7 eleven in japan case study

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Managing millions of daily retail transactions

How Seven-Eleven Japan cut the time needed to share data with stores, vendors and customers from more than one day to just two minutes in the cloud

When he stepped into his role at Seven-Eleven Japan (SEJ) in 2019, the company’s head of information and communications technology saw he had a problem: IT was constraining growth.

“We faced the urgent need to address the challenges of complex IT systems and vendor lock-in against the background of business expansion,” Izuru Nishimura explains.

Solving this would require an overhaul of SEJ’s IT infrastructure. The company needed a data strategy that could match the speed of its business expansion. So Mr Nishimura and his team turned to Google Cloud. What they discovered exceeded their expectations. In the cloud, key data about customer sales could be shared across Japan within minutes, store owners could save time restocking shelves and artificial intelligence (AI)-powered recommendations could help to drive sales.

Sharing data quickly is the key to success

SEJ’s 21,000 stores are independently owned, but depend on common systems to share data such as inventory and customer interactions. The stores are extremely popular, averaging 1,000 customers a day, who generate millions of transactions – and petabytes of data. But SEJ’s ageing systems could not keep up with processing such large amounts of data, preventing the company from using real-time data for orders and other critical functions.

After examining proposals for upgraded versions of SEJ’s existing systems, Mr Nishimura and his team headed in a different direction, opting for a cloud-first architecture that would eliminate inflexible, difficult-to-update, on-premise systems. Google Cloud was flexible, responsive, cost-effective and offered robust security and scalability.

Achieving financial resilience

Seven central.

In 2020, SEJ’s platform – Seven Central – went online in the cloud, sharing point-of-sale and other data across stores, ordering systems and business functions, and even data on customers browsing items available for home delivery.

Behind the scenes, Google Cloud’s streaming analytics collect and process real-time data before quickly routing it to SEJ business, customer and vendor applications. The set-up allows SEJ to separate its data from business processes for the first time, speeding up processing and enabling rapid upgrades in response to business needs. “In conventional system development, databases tend to be built around business logic,” Mr Nishimura explains.

That approach may work for a given use case, but cracking open siloed databases built for one purpose to use for another can be time-consuming and expensive. Seven Central’s cloud-based architecture lets SEJ developers reroute data to new or upgraded applications on the fly, so they can respond quickly to fast-changing business needs.

A platform for digital transformation

Designed to deliver data across the ecosystem in an hour, Seven Central now achieves this in one to two minutes.

“The phenomenally short development time compared to traditional on-premise systems is also worth noting,” Mr Nishimura says. “In the past, it would have taken at least a year to build the data infrastructure alone, but we managed to develop it in about six months.”

Rapid development has enabled SEJ to launch a host of new capabilities. For example, customers using SEJ’s 7NOW application, which pulls data from Seven Central, get deliveries from nearby stores in only 30 minutes. And thanks to Seven Central’s AI-powered ordering process, store owners save eight hours a week on inventory reordering tasks.

“We are still halfway through the process, but Google Cloud is a vital foundation of our digital transformation project,” Mr Nishimura says.

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Seven-Eleven Japan: Reinventing the Retail Business Model

An in-depth description of a firm’s approach to an IT management issue (intended for MBA and executive education)

This case study describes how Seven-Eleven Japan (SEJ) has successfully established an innovative business model that is changing the retail industry in Japan. The case describes the information-based strategies that have helped SEJ become a top performing retailer in Japan, selling high quality products through an industry-wide supply chain network. With its strong capability to analyze customer requirements, SEJ pursues an integrated strategy, supported by innovative use of information and IT, to control the marketing, merchandising and manufacturing of original products. The case also describes SEJ's development of an integrated retailing information strategy and associated systems. The company's policy of outsourcing most IT capabilities to partners and pursuing advanced IT initiatives has provided SEJ with substantial advantages over competitors. Strategic IT, human and information assets such as store councilors, item-by-item real-time control, industry-wide IT network, and a sophisticated analysis syst...

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Any registered, logged-in user of the website can read many MIT CISR Working Papers in the webpage from 90 days after publication, plus download a PDF of the publication. Employees of MIT CISR members organizations get access to additional content.

This case was written by Kei Nagayama, Management of Technology Program Class of 2003 at MIT Sloan School of Management, working with Dr. Peter Weill, the Director of the Center for Information Systems Research at the MIT Sloan School of Management. This case is for the purpose of management education, rather than illustrating or endorsing any particular management practice. The authors would like to gratefully acknowledge Mr. Toshifumi Suzuki, CEO, Mr. Makoto Usui, Managing Director, and Ms. Yuka Ozaki, Mr. Usui’s assistant, at Seven-Eleven Japan, Co., Ltd., in completing and publishing this case. This case may be reproduced free of charge for educational purposes provided the copyright statement appears.

© 2004 MIT Sloan Center for Information Systems Research. All rights reserved to the authors.

