, such valuable data is being handled to forecast coming trends to assist suppliers and manufacturers in new product development (Whang, 2004, pp.202).
Besides that SEJ stores have established unique network for special products as oven-fresh bread' delivered 3 times a day; "Kirin Brewery chilled beer with live yeast"; "Excellent Farmer's Potato Chips" made of high quality potato and others keeping the customer focus and retaining those for high quality exclusive products. (Matsuo & Ogawa, 2007, pp.107-108)
Due to the fact that SEJ stores covers about 70% of area in Japan the developed transportation network is must for the company to be able to catch up with daily requirement to keep up flexibility and responsiveness towards the demand. To keep up high level of responsiveness and lower the transportation costs as stated earlier Distribution centers have been created regionally covering 50-60 stores each and through the detailed panning the transport routes are being scheduled in a manner to stick to timeframe and allow delays no more than 10 minutes. Also handling process at stores takes no more than 90 seconds (Whang, 2004, pp.203).
Always on Time
Marked to Standard
SEJ Company has also done some actions to mitigate risks in emergency situations and has formed fleet of trucks, motorcycles, ships & helicopters taking into consideration traffic in Japan. Due to the fact of such a huge transport portfolio it was able to assist people after Kobe earthquake delivering food by utilization of pool of helicopters and motorcycles. (Whang, 2004, pp.203).
Data & Information Technologies
In 1991 company has adopted Integrated Service Digital Network (ISDN) to connect to headquarters and provide two way data exchange. POS system has also been integrated to data exchange system to provide better information analysis and decision making (Whang, 2004, pp.201). The technology applied allowed SEJ Company to analyze data based on SKU sales, products and time, sales by regions, summarizing weekly and monthly operations and trends, seasonal changes or new product sales. All the data was very valuable for the stores and company, providing flexibility to respond to different demand patterns almost at all the store locations.
Including suppliers to relevant data network has helped to forecast future demand and trends being able to utilize time and effort more beneficially.
Additional data per store and customers helped out to forecast their demand patterns and optimize required product deliveries, hence optimizing the sales and decreasing extra costs.
Establishing of e-commerce application as 7dream.com has targeted the audience that looking for more items not available in SEJ stores with availability to pick up at convenient time in one of the indicated stores close to customer. Also other media devices as MultiMedia Kiosk to help out customers on storing and printing of digital photos and video has been a marketing step towards satisfying customer demand (Whang, 2004, pp.205).
IT integration to SEJ supply chain process starting from registering delivered products, signaling the stock rates and up to submission of aggregated orders to SDC have impacted overall process positively, sharing information, requirements and controlling fulfillment of those up to the point of pick up by customer.
As can be seen in case of SEJ company the high level integration of IT technology in supply chain process has benefitted all the stages of supply chain starting form design, planning & operations phase up to CRM, ISCM & SRM serving for the satisfaction of customers, raising level of supply chain surplus and decreasing product/service costs. Implementation of IT technologies has provided additional marketing actions as MultiMedia Kiosks at store locations, online orders, helping in analyzing logistical drivers as location selection, transportation schedules and etc.