I THUMBS UP AND LEAVE POSITIVE FEEDBACK FOR THE ANSWERS TO STUDY QUESTIONS 5-7!
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I THUMBS UP AND LEAVE POSITIVE FEEDBACK FOR THE ANSWERS TO STUDY QUESTIONS 5-7!
SUPPLY CHAIN MANAGEMENT
THE STUDY QUESTIONS ARE LOCATED TOWARDS THE END OF THE CASE, THE CASE PROVIDES ALL THE INFORMATION REQUIRED!
THE STUDY QUESTIONS 5-7 ARE WHAT I NEED ANSWERED
19,000. Globally, the firm had more than 60,000 conve- nience stores by September 2016 and was the world's largest chain in terms of retail outlets. Global revenues for Seven&i from convenience store operations were 2,675 billion yen in 2016 with an operating income of 352 billion yen. The firm opened over 1,600 new stores in Japan in 2016. Customer visits to Seven-Eleven out- lets averaged more than 1,000 per store per day in 2013 TABLE 3-4 Stores and Annual Sales for Seven- Eleven Japan Number of Stores Annual Sales (billion yen) Year 1974 1979 1984 Company History and Profile Both Ito-Yokado and Seven-Eleven Japan were 989 founded by Masatoshi Ito. He started his retail empire 1994 after World War II, when he joined his mother and elder brother and began to work in a small clothing store in Tokyo. By 1960, he was in sole control, and the single store had grown into a S3 million company. After a trip to 2009 the United States in 1961, Ito became convinced that superstores were the wave of the future. At that time, Japan was still dominated by mom-and-pop stores. Ito's 2,299 3,954 5,905 8,153 10,826 12,753 13,232 14,005 15,072 16,086 16,319 17,491 109.8 386.7 780.3 1,392.3 1,963.9 2,440.8 2,784.9 2,947.6 ,280.5 3,508.4 3,781.2 4,008.2 1999 2004 2010 chain of superstores in the Tokyo area was instantly popu 2012 lar and soon constituted the core of Ito-Yokado's retail operations 2013 2014 2015 In 1972, Ito first approached the Southland Corpo- ration about the possibility of opening Seven-Eleven convenience stores in Japan. After rejecting his initial Source: "Based on Seven Eleven Japan website http://www.sej.co request, Southland agreed in 1973 to a licensing agree- ment. In exchange for 0.6 percent of total sales, South- land gave Ito exclusive rights throughout Japan. In May Southland's common stock for a total price of 1974, the first Seven-Eleven convenience store opened in $430 million Tokyo. This new concept was an immediate hit in Japan, and Seven-Eleven Japan experienced tremendous through a stock transfer combining Seven-Eleven Japan, growth. By 1979, there were already 591 Seven-Eleven Ito-Yokado, and Denny's Japan. In 2015, convenience stores in Japan; by 1984, there were 2,001. Rapid growth store operations from Seven-Eleven Japan and other continued (Table 3-4), resulting in 19,166 stores by 2016. subsidiaries in North America and China contributed jp/company/en/s.growth.html In 2005, Seven & i Holdings was established On October 24, 1990, the Southland Corporation entered into bankruptcy protection. Southland asked for Ito-Yokado's help, and on March 5, 1991, IYG Holding was formed by Seven-Eleven Japan (48 percent) and Ito-Yokado (52 percent). IYG acquired 70 percent of 44.3 percent of total revenues from operations and 88.6 percent of operating income for the Seven & i Holdings Company (see Table 3-5 for details). The relative perfor mance of convenience stores within Japanese operations was even more dominant. The discrepancy between TABLE 3-5 Financial Figures for Seven & i (2013-2015) For Fiscal Years Ending February 28/29 Total revenues (billion yen) Total operating income (billion yen) Convenience store revenues (billion yen) Convenience store operating income (billion yen) Source: Based on Seven& i Annual Report 2016. 2013 4,991.6 295.7 1,899.5 2014 5,631.8 339.6 2,727.8 276.7 2015 6,038.9 343.3 2,675.9 304.1Explanation / Answer
Ques 5: What do you think about the 7dream concept for seven-eleven Japan? From a supply chain perspective, is it likely to be more successful in Japan or the United States? Why?
Answer: 7dream makes sense given that Japanese customers are happy to receive their shipments at the local convenience store. From a logistics perspective, online deliveries can piggy back on Seven-Eleven’s existing distribution network in Japan. Deliveries from the online supplier can be brought to the DC where they are sorted along with other deliveries destined for a store. This should increase the utilization of outbound transportation allowing Seven-Eleven to offer a lower cost alternative to having a package carrier deliver the product at home.
The primary negatives are that 7dream will use up storage space and require the store to be able to retrieve specific packages for customers. One can argue that the concept may be more successful in Japan given the existing distribution network of Seven-Eleven and the frequency of visits by customers. Online delivery is able to link with the existing network. The high visit frequency ensures that packages are not occupying valuable store shelf space for a long time. Also, the frequent visits ensure that the marginal cost to the customer of picking up at Japanese Seven-Eleven is small. This is less likely to be the case in the United States.
Ques 6: 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.
Answer: The difficulty of duplicating the Japan supply chain structure in the United States follows primarily from the much lower density of U.S. Seven-Eleven stores. This is compounded by the fact that Seven-Eleven stores are getting both direct store deliveries as well as wholesaler deliveries to its stores. Setting up its own DCs does not allow Seven-Eleven to get the same level of transportation aggregation as it gets in Japan. Its own distribution system would help more if all wholesaler deliveries and direct store deliveries were stopped and routed through the DC. Even then, having its own distribution system would add much less value than in Japan given the lower density of stores and larger distance between stores. Manufactures may prefer direct store delivery as they would have more control. In US, there are chances for reducing efficiency by using same supply chain system.
Ques 7: The United States has food service distributors like McLane that also replenish convenience stores. What are the pros and cons to having a distributor replenish convenience stores versus a company like seven-eleven managing its own distribution function?
Answer: Pros for having a distributor replenish convenience stores versus a company managing own distribution functions:
Cons could be:
One can contend that a distributor brings much more value to the table in the US relative to Japan. Given the lower density of stores, a distributor is able to aggregate deliveries across many competing stores. This allows a distributor to reach levels of aggregation that cannot be achieved by a single chain such as Seven-Eleven.
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