About the Authors

Kei Nagayama, Management of Technology Program Class of 2003 at MIT Sloan School of Management

Peter Weill, MIT Sloan Center for Information Systems Research (CISR)

Mit center for information systems research (cisr).

Founded in 1974 and grounded in MIT's tradition of combining academic knowledge and practical purpose, MIT CISR helps executives meet the challenge of leading increasingly digital and data-driven organizations. We work directly with digital leaders, executives, and boards to develop our insights. Our consortium forms a global community that comprises more than seventy-five organizations.

MIT CISR Associate Members

MIT CISR wishes to thank all of our associate members for their support and contributions.

MIT CISR's Mission Expand

MIT CISR helps executives meet the challenge of leading increasingly digital and data-driven organizations. We provide insights on how organizations effectively realize value from approaches such as digital business transformation, data monetization, business ecosystems, and the digital workplace. Founded in 1974 and grounded in MIT’s tradition of combining academic knowledge and practical purpose, we work directly with digital leaders, executives, and boards to develop our insights. Our consortium forms a global community that comprises more than seventy-five organizations.

• Feb 7, 2023

7-Eleven Case Study: The Untold Story of the World's First Convenience Store

Updated: Oct 12, 2023

Introduction

7-Eleven is a super convenience store chain that has 78,029 stores in 19 countries as of November 2021. They were the first to brand themselves as a convenience stores chain, totally differentiating themselves from the competition. Now, did the idea just come to them? In fact it actually was a random occurrence that caught on and was capitalized upon by them. Though it was the first of its kind, 7-Eleven had its ups and downs along its journey, but while other competitors bit the dust on these Chrono events; 7-Eleven was saved by its Japanese counterpart and started to thrive after Japanese intervention.

First Growth Phase

During 1927, 7-Eleven started out as four Dallas-based ice companies, merging to form the Southland Ice Company. At first, they included some major grocery items such as eggs, milk, bread and also gasoline at some stations. Also, longer working hours as compared to super markets provided a competitive edge for this company. (Mechanical Refrigerator was available only after 1926)

Southland Ice Company briefly came to be known as the Totem Stores, after one of the store managers in Texas planted a totem pole near his store. The name caught on and they decided to place one totem outside every store and unify the stores under the name Totem stores.

Southland Ice Company also went through bankruptcy in 1931, during the times of The Great Depression, but it got back up quickly with the help of a banker from Dallas W.W. Overton and Southland Ice Company came under the ownership of board members. During its bankruptcy, the operations were allowed to keep running while the Company sold its legal bonds and reorganized the structure.

In 1933, the Southland Ice company hit a major benchmark for growth when the prohibition on sales of beer was removed and they could now sell beer as well. Subsequently, three years later in 1936, Southland found a more stable footing with Oak farm dairies and started constructing Oak farm dairies around the Southland stores network of logistics.

Southland Ice company also began to offer free movie tickets in return for six of its milk-bottle caps, focusing on selling more of Oak farms dairy products.

In 1946, Southland Ice Company renamed its stores as “7-Eleven” as it indicated the working hours were between 7 am-11 pm. Between the 1950 -1960s they expanded their product lining which included rug shampooers, Television sets, floor polishers etc.

7-Eleven owed its growth to an innovative mindset and keeping in touch with their customer demands as they changed. This, they achieved through customer feedback mechanisms deployed at different points of contact. Also, the end of World War II caused the population to move from urban areas to the outskirts; 7-Eleven managed to capitalize on this situation by opening different stores at strategic locations which were primarily located in the outskirts of the city. With this strategy, they were able to attract a huge number of on-the-go customers.

After 1973, Southland moved its borders beyond its North-American provinces by letting out franchises in Japan (7-Eleven Japan; from here on mentioned as SEJ) in exchange of royalty payments. This move freed up growth prospects for 7-Eleven in a major way, as it freed up capital for further investments and the parent company was less burdened with logistics management of the franchise stores.

First 7-Eleven Store in Japan

Gasoline became the major source of profit for 7-Eleven by 1972; which accounted for more than 25% of total sales. By 1973, the company had an annual revenue of $1.4 billion and net earnings of $23 million from almost 5000 stores throughout most of the United States and Canadian provinces.

The company expanded beyond food, drink, and convenience into other fields, purchasing such businesses as Chief Auto Parts (1978). Because many of its stores also served as automobile filling stations, Southland bought CITGO Petroleum in 1983 as a supplier. The company sold off 50 percent of its stake in CITGO in 1986.

Decline Phase (1980 -1992)

During the 1980s, the competition took a peak as supermarkets started opening till late, and more and more gasoline stations started converting into small convenience stores. This point in the case study highlights a tragic point in the life cycle of 7 Eleven. The company had failed to invest in Information Technology, therefore it could not keep pace with changing customer demand and inventory management. Also diversified investments made it harder for the company to push back on loans.

