To get a better understanding of the strategies after earthquake, the study would focus the innovative relationship between Ito-Yokado and its suppliers first. It should be mentioned that most of the suppliers of food are small, medium size firms. The IY requires all the food should be delivered on time every day and their quality and taste should be guaranteed. Meanwhile these suppliers would not offer the products with famous brand. Yahagi (1994) defined this kind of arrangement between IY and suppliers as "closed system" which is characterized by: "relation-specific investment by the suppliers, a high rate of concentration of the suppliers business and an open and fair reward system that shares the benefits flowing from the cooperation."
After the earthquake, the demand of specific goods such as water, instant noodle, and batteries was surging (see table 1).
The supply of the product had been affected because some factories were damaged. It can be seen the supply could hardly to meet the demand of food like water or milk. To avoid the out stock of water, Ito requested an emergency supply from the offshore resources in Korean. All the manufactures were requested by the Ito to increase their production. However, the disaster brought more damage in other areas. Radiation leaks from the Fukushima nuclear plant influenced a lot the supply and demand of local foods including fish. The nuclear risk sparked the panic-buying of consumers in some cities. So the Ito's strategy of supply should focus on two areas: 1) the list of suppliers should be reviewed to determine which sources of goods are safe and which are not. 2) The demand would be different based on the regions, so Ito-Yokado should reallocate the flow of supply to meet the demand of the disaster area. As a result, Ito-Yokado restructured the supply chain.
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The suppliers with a safety problem in the dangerous zone such as Fukushima would be in hold for the further investigation. Meanwhile, Ito would speed up the process of recovery and look for a way to fill the gap of demand. In fact, the best way is the vertical development of existing suppliers within an area. In that way the Ito-Yokado do not spend time to deal with the new supplier from different areas separately. And it would be more efficient to deliver the goods together through one supplier from a city. Thus, this kind of structure would hardly work between competing suppliers.
Ian Sadler (2007) pointed out effective delivery of goods to customers requires the use of distribution centres (DCs) which close to local stores. Usually, it closes to major highways nearby cities and offers a good location for inventory and delivery.
Ito-Yokado, as a supermarket chain of Seven Eleven Holdings, covers distribution logistics in Tohoku district (North-east) from Hokkaido and Kanto areas. In the north-east area, Seven Eleven has 14 DCs. However, after the disaster happened on 11th of March, many of them received huge damage by the earthquake and were completely stopped running. In order to cover the damage in the north-east area, Ito-Yokado and Seven Eleven did a lot to continue the distributions. At the beginning of April, some DCs in the Tohoku have been restored. Meanwhile, fresh food DC in the centre of the disaster area, Sendai, has rerun on April 7th. How could Ito-Yokado and Seven Eleven achieve that?
The shipment volumes of the available DC's in Kanto were doubled or tripled compared with the original operation before the earthquake.
Here is part of the Japanese map. The pink area on the top of this map is the 311 disaster area which had a huge damage in the earthquake. There are 16 DCs in Nagano (in the centre of Honshu, Japan) and 7 DCs in Niigata (around west coast of Honshu, Japan). These DCs have given a strong support to the disaster area, which guarantee and enhance the supply of daily necessities and commodities in this area.
Meanwhile, from the picture above, we could see the difference of distribution logistics before and after the 311 earthquake. Before the disaster, Miyagi is an important DC for distributions of daily necessities, fresh foods and freezing foods. However, after 311, because of destroy of DCs in Sendai, Ito-Yokado and Seven Eleven develop the capacity of distribution from nearby cities which are slightly influenced by the earthquake. Saitama, from south of Honshu, distributes fresh foods to Sendai. What's more, Ito-Yokado also tried to continue the distribution from long distance. Sapporo, as the southernmost DC in Hokkaido, played an important role to help the restoration in disaster area.
Inventory Management in Seven Eleven
Always on Time
Marked to Standard
Seven Eleven started a $200 million program of building up an information system for the 6000 stores in Japan in the early 1990s. Ito-Yokado Group stated their reasons to develop this system: first is to discover who the customers are and what they want; second one is to build up a comprehensive product-tracking system for inventory management. Seven Eleven started to implement the Just-In-Time Approach (JIT) since that time, in which help to ensure the products would be arrived at stores when it is needed.
The purpose of the JIT system is to minimise the inventory costs as well as the cost of damage. At the meantime, Seven Eleven knows well about the customers' preferences, they could skilfully arrange the stock of existing products. Most stores could directly communicate with their suppliers for quick delivery of the products they needed. In this case, inventory cost could be reduced.
What's more, the information system could also help Seven Eleven to transmit the orders automatically to DCs and manufacturers. It also determines the selection of products displayed in each store.
The question is: is it still useful in extreme conditions?
Kent N. Gourdin (2006) states the disadvantages of JIT system which emphasize the risks of stockouts. Generally, managers aim to minimize the stockout issue by frequent services from third partners like co-manufacturers or logistics providers. Nevertheless, if there is emergent situation and these partners could not follow the supply chain (e.g. natural disaster like earthquake), how could the managers handle with the stockout issue?
