Final MGSC Report - Grade: 1.1 PDF

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MGSC Report. SEVEN ELEVEN JAPAN (SEJ).

NOTTINGHAM TRENT UNIVERSITY

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INTRODUCTION________________________________________________________________________2 QUESTION 1___________________________________________________________________________3 HOUSE OF QUALITY____________________________________________________________________4 QUESTION 2___________________________________________________________________________5 SEJ SUPPLY CHAIN MAP________________________________________________________________6 QUESTION 3___________________________________________________________________________8 QUESTION 4/ RECCOMMENDATIONS__________________________________________________10 CONCLUSION_________________________________________________________________________11 REFERENCES__________________________________________________________________________12

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INT ROD UCTI ON 7-Eleven brand was part of South Company of America and became a Japanese Company in 2005 [ CITATION Hua \l 2057 ]. It was established in 1927 in Dallas, Texas[ CITATION Hua \l 2057 ]. With more than 50,000 stores, SE is

world’s leading retailer, franchisor and licensor of

convenience stores[ CITATION RuL18 \l 2057 ].SE store are patented under parent company Seven &I Holdings Co. operating in 16 countries with 15,00 stores in Japan being largest market [ CITATION RuL18 \l 2057 ]. This report mainly focuses on Seven Eleven Japan (SEJ). SEJ primarily focuses on “meeting the needs of convenience-orientated consumers by providing a broad selection of fresh, high quality and services at affordable prices, quick transactions and a clean, friendly shopping environment”[ CITATION sej20 \l 2057 ].

Each store’s selection consists of 2,500 different products and services such as food service provides customers an exclusive line of prepared fresh daily such as rice bowls and lunches, and daily delivered deli foods such as sandwiches, wraps, breakfast sandwiches and all sorts of fruits, salads and baked goods[ CITATION Cho13 \l 2057 ]. Many authors claim success of SEJ is due to supply chain strategy because of its distribution and information system[CITATION Ryu97 \l 2057

\m Seu04 \m Cho17]. Hence, this report will

explore reasons why it’s successful by firstly identifying SEJ order winner and qualifiers, and strategic and competitive priorities using house of quality. Secondly, illustrate SEJ Supply chain map and examine how it relates to strategic and competitive priorities especially on logistics. Thirdly, relate how variation and uncertain, postponement and buffering mechanism relate to SEJ supply chain. Lastly, give recommendations on how SEJ could improve its competitiveness through comparing to IKEA and Smart supply chain and its competitor.

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QUESTION 1 Organization that are successful have implemented strategy. Strategy addresses developing capabilities of an organization ability to reflect its customers’ and markets’ competitive needs and plans of its competitors’ plan[ CITATION Hil11 \l 2057 ]. Fig.1 below illustrates SEJ house of quality which helps to identify order winners, order qualifiers, strategic priorities to achieve order winners and competitive priorities[ CITATION Sla161 \l 2057 ]. The What’s shown in fig.1 are customers’ needs and How’s’ are strategies SEJ are implementing to meet those needs. It’s important to identify order winners (characteristics of service that win customers purchase) and order qualifiers (characteristics of customers to consider service/product) during

service that’s required, for

development of operation strategy [ CITATION

Ter08 \l 2057 ]. Therefore, SEJ must provide qualifiers to remain in the market and should be just as good its competitors (family mart and Lawson) as it may result an occurrence of lost in sales if failed to do so. Nevertheless, SEJ should be better than its competitors, which makes SEJ have competitive strategies to achieve order winner through strategic priorities. Based on fig.1 below, SEJ order winners are speed, dependability and flexibility in terms of offering range of goods and services with fast response to customer demand as the customer importance rating is higher compared to Lawson. Product availability is a key success as the case study shows evidence that 55% of total sales at each store was contributed by processed and fast food that is delivered 3 times a day such as rice balls due to shortened replenish delivery[ CITATION Cho131 \l 2057 ]. The order qualifiers are highlighted orange as shown in fig 1. Based on fig.1 and case study, SEJ strategic priorities to reduce low cost and fast responsiveness to meet franchisee demands as product availability is key success to convenience stores through use of cross docking, distribution system and pull information system achieved through technology usage and support of SE capabilities, resulting efficient operations [CITATION Mon01 \l 2057 ]. Therefore, SEJ’s classified as an order winner to customers compared to its competitors due to its strategic/competitive priorities. Nonetheless, SEJ competitive priorities is based by comparing its competitors (Lawson) as shown in fig.1 below. Therefore, competitive priorities are providing high availability of large variety of products which is achieved through short delivery lead time, supply chain strategy is flexible regards to able to change delivery schedules according to customer demands and frequency of delivery of time (Chopra and Meindl, 200

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HOUSE OF QUALI TY

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QUESTION 2 Fig.2 below illustrates SEJ supply chain of how goods are moved logically from tier 3 upstream to tier 2 downstream and how value is added throughout. Main focus SEJ positions itself is in operations as it contributes as it relates and contributes to its strategic and competitive priorities as mentioned above. SEJ internal operations focuses on functioning fast responsiveness meeting demands. Therefore, SEJ situates itself to be responsive to match uncertain demand and product life with its distribution and information systems as shown below fig .2[ CITATION Cho131 \l 2057 ]. Firstly, as shown in fig.2, at SEJ distribution center (DC) inventory is not held, as SEJ depends on highly efficient responses on franchisee and business level to suitably assign merchandises.