During the hayday of corporate raiders in the 1980s , the Canadian financier Samuel Belzberg threatened a hostile takeover of Southland. In response, the Thompson family took the company in a private leveraged buy-out in December 1987. Many subsidiaries, including Chief Auto Parts, were sold off in order to pay the heavy debt that resulted from the repurchase of shares. Even so, the company went bankrupt for the second time in 1990, the same year that it sold the remaining 50 percent of CITGO. It emerged the following year with 70 percent of its stock owned by the Ito-Yokado Co., a Japanese retailer, and 7-Eleven Japan, the company’s Japanese licensee.

Growth Phase II (Starting from 1992): Seven Eleven Japan

After 1992, with Ito-Yokado owning more than 61% of the total business, 7-Eleven Inc. (from here on written as SEJ: Seven Eleven Japan) thrived under the guidance of Toshifumi Suzuki.

Toshifumi Suzuki had already had a successful run with SEJ during the course of 1973-1992. His strategy relied on common distribution systems, and infrastructures to support the scaling of the business and mostly because of its “fresh food” concept.

Fresh food regularly accounted for 40% of its sales in SEJ.

At first, the idea of applying the SEJ manoeuver in the US market garnered a substantial amount of skepticism but after the model was tweaked to suit the needs of US-based consumers, it did prove profitable.

In contrast to Japanese consumption patterns, US citizens had historically viewed the 7-Eleven stores as pit stops for cigarettes, gas, drinks, etc. Southland had earlier experimented with fresh foods like hamburgers and submarine sandwiches but had failed due to poor logistics regarding distribution, sales and payroll; which proved to be unfeasible.

Over the years SEI has gained popularity with Big eats, Deli sandwiches and originals such as Gulp, Big-gulp, Super Big-gulp, etc. Following in the footsteps of SEJ, SEI also started focusing on Fresh food and started building infrastructures around it to support the sales and scaling of fresh food. SEI also made an effort in management systems by hiring experienced professionals from food sales backgrounds and started creating a network of proprietary fresh food items.

By 2002, the Infrastructure was nearly complete and operating. After that, they shifted their focus to merchandising, and new product releases. By 2003 company had created a fresh food supply network of 13 commissaries, 11 bakeries, and 22 distribution centres that served 80% of the company stores with fresh food daily.

SEI started out with CDCs in 1994, with well-curated routes which were optimised to their finest to generate more profits. To ensure quality of the products they sorted their products into four different categories pertaining to their temperature. Also, the trucks were supported with dual temperature control units that could store dry food items and other chilled items.

SEI faced a minor setback as it was hard to convince vendors and suppliers to opt for Common distribution. Major companies like Pepsi, Coca-cola, Frito-Lay etc. downright refused to use their mode of distribution. Also, loyalty could not be expected from all the partners and some refused to provide logistics and analytics.

Bill Norris, CEO of Constance food group was a major partner. CFG supplied on a non-proprietary basis approximately 230 7-Eleven stores on Long island with fresh sandwiches, salads and other items. CFG also provided SEI with logistics in Long island and other sales analytics.

Under the new food supply system, the suppliers were bonded into a contractual agreement that 7-Eleven will only buy from these suppliers. Now the SEI had forged solid relationships with the elemental relatives of its business on the basis of mutual trust. All parties worked together and actively shared information regarding its business. With this 7-Eleven had spread its wings to take on a new flight.

In 1993 SEI had bagged a prominent supplier, Charlie Burman, CEO and owner of Bakery Express- Mid Atlantic, who had been supplying fresh donuts on consignment on a daily basis to 600 7-Eleven stores in Baltimore, Washington.

The company had established five cross-functional teams, each led by a category manager, to create new food items that would attract on-the-go customers. The teams performed product development, commercialization, marketing, merchandising, and store execution.

7-Eleven had garnered attention since 1927 and has helped many suppliers to earn their daily bread. As the company grew older and went down a downtrend, these loyal suppliers and franchise owners helped SEI along the way to bring about major reforms as it emerged from bankruptcy.

The change required in order to garner success was a huge one, as it basically meant a cultural transformation in business and marketing scenarios in a grander scheme or in other words, 7-Eleven was saved by their loyal suppliers and vendors who remembered how 7-Eleven gave them good business during their own harsh times.

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A Grudge Match in Japan: One Corner, Two 7-Elevens

Inside the war between a very powerful company and a very stubborn franchisee, complete with threats, spies and videotape.

7-Eleven has built a store in a suburb of Osaka, Japan, while the shop next door remains tied up in court. Credit... Hiroko Masuike/The New York Times

Supported by

By Ben Dooley and Hisako Ueno

• Published April 30, 2021 Updated May 18, 2021

Listen to This Article

HIGASHI-OSAKA, Japan — Across Japan , it can seem as if there’s a 7-Eleven on every corner.

