global supply chain management company seven eleven

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUOC TE VNU-INTERNATIONAL SCHOOL THE PROJECT REPORT About GLOBAL SUPPLY CHAIN MANAGEMENT COMPANY: SEVEN- ELEVEN T-ELEVEN... DAI HOC QUOC GIA HÀ NỘI KHOA QU

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUOC TE VNU-INTERNATIONAL SCHOOL

THE PROJECT REPORT

About GLOBAL SUPPLY CHAIN MANAGEMENT COMPANY: SEVEN- ELEVEN

T-ELEVEN

e Lecturer: Ph.D Tran Cong Thanh

e Name group: Group 7

e Project name: 7-Eleven of Supply Chain Management

Ha Noi, June 8, 2021

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© Make outline and brainstorm ideas

supply chain of 7- Eleven

e Analyse “Bullwhip effect’

e Analyse “Logistic: Inbound and

outbound activities”

e Analyse “Lean distribution:

Cross-docking”

management”

e Analyse “Logistic:

transportation, distribution

and warehouse”

© Conclusion of the report

e Distribute and keep track group work , Check and edit the report

2 GROUP 10 - 7-ELEVEN

THE GLOBAL SUPPLY CHAIN OF SEVEN- ELEVEN

Introduction of Seven- Eleven The global supply chain of 7-Eleven Why does 7 - Eleven manage its global supply chain to contribute to business flexibility?

2.2 Integrating demand planning and forecasting

2.3 Identifying major factor that influence the demand forecast

2.4, Understanding and identifying customer segment

2.5 Determining the approach forecasting technique

2.6 Establishing measures of performance and error for forecast

3.1 The inbound activities

3.2.The outbound activities

3.3 Transportation

3.4, Distribution and warehousing

THE MANAGEMENT PRACTICES

Suppliers relationship management

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The research project “Supply Chain Management of Seven- Eleven” was analysed

by members of group 10 - VNU-IS (Vietnam National University - International School)

This report was created with the goal of using the knowledge after studying the Global

Supply Chain Management course Our group investigated and described Seven- Eleven's

supply chain management in order to clarify Seven- Eleven's supply chain issues

Moreover, we also made some recommendations for the company to improve the quality

of the global supply chain

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1 Introduction of Seven- Eleven

The company first instituted a daily delivery of fresh foods, bakery items and other perishable products throughout its nationwide network in 1994, At that time, Seven-

Eleven set up a sophisticated preparation and distribution system designed to minimize

the number of daily deliveries to the stores from multiple suppliers These centralized

distribution centers (CDCs) have turned out to be very beneficial

7-eleven has several distribution centers serving several store areas to deliver fresh and quality products with less lead time and helps to reduce inventory and logistics

costs to the whole chain The DCs contain a system that shortens order cycle time,

granting fresh and superior product and service quality to the customers

Chill temp: Fresh Food Managed Distribution Supplier

Warm temp: Sandwiches, sweets, milk Supplier Frozen temp: Box lunch, rice balls, fresh bread Supplier Room temp: Ice cream, Ice cube, etc Supplier

Another: Canned food, Instant noodles DC Store Store Store Store Store

2 The global supply chain of 7-Eleven

Until 2021, There were over 70,300 7-Eleven convenience stores and over 1800

suppliers in operation around the world In the supply chain, distribution is the final link

between producers and consumers The speed of distribution efficiency unswervingly

affects the degree of customer satisfaction The entire supply chain was intimately

interconnected by the 7-Eleven distribution system For breakfast, lunch, and supper

orders, all stores have set cutoff times When a store puts an order, it is sent to both the

supplier and the delivery center right away The supplier begins manufacturing to fulfil

orders as soon as it receives orders from all Seven-Eleven locations; this means that all

suppliers base their forecasts on actual consumer data as a result leading to the removal

of the Bullwhip effect, we can see that all the players in the supply chain are focused on

boosting supply chain surplus, and not just their own profit

Orders are then truck to distribution centers (DCs) As a result, the goods arrive

at the stores precisely when they are required — (just in time delivery) The combined

distribution system, as 7-Eleven refers to it, 1s the key to efficient delivery 7-Eleven

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establishes combined distribution centers in each area, categorizing them by product type

and temperature At the DCs also, deliveries are carried onto one temperature controlled

truck by similar items from multiple suppliers ensuring that every product is kept at an

ideal temperature in every stage from manufacturing to delivery to the shop

I1 lÐ SUPPLIER {Ss SUPPLIER I1 SUPPLIER

IS OTHER SUPPLIER

93% of total products in 7-Eleven stores are supplied from over 1800 suppliers

Each has the share for less than 20 percent of the total sales of which according to the

risk management scheme, not to depend on any particular supplier more than necessary

The left 7% are supplied from 7-Eleven groups and the CP Group — the major shareholder

of CP All

3 Why does 7 - Eleven manage its global supply chain to contribute to

business flexibility?