In the case of earthquake concerning, James C Barnes (2001) gives some preventive measures for business continuity under earthquake conditions. He suggests adhering earthquake construction guidelines so that the damage could be minimised. Meanwhile, equipment tie-downs could be used in DCs to protect the critical data information. Last but not least, emergency power is strongly recommended for Ito-Yokado and Seven Eleven, especially in countries like Japan which has a history of massive earthquakes.
According to Edward Frazelle, 'Transportation is the way to connect suppliers and retailers and customer '.it is very important to reduce the cost of production and it is also the key factor to keep satisfaction of customers' demand. Earthquake is a very special situation which could not be predicted, so that the company needs to have a good transportation system to fix the mess after earthquake. After 311 earthquakes, Ito-Yokado needs to find a very good transportation way to keep a fast response and on-time delivery.
There are 3 different transportation strategies Ito-Yokado take to make the deliveries, which are 1.Ito-Yokado has their own transportation system to make the delivery; 2. Ito-Yokado was cooperating with the famous third party logistics companies which responsible for purchasing production and making deliveries; 3.the suppliers delivery productions directly. So, in that part, we mainly focus on Ito-Yokado's own transport system.
The transportation selection for Ito-Yokado in a normal situation:
According to (David B,Grant,Douglas M.Lambert,James R. Stock and Lisa M ellram) there are 5 transportation modes which are truck or road, rail ,warter ,air and pipeline.' For Japan's special geography situation which is that Japan is composed by thousand islands and most business activities are running in four main islands as well, so the main logistics transportation way of Ito-Yokado are truck transportation, ship transportation, and air transportation. When Ito-Yokado is selecting their company's best transportation system for, they have to evaluate it from following factors which are cost, delivery time and loadage.
According to (David B,Grant,Douglas M.Lambert,James R. Stock and Lisa M ellram)'truck compete with air for small shipment and rail for large shipment.'
The cost of truck transportation is more expensive than ship transportation but is quite cheaper than air transportation.
This transportation way has a medium loadage, but truck transportation is quite flexible. If the company wants to make a delivery by truck, then they could more trucks or delivery more times.
Shipping is the cheapest way to make transportation.
Shipping transportation take a very long delivery time.
It requires the transport location must have port. For Ito-Yokado , the main sourcing locations are China, Korea and Taiwan. And the shipping needs to take about 2 to 3 days to make delivery. So, for those productions which ask for low cost and do not have high requirements about delivery time, shipping transportation is the best way.
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Air transportation could make any delivery whatever the international delivery or inland deliver, but cost of air transportation is the most expensive transportation way of all of those 3 transportation ways, so the way mostly use to deliver products which have a high requirement about delivery time and have a high budget on delivery cost, they could use air transportation to make delivery productions.
What transportation challenges ito-yokato will face after earthquake?
After the earthquake, there is a huge requirement about foods and some necessary supplies (sleeping bag and blanks) in the disaster region. The company needs to transport productions from sourcing location to distribution centre, warehouse and shops more quickly than the usual time. In that special situation, normally Ito-Yokado could use a mixed transportation mode to make delivery.
For food delivery, the best way is the company to look for some new suppliers which is near the shops and using truck to make a fast delivery. Some motorway, roads and bridges was destroyed in the east of Japan after the earthquake. The earthquake also leads to some old suppliers companies of Ito-Yokado shut down. So the best way is find the new foods supplies.
For some other necessary supplies(for example, blanks and sleeping bag) ,those products may out of stock in Japan, so the company needs to purchase from other countries, like China and Korea. For that stuff, the company should consider use ship transportation and air transportation for the international delivery.
After the earthquake, there are 6 major port and some medium and small ports were shut down, also tsunami earthquake happened with nuclear leak, that cause the shipping cost increase and the company must stop ship to those destroyed port. So the company needs to find new port to make delivery to replace the old ports. Then ship transportation takes longer time than usual. So the problems for ship transportation way are: first, there are few transportation companies are available for Ito-Yokado; secondly, shipping cost is much higher than the normal situation. Third, because changing of port, so that make a long delivery time.
After the earthquake, there some of airports were shut down as well , but it re-open very quickly. And for that situation, air transportation is the fast way to make delivery which could solve the out of stock products, but it takes a very high costs.
The change of sales products and sales strategy of Ito-Yokado pre and post the earthquake
The Ito-Yokado Group was found in 1920, retail industry is the main areas that Ito-Yokado involved in. Just as the "Comprehensive and specialization cycle theory" says "The sales format of retail industry is a cycle between the comprehensive to specialization, the two formats will transform into each other when develop to a certain level or under a certain condition". (Proposed by Hower and Hollander). Before the earthquake, Ito-Yokado use the comprehensive sales strategy, the sales formats include convenience stores, hypermarkets, supermarkets, department stores, specialty stores and discount stores. Before the earthquake, Ito-Yokado did not take the specialization investment strategy, but they have taken a comprehensive attack strategy. Although the end user customers they faced to is only the individual user, but this not only includes the high consumer customers also include the low consumer customers, to meet the different levels of consumers` demand in daily life.