Now, on a single corner in a working-class suburb of Osaka, there are two.

The unusual pairing is the latest manifestation of a grudge match between one of Japan’s most powerful companies and, arguably, one of its most stubborn men.

Mitoshi Matsumoto, a franchisee, ran one of the two 7-Elevens until the chain revoked his contract in 2019 after he dared to shorten his operating hours . For over a year, his store has sat empty as he and 7-Eleven have battled in court over control of the shop. Fed up and with no end in sight, the company decided on a stopgap: It built a second shop in what used to be Mr. Matsumoto’s parking lot.

The conflict’s outcome will determine not just who gets to sell rice balls and cigarettes from one tiny patch of asphalt and concrete. It could also have profound implications for 7-Eleven’s authority over tens of thousands of franchise shops across Japan, part of a convenience store network so ubiquitous that the government considers it vital to the national infrastructure during emergencies.

7-Eleven has gone to surprising lengths against Mr. Matsumoto. It hired a team of private investigators to watch his store for months, collecting grainy video that, the company asserts, shows him head-butting one customer and attacking another’s car with a flying kick. It has also compiled a dossier of complaints against him, including one over a bungled giveaway of “commemorative mayonnaise.” And now it says it plans to charge him for the cost of building the second shop next to his.

The company maintains that it moved against Mr. Matsumoto simply because he was a bad franchisee. But he argues that it is no coincidence that the company’s view of him dimmed sharply after he said he would defy its rigid demand that stores stay open around the clock.

Before his seemingly small act of rebellion, the company had deemed him a model worker. He had received praise for, among other things, having the highest sales of steamed pork buns in his region.

After his decision, 7-Eleven threatened his business and eventually cut off his supplies and sued to take over the store. With its actions, Mr. Matsumoto says, the company is sending a message to other franchisees: The nail that sticks out gets hammered down.

The fight playing out in an Osaka courtroom will have ramifications for 7-Eleven and the rest of Japan’s major franchises, which control the vast majority of the country’s more than 50,000 convenience stores. 7-Eleven accounts for nearly 40 percent of those, and its business practices, for better or worse, have long been viewed as the industry standard.

“The outcome of this trial will have an enormous impact,” said Naoki Tsuchiya, an economics professor at Musashi University in Tokyo. “A loss would be a considerable blow to the company,” but a win would “shift the balance of power away from the franchisees and toward corporate HQ.”

Mr. Matsumoto ran the first of the two 7-Elevens from its construction in 2012 through the end of 2019. Situated on a busy street near one of the largest private universities in the region, the store has been shuttered for 16 months, musty, dark and gathering dust.

The second 7-Eleven, a scaled-down version of the shop next door, is being built as a service to the neighborhood, the company says, after residents expressed concern that the empty store was a security issue. The new shop has the knocked-together look of the temporary housing that springs up in the wake of a natural disaster. When the finishing touches are put on in the coming days, it will be operated — 24 hours a day — by 7-Eleven itself.

For most of the seven years that Mr. Matsumoto operated his 7-Eleven, he faithfully carried out the demands for round-the-clock operations, which boost corporate profits but can be costly for franchisees, who shoulder the labor costs. The pace became unsustainable, though, as help became harder and more expensive to find — a problem that grew more acute after his wife’s death from cancer in the spring of 2018.

In February 2019, he announced that he would close his store from 1 a.m. to 6 a.m. each day. 7-Eleven began pressuring him to return to round-the-clock operations, his defense team wrote in court filings. Mr. Matsumoto, who prides himself on being persistent and plain-spoken, did not back down.

He went to the news media and described the industry’s harsh labor conditions, including his own days working 12 hours or more. His story hit a nerve in a country where overwork is rampant and sometimes fatal.

His willingness to criticize 7-Eleven in ways that most other franchisees would not made him famous. It also cast a light on the hidden costs of ultraconvenience in Japan, where convenience stores fulfill many of life’s daily needs and are often held up as symbols of the country’s remarkable efficiency and customer service.

7-Eleven stood down in its clash with Mr. Matsumoto over his shorter hours. But his relationship with the company, which had always had some problems, reached a breaking point in October 2019 when he announced that he would close the store entirely for one day, on New Year’s.

In late December, 7-Eleven notified him that it would revoke his contract unless he took unspecified action to restore a “relationship of trust.” It gave him 10 days.

The company said it was responding to two problems. One, Mr. Matsumoto had attacked it on social media. Two, he had racked up hundreds of customer complaints. (It would later claim, without providing evidence, that it was the largest number of any store in Japan.) It was the first time, he said, that the company had ever brought the problem to his attention. The company denies this.

The first complaint came in the months after the store’s grand opening. Mr. Matsumoto and his wife had papered the neighborhood with fliers promising a squeeze tube of “commemorative mayonnaise” to any customer who showed up on the first day.

