Sunday, September 21, 2014

7-11: A Successful Practitioner of “Just in Time”

With more than 50,000 stores around the world, Seven-Eleven (SE) is unquestionably the largest convenience store network in the world. In its main market Japan, there are 16,664 chain stores. Other stores are located in the US (8170), Thailand (7816), South Korea (7055), Taiwan (5001), China (2022), and so on. Managing such a large amount of worldwide chain stores efficiently not only requires reasonable and creative business strategy, but also asks for comprehensive and effective supply chain management. Through exploring the secret of SE’s success, it gradually become evident that how the strategy of “Just in Time” serves as a practical tool on its supply chain management.

“Just in Time” Responsiveness
The main customers of SE are usually those of young nine-to-fivers who are pursuing a fast-paced and fashion life. In this circumstances, customer preferences and requirements are rapidly changing. Moreover, it is obvious that many commodities in this kind of convenience store, like vacuum-packed lunch, sandwich, sushi and rice balls, have shorter life cycles. Therefore, the flexibility in sourcing and delivering is critical in the industry of convenience store.

For SE chain stores in Japan, there are 290 dedicated manufacturing plants for only producing fast food and 293 dedicated distribution centers, but none of these distribution centers carry inventory. In order to shift the capacity risks away from the company, SE choose to source most of its products externally. By reducing its pressure on regulating the inventory, SE has paid more attention on the management of sourcing and distribution. Depending on small-batch, frequent and fast sourcing strategy, SE managed to make a “just in time” responsiveness to the replenishment of goods. SE has been setting its rule of “Three Times Daily Delivery” for every store since 1987. To deal with the current change of demand on daily meals, all stores are given cut-off times for breakfast, lunch and dinner ordering. In addition, SE has different delivery frequencies in winter and summer to cope with seasonal demand variability. In this respect, it seems that SE must have taken a lot of money on transportation. However, by using a third service of third party delivery companies, SE has successfully lowered its transportation cost and increased the efficiency.

“Just in Time” Information Exchange
With the limited shelf space in each store, it is extremely important for SE to decide which items should be placed and when should be ordered to avoid overstocking and stock outs. Thus, “Just In Time” is not only showed in its delivery, but also reflected in its information exchange system.

The key points of SE’s information technology is the store’s computer system and the attached Point of Sale (POS) Register System. Both of them are helpful for a continuous and smooth flow of information inside of the company. POS Register collects real and instant information on purchasing while the store’s computer system gets a real time capture in store inventory. A large amount of sales data on hand, store managers are supposed to do a more accurate forecasting and make a prompt adjustment to its previous orders. Furthermore, SE also regards the external information exchange as a necessity for the whole management of its supply chain system. Instead of possessing these first-hand information exclusively, SE definitely shares the POS Register data with its suppliers, distributors and other partnerships. Moreover, by inviting its suppliers to join its discussion of future development, SE is dedicating in making a solid trust with its partnerships.

Under the core value of “Just in Time”, SE has enhanced its service efficiency to customers and generated high customer satisfactions. Its information system enabled sound relationship with its partnerships and encouraged significant improvement in strategic sourcing and inventory control.

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