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However, stores are fully stocked at all time due to replenishment policy of delivering three times a day especially on fast moving items such as rice bowls, hence, frequent delivers to stores with small lot size orders are made due to limited shelf storage space. Therefore, this prevents loss of customer to competitors as product availability is high. Secondly, transportation is vital to SEJ as it relies on well-organized transportation. However, information and transportation system support one another as information system in all stores are linked to headquarters, suppliers and DC using ISDN to link all tiers. The table below fig.3, gives more insight of hardware used in information system[ CITATION Cho131 \l 2057 ]. Moreover, downstream is pull strategy, first orders are placed on GOT as shown in fig.2, order cut off times are given to all stores. Second, order data are sent headquarters (processes data) before 3pm and send to suppliers. Suppliers prepare orders based on requirements.

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SEJ SUPPLY CHAI N

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MAP

However, to reduce deliveries to store per day and reduce cost and time of excessive handling and receiving. SEJ created a combined delivery system: food products are categorized based on four temperature as shown in fig.2 and products that require same temperature zone would be cross docked at a single supplier distribution center (SDC) before it’s trucked to SEJ DC (Harrison,et al.,2004). For instance, various milk suppliers would deliver milk at SDC for chilled temperature products and milk is docked directly into one supplier chilled temperature truck that delivers to SEJ DC: where assigns and cross docks each store order accordingly to data received into controlled temperature tucks of SEJ. Each truck delivers to multiple stores that are geographically located closely, called milk-round (SEJ Co.,LTD.,2017).

Lastly, all orders delivered during off peak hours and received through scanner terminals. Hence, system is based on trust as driver is not required to be present. Therefore, delivery time at each store decreases as driver drops orders and carries on delivering. Overall, none of DC’s hold inventory as items from suppliers’ truck are cross docked into SE truck provided by Transfleet LTD. Thus, distribution and information system result short lead time, eliminates stock safety and enables SE and store to better match supply with demand.

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QUESTION 3 Fisher (1997), recommends effective supply chain is mapped with respect to product that is delivered through the chain. Based on Fisher (1997) theory products can either be functional or innovative, rely mainly on its mandate characteristic regarding life cycle length, demand predictability, product range and market criteria for lead times and service. In SEJ case, products are innovative due to high variation in demand and high variety products (Fisher,1997). For instance, new products are introduced every week. However, supply chains can either be market responsive or physically efficient subject to terms of inventory and resource plan, and inclusive objectives (Fisher,1997). For SEJ, no inventory held at DC, uses market information system through real time data and distribution system mentioned above to enable short lead times. Therefore, SEJ chain is responsive resulting an agile supply. However, variation and uncertainty may occur therefore, SEJ chain is structured to be efficient with use of postponement and buffering mechanism. Variation and Uncertainty Variation is “level of non-uniformity of demand or output from resources within supply chain” (Stratton,2012). Hence, may result from internal operations process or customer demand variation. For example, delay in delivery to stores may vary due to traffic or bad weather of which SEJ may receive a penalty for being late. Therefore, may result negative impact on SEJ performance of direct and opportunity costs as it may lead to uncertainty depending on level of variation its impacting. Uncertainty is “level of unpredictability of the associated variation (Stratton,2012). It could relate to process variation e.g. machinery breakdown or demand variation e.g. forecast uncertainty. SEJ case, implied demand uncertainty is high for many reasons. For instance, seasonal demands can increase demand for specific goods such as demand for ice cream due to change of weather. Postponement and buffering mechanism SEJ implemented postponement strategies in supply chain, it restricts the level to which process variation and demand uncertainty arrives supply chain within postponed product differentiation that is known as order penetration point (OPP) [ CITATION Olh03 \l 2057 ]. SEJ have postponement at the point where inventory is detained by suppliers before it is dragged through milk rounds and cross docking. As fig.4 shows the suppliers use a push approach as production volume is high which enables buffer inventory in upstream of supply chain. However, SEJ itself is pull approach as orders come in from franchisee through the hi-tech system frequently and

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placed with suppliers who holding inventory therefore the point when orders come in is pull approach. Hence, agility is key in SEJ case.

Before point of postponement, the suppliers are buffering with inventory and after POP SEJ is buffering with capacity as shown in fig.5. For example, there may be excess in logistics in the cross-docking area which can be allow flexibility and reduce variation and uncertainty, therefore does not use operations to the fullest as room is left for flexibility of unpredicted changes.

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Each order from franchisee are customized in order to meet specific needs. Therefore, enable to enhance product offerings, SEJ alter its supply chain to acclimatize mass customization processes [ CITATION SuJ05 \l 2057 ]. In SEJ upstream, production is standardized however downstream of the chain is customized as each order is customized to meet each franchisee specific needs. Fig.6 below illustrates how it is customized, and from which point it takes place.