The mayonnaise ran out in hours, and Mr. Matsumoto ended up telling hundreds of shoppers to come back later that week to claim their gift. Over a month later, one disgruntled customer tried to cash in the I.O.U., then fired off a scathing complaint when she was refused.

The other complaints range from serious accusations — berating customers — to minor quibbles. The dossier also contains a number of complaints from former employees about pay and working conditions that echo some of Mr. Matsumoto’s own complaints about 7-Eleven.

Mr. Matsumoto does not pretend that everything at his store was perfect. For years, he had been engaged in a heated battle over his parking lot, where customers of other businesses would often leave their cars for hours without so much as a thank-you.

By Japanese standards, Mr. Matsumoto’s neighborhood is a little rough. People cut in line. They cross the street against the light. They aren’t afraid to give a convenience store owner a piece of their mind.

He gave as good as he got, he readily admits, and he was not popular with the neighbors. On more than one occasion, a shouting match over parking spaces ended with a call to the police. They always sided with him, Mr. Matsumoto said.

7-Eleven had never seemed particularly interested in the occasional blowups, but after he declared that he was closing early, it began taking a very specific interest in them.

In the summer of 2019, the company hired private investigators to keep tabs on Mr. Matsumoto’s store, it wrote in a court submission. Perched in a nearby building, they spent months secretly filming the shop’s comings and goings.

The result is 7-Eleven’s evidential pièce de résistance: five videos of what appear to be confrontations between Mr. Matsumoto and various customers in the parking lot. Two involve what the company says are the flying kick to the car and the head-butt, but it is difficult to make out much of the blurry footage presented to the court.

Another video shows Mr. Matsumoto upbraiding a man in a white van. Two men loitering nearby are surreptitiously taping the argument, and the company has crosscut shaky footage from their cameras with video taken from the balcony above Mr. Matsumoto’s shop to give several perspectives on the exchange.

When approached for comment, a 7-Eleven representative referred reporters to the company’s court filings.

Mr. Matsumoto’s legal team has years of experience fighting convenience store chains in court, but one of his lawyers, Takayuki Kida, said that “there aren’t many cases that are full-out war, where 7-Eleven is this set on crushing someone.”

It’s easy to see why, said Mr. Tsuchiya, the Musashi University professor. The attention on Mr. Matsumoto has already helped spur change in the industry.

In September, a broad inquiry by Japan’s Fair Trade Commission concluded that the convenience store industry’s 24-hour-a-day policy was unsustainable and ordered stores to give owners more flexibility or face possible legal action.

Under pressure, 7-Eleven has increased franchisees’ share of revenue and, during the pandemic, taken a more lenient stance on operating hours . It is not clear how far the changes will go or whether regulators will follow through on their threat.

Mr. Matsumoto is bemused by 7-Eleven’s decision to build a new shop next door to his. “Everyone had forgotten about me,” he said during a recent visit to the construction site. “Now they’ve put me back in the news again.”

As he watched a crane do excavation work, a passing bicyclist stopped to share a few words of encouragement, urging Mr. Matsumoto not to let the “big guys” win.

Last year, Mr. Matsumoto says, the company offered him 10 million yen, or more than $92,000, to drop his case. The court encouraged him to accept the offer. But he wasn’t interested. Now, the company is trying the opposite approach. Its lawyers have said they will bill him ¥30 million for construction of the new store.

Either way, it’s the same to him, Mr. Matsumoto said. “It’s not about the money,” he said. “It’s about something bigger.”

The same could be said for 7-Eleven. A sign in front of the construction site sums it all up: The building is temporary.

Win or lose, the company plans to tear it to the ground.

Ben Dooley reports on Japan’s business and economy, with a special interest in social issues and the intersections between business and politics. More about Ben Dooley

Hisako Ueno has been reporting on Japanese politics, business, gender, labor and culture for The Times since 2012. She previously worked for the Tokyo bureau of The Los Angeles Times from 1999 to 2009. More about Hisako Ueno

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Seven-Eleven Japan Co.

By: Sunil Chopra

Discusses the structure of the Seven-Eleven Japan supply chain in terms of its facilities network, inventory management, distribution, and information.

• Length: 14 page(s)
• Publication Date: Jan 1, 2005
• Discipline: Operations Management
• Product #: KEL026-PDF-ENG

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Learning Objectives

To discuss how Seven-Eleven has made consistent supply chain choices to support its business strategy of providing convenience to customers. Points to how Seven-Eleven has used information and aggregation in transportation to improve supply chain responsiveness at a relatively low cost.

Jan 1, 2005 (Revised: May 26, 2022)

Discipline:

Operations Management

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Industries:

Retail trade, Transportation and distribution

Kellogg School of Management

KEL026-PDF-ENG

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Structure of the Seven-Eleven Japan Supply Chain Case Study

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.

