Seven Eleven Questions

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Seven Eleven Questions

• Why are we looking at Seven Eleven?
• What is the facilities strategy?
• What is the information strategy?
• If you were a store manager what information
  would you want from the POS system to assist you
  in your job?
• What is the transportation strategy
• Are they a responsive or efficient organisation?

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Supply Chain Drivers

• Learning objectives
• Identify the major drivers of supply chain
  performance
• Discuss the role each driver plays in creating
  strategic fit between the supply chain strategy
  and the competitive strategy

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Drivers of Supply Chain Performance
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Seven Eleven Japan
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Seven Eleven - Number of Stores
1999 8,027
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Seven Eleven - Net Sales
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Seven Eleven - Pre tax Profit
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Business Strategy and Supply chain Objective

• Business strategy
• Convenience shopping, customers willing to pay a
  premium
• Supply chain objective
• Micro matching of supply and demand (by location,
  time of day, day of week, season)

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Store Description

• Average size 100 sq. m. 1,000 sq. ft. (about
  1/3 of typical US/European store)
• Average sales 700,000 Yen (about twice average
  US/European store)
• SKUs offered in store Over 3,000 (change by
  time of day, day of week, season)
• Virtually no storage space

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Facilities Strategy

• Have many outlets, at convenient locations, close
  to where customers can walk
• When they locate in a place they blanket the area
  with stores stores open in clusters with
  corresponding DCs
• Approximately 1000 stores in the Tokyo region
  alone

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Store Location Strategy

• Seven Eleven has adopted a dominant location
  strategy
• Location - in service sector a specific location
  often influenced by revenue more than cost
• Maximising revenue

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Service Location Strategy - Revenue Focus

• Volume
• Drawing area, purchasing power, competition,
  advertising/pricing
• Physical quality
• Parking/access, security/lighting,
  appearance/image
• Cost determinants
• Rent, management calibre, Operations policies

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Information Strategy

• Quick access to up to date information (as
  contrasts with data)
• High speed data network linking stores,
  headquarters, DCs and suppliers
• Store hardware
• Store computer
• POS registers linked to store computer
• Graphic Order Terminals
• Scanner terminals for receiving

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(No Transcript)
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Information Analysis of POS Data

• Sales analysis of product categories over time
• SKU analysis
• Analysis of waste or disposal
• Ten day (week) sales trend by SKU
• Sales trends for new product
• Sales trend by time and day
• List of slow moving items
• Contribution of product to sections in store
  display

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Accurate, Available Data

• Accuracy problems
• Improper handling of returns
• Volume of transactions
• Distribution errors
• Availability problems
• Length of time online sales data is held
• Sales history can provide useful information
• Insufficient detail in sales data

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Transportation Strategy

• Delivery arrives from over 200 plants
• Food DCs store no inventory
• Delivery is cross docked at DC (over 80 DCs for
  food)
• Combined delivery system frozen foods, chilled
  foods, room temperature and hot foods
• 11 truck visits per store per day (compared to 70
  in 1974)
• No supplier (not even coke!) delivers direct

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Crossdocking

• Products arriving at DC from several suppliers
  broken down into smaller shipments and then sent
  to individual stores
• Single temperature controlled trucks (frozen,
  chilled, room temperature and hot foods)
• Use milkrun concept (truck makes several
  deliveries) since total shipment to a store from
  suppliers does not fill a truck (routing and
  scheduling important)

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Crossdocking

• Benefits
• Reduces inventory along supply chain
• Product flows faster along the chain
• Inbound transportation costs lower due to
  economies of scale
• Outbound transportation costs reduced since DCs
  serve stores located nearby
• Saves on handling costs because product does not
  move in and out of storage areas (warehouses)
• Requires a high degree of coordination and
  synchronisation

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Inventory

• Closely linked to facilities, information and
  transportation strategies
• Cycle inventory
• Average amount of inventory used to satisfy
  demand between receipt of supplier shipments
• Cycle inventory policy in stores?
• Safety inventory
• Held just in case demand exceeds expectation
• How do stores deal with demand uncertainty?

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Inventory

• Demand uncertainty reduced by a number of
  operating policies
• Stores apply a JIT approach to managing
  inventories
• Demand forecasting is focused on short time
  horizons
• Demand forecasting is adaptable and relies on
  human input
• Forecasts throughout the supply chain are linked
  directly to customer demand data

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Seven Eleven - Inventory (days)