Seven-Eleven Japan

Case Study 1: Seven-Eleven Japan Co.

Summary

A man names Masatoshi Ito founded Seven-Eleven Japan and Ito-Yokado following World War II. After a license agreement was accepted in 1973 by the American owned Southerland Company, the convenience store concept took off in Japan and was able to experience tremendous growth throughout its existence. Due to financial problems, the Southland Corporation was later acquired in 1991 by Ito Yakado, making Seven-Eleven a dominant part of the company. In 2002, Seven-Eleven was Japan’s leading convenience store operator accounting for 21.7 percent of all stores and 31.5 of total sales. By 2004, daily sales had reached 647,000 yen.

Along with all of its initial success, Japan began a franchise tag that thrived and accommodated nearly two-thirds of its total sales. This helped to realize the concept of clustering stores in areas of success to be supported by a distribution center. Franchise tags were only given out to a select few and required a larger amount of money to be placed up front. Responsibilities were shared by Seven-Eleven Japan and the franchise owners.

By 2004, the number of stores in Japan had accumulated to over 10,000, almost twice as many of that in the United States. The stores offer a wide variety of food items, beverages, magazines, and consumer items. Processed and fast foods were popular items and were replenished multiple times daily to meet the rushes. Seven-Eleven began to expand its services by offering electronic bill pay, ski lift vouchers, gas, ATM machines and even parcel pickup services, giving customers more reasons to visit their local stores. Eventually, 7dream was established as an online shopping service, where items were ordered online and picked-up and paid for at the stores.

The information system became highly integrated and user-friendly. The cash register systems were linked through the head office as well as the vendors to maintain a consistent flow of data. Data was easily received and analyzed on a daily basis to better match supply with demand. Store owners were able to place orders electronically to be fulfilled next morning at the latest. Orders for breakfast, lunch and dinner had individual cutoffs for orders placed.

Seven-Eleven Japan utilizes combined distribution centers that place like products in the same temperature controlled trucks for delivery to the stores. This reduced the number of vehicles required for daily deliver service to each store, even though the frequency was increased. Seven-Eleven was able to realize cost savings through the use of CDCs that ensured rapid and reliable delivery.

After acquiring Southland Corporation, Seven-Eleven Japan made it a priority to improve on the processes in the United States. They began to convert its distribution services from direct store delivery to