In order to become responsive, a supply chain for convenience stores can be organized using three main models: the dependence on distribution centers, the direct provision of goods, and the local production of fresh foods. A supply chain that includes distribution centers is effective when it is necessary to provide many stores with a certain amount of products regularly. As a result, a convenience store is responsive because it guarantees the provision of many facilities with the necessary amount of goods in the most efficient manner. Seven-Eleven Japan uses this system (Chopra 7). Still, risks are in changes in demand.

If demand decreases unexpectedly, there are many products in a distribution center that should be sold. Direct store delivery is another approach that is used in small local convenience stores that do not belong to chains, and risks are in delays and inabilities to address demand. The third approach to developing a responsive system is the local production of goods. However, this system is not appropriate for stores where the flow of consumers is extremely high because of the limited capacity related to producing fresh and cooked foods.

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?

Facility locations of Seven-Eleven Japan are selected with reference to the principle of market dominance. More new stores appear in those areas where there is a cluster of Seven-Eleven Japan stores to guarantee the effective distribution and rapid provision of products. Inventory management and transportation are based on the work of distribution centers and the provision of many goods. In this context, regional merchandizing guarantees a focus on customers’ needs.

The company works to decrease the number of used vehicles, but the increase in productivity is observed (Chopra 7). Organization of the work of stores, suppliers, manufacturers, and distribution centers, and transportation are based on the implemented Total Information System. This network allows for ordering and communicating between store managers and distribution centers.

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?

While using distribution centers in order to control the delivery of products, Seven-Eleven Japan guarantees that all stores will be provided with goods on time, the delivery will be properly scheduled, and customers’ needs will be addressed. It is important to use distribution centers for chains that include many convenience stores because of the necessity to organize deliveries several times a day (Chopra 6-7). Direct store delivery can be selected when a store needs certain products to be provided only a few times a week or when small stores choose to cooperate with local suppliers. In this case, it is almost impossible to address the problem of delays and increasing demands.

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

The benefits of using combined distribution centers are in possibilities to control the whole supply chain and organize it according to the store’s needs, to monitor the amount and quality of goods, and to increase the productivity related to the workload and transportation. Furthermore, combined distribution centers allow for focusing on the particular needs of customers because of the ability to regulate the amount of proposed fresh products, cooked products, or manufactured goods.

However, the disadvantages of such an approach are in the necessity to adapt the distribution system applied in Japan to the requirements of the US market (Chopra 8). It is possible to state that combined distribution centers are more difficult to manage in comparison to centers organized in Japan. Furthermore, combined distribution centers in the context of the US market can be discussed as less appropriate than the direct store delivery system.

Works Cited

Chopra, Sunil. Seven-Eleven Japan Co . Battle Creek: Kellogg School of Management, 2005. Print.

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IvyPanda. (2021, March 22). Structure of the Seven-Eleven Japan Supply Chain. https://ivypanda.com/essays/structure-of-the-seven-eleven-japan-supply-chain/

"Structure of the Seven-Eleven Japan Supply Chain." IvyPanda , 22 Mar. 2021, ivypanda.com/essays/structure-of-the-seven-eleven-japan-supply-chain/.

IvyPanda . (2021) 'Structure of the Seven-Eleven Japan Supply Chain'. 22 March.

IvyPanda . 2021. "Structure of the Seven-Eleven Japan Supply Chain." March 22, 2021. https://ivypanda.com/essays/structure-of-the-seven-eleven-japan-supply-chain/.

1. IvyPanda . "Structure of the Seven-Eleven Japan Supply Chain." March 22, 2021. https://ivypanda.com/essays/structure-of-the-seven-eleven-japan-supply-chain/.

Bibliography

IvyPanda . "Structure of the Seven-Eleven Japan Supply Chain." March 22, 2021. https://ivypanda.com/essays/structure-of-the-seven-eleven-japan-supply-chain/.

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Seven-Eleven Japan Co. – Case Solution

This case study deals with the organizational structure and business processes of Seven-Eleven Japan Co. to provide its customers with their necessities.

​Sunil Chopra Harvard Business Review ( KEL026-PDF-ENG ) January 01, 2005

Case questions answered:

• A convenience store chain attempts to be responsive and provide customers with what they need, when they need it, and 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 Japan Co. 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 and 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 its 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?

Not the questions you were looking for? Submit your own questions & get answers .

Seven-Eleven Japan Co. Case Answers

1. a convenience store chain attempts to be responsive and provide customers with what they need, when they need it, and 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 japan co. achieve the responsive strategy.

There are various ways in which a convenience store like Seven-Eleven Japan Co. could be more responsive.

Responsiveness can be broken down into three broad categories.

• Knowing what the customers need.
• Making sure they get it when they need it.
• Making sure it is available where they need it.

These can be achieved in the following ways:

Combining one or more of the above measures could mitigate most of the issues in a supply chain and make it more responsive.