The first one is to change into specialization sales strategy, mainly sales the products which are highly demand after the earthquake and the disaster emergency products, such as food, tents, medicines, candles, etc. This is caused by the impact of demand of the market. The demand is the mainly factors affect the sales strategy. The products which are highly needed after the earthquake are daily necessities or emergent products like water, vegetables, etc. has both been out after the earthquake. (Japanese Economic News). the research shows vegetables, meat, medicines and other commodities has both been out of stock during 11th to 31th after the earthquake. 2) at the same time, impact of the suppliers. Before the earthquake there are many suppliers of Ito-Yokado, these suppliers can guarantee the products supply of Ito, so Ito take the comprehensive sales strategy, but the earthquake in 11th and the tsunami caused by the earthquake destroyed the cities in the east of Japan, so the suppliers in east of Japan are almost paralysis, so the supply of products cannot be guaranteed. 3) The social responsibility of enterprise, and improving the image of corporate. Ito sends many foods, water and medicines to the east disaster areas and creates a simple store in form of truck and tent to distribute the foods and medicines.
2 . China is an extremely attractive market from the retail perspective with a population of 1.3billion. These years, the number of high-income consumers is increase particularly in Beijing and other metropolitan areas. The demand for the high level quality product or service in China market is increasing. So from 1997, Ito-Yokado stationed into China and continuous open branches in Beijing and Chengdu. Due to the suppliers of the Ito-Yokado Chinese branches are mainly the China local suppliers or the joint enterprise in China, so only 10% of products in China branches are come from Japan. So the China branches are independent from the Japan Ito-Yokado. So the China branches are not affected by the earthquake and operated as normal. At the same time, due to the fear of merchandise out of stock, the new sources from Japan affected by nuclear radiation caused by earthquake, some products like rice and milk powder, the demand is rising. In contrast, in Japan, the demand of food, medicines and other disaster emergency products is increase sharply; Japanese local producers and suppliers cannot meet the market demand, so Ito-Yokado has the demand of imported these products to satisfy the demand of the domestic market.
The demand of the market is the mainly factor impact the decision of sales strategy. Ito-Yokado based on the actual situation of Japan adjusts the sales strategy in time and made a successful. Since the situation in Japan is recover, Ito will change the strategy also.
High Standard of Service Consciousness and Service Quality
La londe and Zinzez defined logistics services as that'to meet customers' needs, ensure customer satisfaction and win the praise of enterprises by activities.' This definition makes the operational level of products rise to the marketing level. Nevertheless, people definite the concept of logistics services still from the perspective of logistics provider and no-customers. Mentzes Gomes and Krapfe consider that logistics services contain two parts, one is customer marketing service and the other one is physical distribution service (PDS for short).
High standard of service consciousness and service quality is reflected in all aspects of Ito-Yokado. Firstly, the understanding on the concept of service. Service principle advocated by Ito-Yokado considers the issues in the position of the customers all the time.They take the needs of customers as both their starting point and ultimate goal. In their mind, only adapting to the changes of the market constantly and meeting customers' requirements can develop the market, which is the founding of the retail industry. In terms of ideology, they consider the customer's patronage as the source of their developing and living, so their action is bound to reflect the excellent level of service.
Secondly, Ito-Yokado puts emphasis upon the management of product quality. Headquarters in Japan set up a control room for quality management with variety advanced equipments, while any new merchandise into the store need to receive the rigorous quality inspection. In various maketplaces, fresh management table can be seen next to the fresh products to monitor the temperature of cold storage at any time. The fresh products not sold at that day must be destroyed.
In addition, the high level of service awareness is also reflected in some fine details. For example, various marketplaces of Ito-Yokado are equipped with wheelchairs and baby strollers which are prepared specifically for people with disabilities and the customers with children. Ito-Yokado in Japan, refrigerators has been set up in front of the stores for the increased inconvenience rose in the process of buying frozen foods.
Many shops face electricity blackout and the possibility of aftershocks after this great earthquake in Japan. Ito-Yokado set the points of sale in their parking lots. In order to avoid the situation of looting the bacic necessities,such as water, bread,etc. after the earthquake, the maketplaces prescribe a limit to the quantity of food and water. One people can only buy one bottle of water, which is intended to allow more people to buy water and the food. The food supermarkets of Ito-Yokado, especially the fresh departments, check the food especially strictly. Aiming to provide customers the fresh and safe food, they re-selected the suppliers to in sure the goods sold are far from the effects of radiation. Most of the commodities are on sale, especially the bacic necessities like meat, salt, vegetables, fruits and the frozen foods, the highest reduction being about 50%. After the earthquake, Ito-Yokado take up social responsibility actively. In order to care for the community and people's livelihood, they organized the fund-raising activities and charity activities.
The fund-raising activities start from March 13, 2011 to May 31, 2011, according to the official figures, there is the total donations of 2,800,240,000 yen.