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Seven Eleven Japan Co Case Solution
Seven-eleven started in the early 1970s in Japan and quickly became the top convenience store in the country. The company's rise has been significantly increasing both its revenues and profits in a very short period transforming the retail business in the country. The company also operates in the USA and has been able to improve its performance in the country over time. The strategy of Seven-Eleven has been market domination and expanding quickly. They achieve this by building a cluster of 50 to 60 stores in a small geographical area serving them through a single distribution centre. The franchise system has also been both helpful and has helped the company expand further. Another significant advantage has been provided by the information and data collection system and technology in place allowing the company to increase its efficiency. The company has kept on growing to offer in-store services and has remained at the top of Japan's retail sector.
Following questions are answered in this case study solution
A convenience store chain attempts to be responsive and provide customers what they need, when they need it, where they need it. What are some different ways that a convenience store supply chain can be responsive? What are some risks in each case? How does Seven-Eleven achieve the responsive strategy?
What has Seven-Eleven done in its choice of facility location, inventory management, transportation, and information infrastructure to develop capabilities that support its supply chain strategy in Japan?
Seven-Eleven does not allow direct store delivery in Japan, with all products flowing through its distribution center. What benefit does Seven-Eleven derive from this policy? When is direct store delivery more appropriate?
Seven-Eleven is attempting to duplicate the supply chain structure that has succeeded in Japan in the United States with the introduction of CDCs. What are the pros and cons of this approach? Keep in mind that stores are also replenished by wholesalers and DSD by manufacturers.
What do you think about Seven-Eleven coming to India? What would be the best strategy to operate in India? How should they start the initial phase of operation? Can Seven-Eleven replicate the success in India by following the strategy used in Japan?
What is your expectation about the competition of Seven-Eleven in India?
What do you recommend for Seven-Eleven in the COVID-19 era?
Case Analysis for Seven Eleven Japan Co
1. A convenience store chain attempts to be responsive and provide customers what they need, when they need it, where they need it. What are some different ways that a convenience store supply chain can be responsive? What are some risks in each case? How does Seven-Eleven achieve the responsive strategy?
A convenient store must be responsive to make sure that the business is growing, and the customers are satisfied. This means that the supply chain has to be efficient and responsive to the needs of the consumers. The problem, however, is that as the supply chain of convenient stores becomes more responsive, it opens up possibilities of uncertainty. They need to address this uncertainty while increasing the efficiency of their supply chain. Some strategies to achieve that are discussed here.
One way which can help with food items like discussed in the case of seven-eleven is providing local cooking capacity. It would help in fulfilling any demand quickly and the uncertainty factor would be decreased significantly. A convenience store in this case would not have to plan their demand ahead of the actual day and they can instead cook and make different items as needed. The problem with this approach is the increase in cost and the lack of utilization that may come because of the decentralized approach. When seven-eleven, for example, cooks for multiple stores the fixed costs go down significantly which would not be the case if every store had its own in-house cooking capacity.
Another way that supplies chain can improve their efficiency especially during times like these when there is a pandemic and online retail has exploded is to improve the delivery system directly to the consumers. This can be achieved by either subscription services or having specific timings for different locations because if a convenience store starts to deliver directly to every consumer at any time that they need, it is going to take the costs very high ending up not being a good option for either the consumers or the store. Optimizing the deliveries can instead bring the costs down while providing convenience to the consumers.
2. What has Seven-Eleven done in its choice of facility location, inventory management, transportation, and information infrastructure to develop capabilities that support its supply chain strategy in Japan?
There are multiple problems that may arise when the company starts to micromanage supply and demand at a very minute level. First of all, this model of just in time can be very advantageous for a retail business especially because it brings the cost down while improving the efficiency of the overall operations. The problem, however, comes when there is a sudden increase or drop in demand. This happened during covid19 especially during the start when people were bulk buying, and the retail shops could not keep up with the demand. There were no metrics that could have determined the increase in the demand that did happen during that time. This in many ways failed the just-in-time model which was used predominantly by the retail outlets.
Similarly, a sudden drop in demand would mean that the store would have to bear the cost of inventory. In a different scenario, the demand for certain items or SKUs might increase but since seven-eleven use historical data to determine demand and replenish, this could mean that the demand may not be predicted accurately. Another problem is with the increase in cost because of transportation and frequent replenishment along with the time required to receive and place the products. Since seven-eleven has to frequently replenish their inventory levels as they are micro matching the supply with demand. If, for example, they were replenishing the inventory once every two weeks then there would be one vehicle or one-time delivery decreasing the cost of transportation but because of the micro-matching, they have to replenish more frequently which means that the vehicle may even not be completely loaded. This increases the cost of transportation overall and requires more man-hours to off-load the stock received at the different locations of seven-eleven.
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