Seven-Eleven Japan Co. achieves responsiveness by attempting to micro-match supply and demand using rapid replenishment. This assumes that the demand pattern would be relatively constant on a day-to-day basis.

Some risks associated with this method are:

• Risk of Delay in transportation since all units flow through their warehouses.
• Higher cost of transportation.
• Risk of no stock – This will happen when a group of customers come into the store and buy all the inventory of products that are generally in high demand.
• Risk of system failure – Seven-Eleven Japan Co. depends highly on technology to micro-match supply and demand using rapid replenishment. Therefore, if there were to be a Network failure / Server breakdown, it would put their whole system into the high-risk territory.

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?

Seven-Eleven’s supply chain strategy is essential to closely monitor demand on a daily basis and try to tweak their supply to fulfill that demand in a short span of time. To support such a strategy, the following systems and capabilities have been put into place:

Facility Location:

• Seven-Eleven Japan Co. has a

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7-Eleven Japan Harvard Case Solution & Analysis

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7-Eleven Japan Case Study Solution

Factors Allowing the 7/11 to operate at almost 1 inventory turn in a week for convenience store business, and the similarities in the supply chain between ZARA and 7 Eleven Japan.

The main factors for Seven Eleven Japan (SEJ) to provide almost 1 week of inventory turnover at its convenience stores are provided below:

Freshness Job Strategy:

The executed strategy of SEJ to provide the fresh products displayed at the stores; not only the perishables but other items are also replenished with fresh products and the items offered in the shops are considerably fresher than other convenience stores. This is provided by tracking customer preferences and their changing behavior towards the products, and non-fresh products being destroyed; for example; coffee having a life of not more than 2 hours.

Information systems and the use of OFC’s:

The information system implemented by the 7/11 is very up to date, with two way communication between the store and the HQ, manufacturers, and other areas. Further, beside the store manager; the organization’s operation field counselors (OFC’s) has direct contact and influence which consider the customer preferences of the convenience store. The stock is ordered in small quantities throughout the week, making the store to turn out inventory as soon as possible.

Daily Ordering System and the Supply Chain:

This factor is the main backbone of the organization, with the information system having direct contact with manufacturers about items to be delivered and their specific quantity. There is a daily ordering system in which the corporate manager orders products which are delivered daily, with the manufacturers being on board through the contact with the HQ. This results in low quantities being provided according to the needs daily, making the inventory move out.

Main Similarities of Supply Chain between ZARA and the SEJ

Small Batch Productions:

Zara considering SEJ has also a very low inventory turnover, they create smaller quantities to assess the demand and the success of its sales. This is similar to the SEJ as they also order quantities which are low and according to the demand. This makes the inventory turnover rate considerable less for both organizations.

Central Distribution Center:

Like SEJ, ZARA has a strong IT system backing its distribution. All clothes produced are shipped to Spain, and then distributed. SEJ also has a similar model, which implies not having different distributors for every product, and using the Supplier Distribution Center (SDC) for the distribution to the stores.

Quick Response to the Demand:

Another similarity is the variable quantities being supplied, as required by the needs of the current times. ZARA also has this chain in line with 1000 new designs being made every month, looking at customer requirements and then ordering as per need.

Three key features of 7-Dream.com’s e-business, the risks and rewards of the e-business model, bottlenecks, weaknesses, and suggestions for improvement for the Seven Eleven Japan.

Three key features of the 7-Dream.com’s e-business are provided below:

• New Company with renowned partners of the Japanese Market; NRI, SONY, MITSUI, JTB, and KINOTROPE. Providing many products for the consumers at one stop, ranging from Convenience goods to travel network.
• Online business Company, with no physical shop and distributed through partners personal supply chains.
• Items collected from different venues, as requested by the Customer on his convenience in 2-3 days.

The risk and rewards of this business model:

The organization is new with no previous or past coordinated work experience, which might create management issues for all the organizations in this venture. Further, the organization which will fail to be successful will tarnish the image of all partners, even though with one glitch from any partner involved. The online store will only provide the consumers with dissatisfaction as no physical appearance or showroom is available, the trusting part of the Japanese consumer takes time. The orders might have problems if a consumer wants items of more than 1 partner, what will be the destination to collect up; who is going to complete the order.

Very low costs in comparison to their competing online sales companies. Range of items being available to shop from, increasing the customer inflow to the 7-Dream Website.

The delivery system is very high, as not much inconvenience will be provided to all the companies, as distributions can be maintained at their own leisure.

Some of the partners are competing in different environments, this will create a problem on the intellectual property and strategies being taken by the other organizations.

Bottlenecks:

Combined offers cannot be provided, as all the companies are different. Consumer will feel a sense of one company, which might create awareness problems for separate entities of the partners.

Combined focus in place, rather than separate entity perception.