QUESTION 4/ RECCOMMENDATIONS Given that SEJ is an agile supply chain therefore, it is based on market knowledge which makes its market driven. However, Ikea is a lean supply chain that produces in standardized products in bulk as it aims to reduce costs and be efficient. On other hand, Smart Car is leagile supply as that produces standardized products before point postponement which is lean and after point of postponement it is agile supply [ CITATION Van02 \l 2057 ]. Ikea buffer inventory throughout its supply chain whereas Smart Car buffers inventory until point postponement then its buffer capacity

as

it

allows

room

for

flexibility

and

customization

in

meeting

customers

demand[ CITATION Lau17 \l 2057 ]. The supply chain amongst the three-case studies are different however one company may learn to implement strategies from another to enhance improvement. Therefore, SEJ could implement in safety stock strategy as Smart and Ikea implement as it may enhance its performance or competitiveness as it will improve dependability and reduce short lead times in delivery as it does not have to wait for suppliers. This will make it more competitive compared to its competitor in fig.1 above. Adding on, SEJ introduces products are introduced every week, however, difficult to anticipate demand, hence there is higher demand uncertainty for SEJ. Nonetheless, till SEJ HQ receives data to identify demand for those products introduced, therefore there’s possibility of SEJ making

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a loss due to likely high predict error. Secondly, unusual events in areas could rise the demand for particular item. For instance, local street festival could increase demand for beer, hence stores have to respond to these needs otherwise will be losing out certain profits. As SEJ supply is responsive, it may be natural to have high demand uncertainty but however, to avoid or reduce SEJ should look into further investments in research and developments as this may be efficient in handling variation and uncertainty. Lastly, SEJ could consider allowing suppliers to deliver directly to stores for replenish items that need three times delivery, therefore, would shorter the lead and increase competitiveness against its competitors. CON CLUSION

REFERENCES

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Abukhader, S. & Jonson, G., 2007. Postponement strategy in food supply chains - An empirical investigation. International Journal of Logistics Systems and Management - Int J Logist Syst Manag, 3(2), pp. 215-233. Chopra, S., 2017. Seven-Eleven Japan Co.. Kellogg School of Management Cases. Chopra, S. & Meindl, P., 2013. Supply Chain Management : Strategy, Planning, and Operation. 5th ed. Boston: Pearson.

Fisher, M. L., 1997. What Is the Right Supply Chain for Your Product?. Harvard Business Review, 75(2), pp. 105-116. Harrison, T. P., Lee, H. L. & Neale, J. J., 2004. The Practice of Supply Chain Management: Where Theory and Application Converge. Boston: Springer. Hill, A. & Hill, T., 2011. Essential Operations Management. London: Palgrave Macmillan.

Hill, T., 2008. Manufacturing Operations Strategy. 3rd ed. Basingspoke: Palgrave Macmillan. Huang, T. & Liu, C., 2017. The Distribution Strategies of Convenience Stores Chain in China from Japan 7-11. MATEC Web of Conferences, 100(05045). Kunitomo, R., 1997. Seven-Eleven is Revolutionising Grocery Distribution in Japan. Long Range Planning, 30(6), pp. 877-889.

Laurin, F. & Fantazy, K., 2017. Sustainable supply chain management: a case study at IKEA. Transnational Corporations Review, 9(4), pp. 309-318. Lewis, R., 2019. 7-Eleven RETAIL COMPANY. [Online] Available at: https://www.britannica.com/topic/7-Eleven [Accessed 20 March 2020].

Morash, E. A., 2001. Supply Chain Strategies, Capabilities, and Performance. Transportation, 40(1), pp. 37-54. Olhager, J., 2003. Strategic Positioning of the Order Penetration Point. International Journal of Production Economic , 85(3), pp. 319-329.

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Ru, L. T., 2018. Entrepreneurial Management Theory and Practice: With Cases of Taiwanese Business. 1 ed. Singapore: World Scientific Publishing Co. Pte. LTD.. sej.co.jp, 2020. Seven-Eleven Japan Co.,LTD. Message from President. [Online] Available at: https://www.sej.co.jp/company/en.html [Accessed 1 March 2020]. Seven-Eleven Japan Co., LTD., 2017. Seven-Eleven Japan Corporate Profile 2016-2017, Tokyo: Seven Eleven Japan Co., LTD. Slack, P. N., Brandon-Jones, P. A. & Johnston, P. R., 2016. Operations Management. 8th ed. Upper Saddle River : Pearson. Stratton, R., 2012. Variation and Uncertainty Buffering: A grocery supply case. Supply Chain Management : An international Journal , 17(6), pp. 655-665.

Su, J. C. P., Chang, Y.-L. & Freguson, M., 2005. Evaluation of Postponement Structures to Accommodate Mass Customization. Journal of Operations Management , 23(3-4), pp. 305-318. Van Hoek, R. & Harrison, A., 2002. Logistics Management and Strategy, Harlow: Financial Times/Prentice Hall. Whang, S., 2004. Data-Rich Supply Chain Management: The Case of Seven Eleven Japan. International Series in Operations Research & Management Science, 62(12), pp. 199-207.

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