INTRODUCTION The ability to respond quickly to the ever-changing marketplace is paramount to the success of most businesses. The convenience-store industry is a highly competitive one and 7-Eleven’s ability to become a leader market leader appears to be based on the company’s ability to quickly respond to the rapidly changing tastes and needs of the market. 7-Eleven has not always enjoyed success, especially in the 1980s when things got really bad for the company. Helped, however, arrived in the form of Ito-Yokado (the company’s Japanese Licensee).
Ito-Yokado revamped the entire retailing approach of the company by introducing an innovative approach to retailing which, along with the aid of technologically advanced systems, significantly impacted 7-Eleven’s success. ANALYSIS Ito-Yokado’s innovative approach to retailing is known as “tanpin kanri” or “item-by-item management”, a business approach that revolves around the following: 1. Carefully tracking and paying attention to the fine details of the buying preferences of customers 2. Allowing the customers tastes and shopping habits to dictate the products that are carried in 7-eleven stores. -Eleven has been able to simplify the process of tracking and paying very close attention to the shopping habits of their shoppers by using the information systems installed in all of their stores. USING TECHNOLOGY TO IMPACT SUPPLY CHAIN VISIBILITY, VARIABILITY AND UNCERTAINTY Technology plays a vital role in 7-Eleven’s supply chain. The company’s state-of-the-art information systems appear to have reduced the company’s supply chain risks by increasing visibility, while reducing variability and uncertainty. Supply Chain Visibility Supply Chain visibility is the ability to access relevant supply chain information.
Thanks to cutting-edge technology, like the Mobile Operations terminal or MOT, 7-Eleven knows the exact amount of individual items that are sold in each of its 5,800 North American stores on a daily basis. Another technology: the MC3000 handheld scanner lets the company collect data on items as they come off delivery trucks- increasing the company’s visibility on a real-time basis. 7-Eleven’s supply chain visibility has been greatly impacted by technology as it allows the company to better predict, with great accuracy, the number of individual SKUs that each store will sell. Supply Chain Variability
Supply chain variability involves volatility in the flow of goods and services in a supply chain. By having the right systems in place, 7-Eleven’s supply chain variability appears to have significantly decreased. The MOT system at 7-Eleven, for example, allows stores to better forecast the number of individual SKUs, resulting in decreased storage and spoilage costs; and the elimination of potential bullwhip or snowball effects. MOT has also slashed the amount of time and labour that it takes to count inventory and to order new products, causing an improvement in company efficiency and a decrease in variability.
Supply chain uncertainty Supply chain uncertainty occurs when decision makers do not know what to base their decisions on (due to a lack of proper information). 7-Eleven store managers used to color code information manually physically keep track of frozen sandwiches by their written expiration dates and would sometimes make sandwiches on the premise when instructed by corporate management. Information systems now allow stores to accurately forecast the number of stock/items that need to be replenished, resulting in significantly reduced uncertainty. THE BENEFITS OF TECHNOLOGY AT 7-ELEVEN
Technology has played a crucial role in increasing 7-Elevens profitability and market share. The hundreds of millions of dollars that the company has invested in technology in the past decade appear to be paying dividends in the following ways: •Increased profitability: Last year, the store reported $12. 2 billion in revenues •Increased share prices: Company stocks have soared above $30, since trading for less than $6 in early 2003. •Consecutive sales increases: The company boasts 35 consecutive quarters of same-store sales increases Technology plays a crucial role in the gathering, analyzing and distribution of information at 7-eleven.
While other convenience stores chains have just gotten around to POS scanning, 7-Eleven has item-by-item information gathering systems that assist in day-to-day decision making. 7-Eleven’s retail information system or RIS provides timely sales data that enables stores to tailor their product assortments to meet the demands of their customers, reducing the risks involved in introducing new products ( due to the availability of sales data within 24 hours of a product’s introduction). The 7-exchange data system for category management, which suppliers access online, provides insights that can lead to new products or product packaging.
The information on this system can even alert suppliers to a potential or missed opportunity. 7-Eleven’s has opened its doors to small suppliers through its Web Vendor terminal. Suppliers who cannot afford EDI use this to communicate with the company and accept orders for very specific items like ethnic items or the self-serve espresso in a Manhattan store 7-ELEVEN’S BUSINESS STRATEGY The driving force behind 7-Eleven’s success appears to be the company’s ability to execute a Customer Intimacy strategy.
Customer intimacy involves targeting specific market segments, then tailoring offerings that meet the demands of these segments. Companies that excel at this are known to: 1. combine detailed customer knowledge with operational flexibility (so they can respond quickly to fulfil the needs of their customers) 2. Continuously tailor and shape their products and services (in order to fit their customers). According to Keith Morrows, 7-Eleven’s CIO and VP of information systems, “decisions about what should be in the store are best made at the store, at the moment of truth, by people in the store, on a real-time basis”.
This allows the company to shape their stores around the customer’s day-to-day habits, instead of basing company decisions on focus groups, marketing research or non-scientific guesses. Pursuing a Customer Intimacy strategy can be expensive: 7-Eleven spent $93 million on technology as the company installed new HP servers, wireless LAN, computer-based training software and new ordering system for fresh foods. Customer intimate companies, however, are willing to spend in order to build long-term customer loyalty that provides lifetime value to the company.