Suggestions for improvement:

Using an SDC as the SEJ is implemented in its own convenience stores for the distribution which will unify the products from all partners, and provide problems for delivery. Though this will add costs for the 7-Dream organization.

Q.8 Seven Eleven US Model; introduction of the CDC’s and its pros and cons, and pros and cons for having a distributor replenishing stock to the 7/11 inbound distribution.

The duplication model, being put in place by the SEJ in the US market has certain pros and cons attached, which are as follows:

Pros of CDC:

The pros relate to the success of Seven Eleven in Japan, the company used the SDC program to support the sales and the distribution channels. As this model has been in place from the 1990’s in the Japanese industry, the Seven Eleven has high experience of this model which will create an ease in its use in the new market.

Another pro for using this system is to manage the items in the convenience stores, using different manufacturers and retailers to provide for the replenishing stock provided with the usage of different trucks being in and out with protocols to follow. The CDC system will ensure that stock provided will be up to the quantity required with less hassle as possible. The SEJ’s SDC in Japan has a truck time per store of not more than 1.5 Minutes to supply all items.

Cons of CDC:

The cons of using the SDC is that the motto of Seven Eleven to provide for the fresh food might not uphold due to the first manufacturers providing the foods and items at the CDC and then shipping to the stores, which will take time till stock being kept on the shelf. Another con is the added costs which will be attached to the CDC as the transportation will add to the tight revenue margins of the organization.

The next part of the Pros and cons will relate to the Distributor replenishing stock rather than the Distribution of the Management of Seven Eleven.

PROS and CONS:

The pros for the distributor replenishing stock is the time savings and more quantities with fixed schedules which will help the store managers to create a schedule upon their ease of the replenishment of the stock.

The con for using the distributor is that, the POS and GOT implemented by SEJ of minimum quantities as required basis will not be effected as the distributor will just be the supplier and this might lead to some items being overstocked and others being under stocked.

Q.9 the differences between Seven Eleven Japan and Inditex (ZARA) strategies; defining the return on assets, commenting on the decentralized versus vertical integration.

Differences in Strategies:

• Timing and the freshness of the product:

This strategy looks similar to both organizations as low stock and customized quantities, but the supply of both the products use different strategies as 7/11 has perishables which are of daily occurrences rather than the monthly stock strategy by ZARA.

• The IN HOUSE Distribution strategy:

As provided in the above questions, all the manufacturing of ZARA has to be supplied to SPAIN and then distributed in other areas. This is different to the 7/11 as the products of the convenience stores are mostly general in nature with no in-house refinery or plant. It cannot be applied to 7/11 organizations due to the nature of the business.

• Different Product Development Teams:

ZARA has different product development teams working separately, however SEJ has made use of the OFC’s and area managers which are required to fly to the HQ every week for evaluation and new instructions . They have to work together to improve and to assist the overall organization, which is entirely different in ZARA with separate teams working in isolation to others.

• Vertical Integration (VI) and Decentralization strategy:

Zara uses the VI model of acquiring its manufacturers and the retailers creating one seamless flow of activities, on the other hand SEJ uses decentralization with different CDC’s and store managers and OFCs responsible for their own units.

This creates differences in the strategies, but due to the different nature of businesses; they are both successful and centralized strategy will not be sufficient for 7/11.

The Return on Assets formula is Net income divided by the Total Assets. In consideration to the Seven Eleven Japan and the Inditex (Zara), the ROA of SEJ must be lower than the INDITEX. The reason is because of the nature of business . ZARA works in apparel industry with higher margins as compared to SEJ which works in the convenience market with lower margins on the products being sold, making the ROA lower as more resources are used in the generation of income for SEJ.

Q.10 Critical Assets of 7/11 Japan, Inditex (ZARA), and the role of product innovation for both organizations.

Critical Assets of 7/11 Japan :

• Information system, with double loop connecting the Head Quarters of SEJ with Stores, SDC, Manufacturers, and retailers with 2-way communication.
• An Operational design supporting the quick and responsiveness of different convenience stores throughout Japan and neighboring areas.
• Logistics and Delivery Channels.
• A Brand Name.

Critical Assets of Inditex (ZARA):

• Vertical Integration Model creating a Seamless flow.
• Intellectual property: BRAND NAME

We will be considering the Role of product innovation for both the Businesses.

When we consider the product innovation for the SEJ’s current business model and the critical assets. The product innovation will not affect the model or the chain as the products are provided through the Manufacturers to SDC and then they are provided to the retail stores.

The only effect, which can occur is the time period of the available product which might change. The organization has already other perishable products such as coffee which has 2 hour shelf life, SEJ will not change and can provide for the new product with ease.

The product innovation at ZARA will be directed because of the changes in the consumers’ tastes, and that can be a negative impact on the organizational model as the whole system is one flow. The HQ is based in Spain with all the powers. The organization will be affected as the current model will need to be re-thought to best assist the organizational needs and profitability...............

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