An Enterprise Case Study - 7-eleven

University Degree Business and Administrative studies

7-Eleven: An Enterprise Case Study

7-ELEVEN

An Enterprise Case Study

Anitha Y – [email protected]

Indian Institute of Information Technology – Bangalore

Electronics City, Bangalore

Summary:

7- Eleven, a company founded in Dallas, Texas in 1927 under the name Tote’m as an ice company pioneered the convenience store concept during its early years when its ice docks began selling milk, bread and eggs as a convenience to customers after normal working hours. This company, which has now about 24,000 stores around the world and number one store in many countries like Japan has been recognized for its process involving the convenience stores’ supply chain management. It has a Retail Store Information System used to record all sales, order best selling items, remove slow selling items, share sales information across the enterprise etc., It has been found to have given huge results both in the form of sales and profits. Each store focuses on meeting the needs of busy customers by providing a broad selection of fresh, high-quality products and services at everyday fair prices, along with speedy transactions and a clean, safe, friendly shopping environment. A 7- Eleven Japan store, affiliated to 7- Eleven Inc, has shown to grow into a successful and robust organization mainly due to its Integrated Information System. In the past two decades, 7-Eleven Japan has doubled its store sales and claims to be the world’s most advanced retailer system.

Background:

In 1927 a company by name Tote’m, an ice company in Dallas, Texas began to sell milk, bread and eggs on Sundays and evenings when grocery stores were closed. This new idea gave birth to the concept of convenience stores selling things at the convenience of the customers. In 1946 this very company was renamed as 7-Eleven, to send home the message that this store will be open from 7 a.m. to 11 p.m. It was in 1962, when an interesting accident converted this store to keep it’s doors open for customers for 24hrs each day. In Austin, Texas there was a store close to the university campus. One Saturday night after a football game the store was so busy that it never closed. Eventually the manager opened the store for 24 hours a day, seven days a week and it was quite successful. This spread to all other stores. Now, this store with its 24,000 stores around the world makes billions of customers says, “Oh Thank Heaven for 7-Eleven!” . Recently, 7-Eleven swept #1 in all merchandise categories in the Convenience store News’ Category Study for both 2001 and 2002. [www.7-Eleven.com] 7- Eleven is also an active participant in activities relating community affairs, staff training programs, safety programs etc.

Key Findings:

7-Eleven Japan has a Retail Information System to help the store operators in maintaining the stock updates, check out for the demand variations of different items. For example, the number of groceries may be reduced in the summer when people cook in-doors less, and could be expanded in the winter to meet the holiday cooking needs. The system also provides information about various aspects of the stores operations and management. It has the following features:

Point of sales (POS) data entry system through a touch screen. Cash registers, credit card authorization, gasoline sales and ...

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Key Findings:

Point of sales (POS) data entry system through a touch screen. Cash registers, credit card authorization, gasoline sales and scanners are also connected to it.
Daily weather reports, merchandising information, regular updates.
Item level information to assist in making ordering decisions.
Automated daily reporting system for certain items.
Hand-Held computers used to facilitate ordering, payroll time-keeping mechanism are integrated into the system.
Tools to help the store staff find the appropriate product assortment and slow moving items.

7-Eleven apart from being a retailer, also offers convenient services based on each neighborhood’s needs including fax, copiers, ATMs, Phone call cards, lottery tickets etc.

Checking out on the system in 7-Eleven Japan, which is said to be most advanced retailer system, we find that information technology is used for the following systems:

Electronic ordering system
Capturing electronic Point of Sales (POS) data
Merchandising design system
Electronic Data Interchange
Direct Product profitability (DPP)
Truck driver system used to track the position of the delivery vehicle

In order to understand the system better, lets look at a typical day in a 7-Eleven Japan store:

An order for the day is placed at 10:00 for a delivery at 15:00 with an allowed delay of 15 minutes at the maximum. The order is passed to the regional office through the ito-Yokado network from the local store computer system. From there it is sent to the suppliers directly by 11:00. At 13:00 a delivery van leaves the factory to deliver the goods.

Thus the network links the stores, head office, distribution centers, manufacturers, wholesalers etc., The data stored in the stores for local management gives information in a graphical form about the time when each product is sold out including the number delivered, analysis of the sales by category in time clots, actual sales customer and time slot, best-to-worst analysis of items sold and slow moving items and their sales graphs. On the other side (ie., the regional office or the head office) the information system gives the analysis of about the pattern of purchases and information of customers and choices in purchases. All these resulted in fast delivery of items, timely elimination of slow moving items, early evaluation of new merchandise, reducing inventories and increasing sales by improving merchandise turnover rate, achieving a product mix that matches the client set for that particular store and effective handling of goods specially perishable goods. The system collects sales data from all the stores 3 times a day and takes about 20 minutes to analyze the information.

Interesting Findings:

One interesting feature of the supply chain system of 7-Eleven has been implementing the ‘Come of Age’ awareness principles into the system. ‘Come of Age’ is the 7-Eleven training and awareness program aiming to teach the store staff about the techniques and laws regarding the sale of age-restricted products. The system has tried to restrict sale of age-restricted products against the rules by reminding the sales staff to check for the identification when an age-restricted product is scanned or purchased.

7-Eleven Japan has a system of interactive cash registers, which facilitates information exchange between the headquarters, franchises and suppliers where otherwise communication is a major concern. This system has been already utilized by a number of companies like Tokyo Electric Power Company, Gas Company, Dai-Ichi Mutual Life Insurance Company, Mitsui Marine and Fire Insurance Company.

The store system has another unique feature of displaying characters and voice messages along with data on the screen while ordering. This functionality helped the store employees to share information between each other specially when working on different shifts.

Conclusion:

From my understanding of the 7-Eleven stores case study, I think the success story has more than SCM to talk about. Considering the various methods used to hook up the agents involved, the entry methods used to capture data into the system and the overall efficiency required for the system puts more of an emphasis on Enterprise systems. 7-Eleven uses the technology through electronic ordering system, electronic capture of Point of Sales data, electronic data interchange etc., to support different people involved in the supply chain – store operator, head office manager, distribution center in-charge, suppliers and custromers.

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