The client at 7-Eleven is searching for convenience rather than the lowest price

That consumer is typically in a hurry and wants the store to be nearby and have a wide

choice of products so that they may pick up modest amounts of basic housekeeping or

food items that they require nght away Clearly, 7-Eleven's supply chain needs to

prioritize response Customers in this category anticipate and will pay for convenience

The global supply chain of 7-Eleven is quite complex There are so many suppliers in different places around the world so they have a large supply chain

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Moreover, each market has a different demand and level of need That is the reason why

it is hard to manage their system and it also leads to the bullwhip effect and many

consequences such as higher inventory cost or reduced global supply chain efficiency

1 Bullwhip effect

The bullwhip impact on the supply chain happens if changes in customer demand lead the supply chain firms to buy additional items in order to respond to new demand

Typically the bullwing effect is generated through the supply chain, starting with the

distributor, distributor, producer and finally the provider of raw material

First, 7-Eleven releases new things on a regular basis Every week around 100 goods are shown In the year, around 70% of the goods offered in shops will be modified

There is a challenge in forecasting demand for freshly released items, and so more

demand uncertainty exists for them Seven-Eleven may lose part of the earnings by

perhaps high-prognosis mistakes until its headquarters collects enough data to detect

demand trends for these goods

Second, unique events in the vicinity of shops can rapidly enhance the demand for particular products For example, nearby baseball games can increase the demand for

beer and chips In that circumstance, companies must respond to the requirements of the

client, or they will lose some earnings It may appear normal to have such significant

demand unpredictability in such a reactive supply chain and may be fruitful for additional

investment in research and development But for now Seven-Eleven loses millions of

dollars annually due to the flaws

2 Forecasting demand

Demand forecasting is a process that takes historical sales data and uses it to make

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estimations (or forecasts) about customer demand in the future For enterprises, demand

forecasting allows for estimating how many goods or services will sell and how much

inventory needs to be ordered

Demand forecasting lays the foundation for many other critical business assumptions such as turnover, profit margins, cash flow, capital expenditure, and capacity

planning Demand forecasting is often associated with managerial economics and supply

chain management, but it applies to every company in every industry

Demand forecasting is a pivotal business process Many strategic and operational tactics are based on this forecast, such as budgeting, financial planning, sales and

marketing plans, and capacity planning Because so many business decisions are

contingent on demand forecasts, it is crucial to get an accurate prediction

Like any planning aspect of any business process, forecasting plays a crucial role

in the smooth functioning of your end-to-end supply chain First and foremost, customer

satisfaction relies on forecasting abilities, since the more accurate your production runs

are the faster we'll be able to fulfill orders and keep our customers happy Now think

about inventory carrying costs: the closer the company can get to equity in incoming

supplies vs outgoing orders the less excess inventory we'll be paying to store in our

warehouses Along the same lines, accurate supply chain forecasting enables better

optimization of resources The closer the company can get production levels to capacity,

the less machine and employee downtime the company will encounter Forecast accuracy

also affects over and under-runs in production, lowering time and resource waste even

further

Another consequence of failed forecasting demand is waste Because the products

of 7- Eleven include fresh food such as meat, fish, egg or the products having short expiry

date so if they produce redundantly and can not sell in the right time when fresh food is

in the best condition, they have to throw out perished items or obsolete inventory, or

marking it down to clear it out, are among the other wastes that result from poor demand

forecasting Therefore, keeping the nght amount of product in stock is critical to

businesses

There are 6 steps in process forecasting that helps company follow this way to operate

smoothly:

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2.1 Understanding the objective All companies and projects are driven by specific goals and objectives These can

be long or short term and can be based on achieving tangible, physical results or more

abstract outcomes

The objective of 7- Eleven company is to forecast the number of customers, the number

of products sold and to classify those products in order

2.2 Integrating demand planning and forecasting

- Types of Forecasting: Demand forecasting — production planning This is a collaborative process of developing joint forecasts and plans with supply chain partners, rather than doing them independently It is based on the premise that

companies can be more successful if they work together to bring value to their customers,

share risks of the marketplace, and improve their performance

This may be one factor that leads to production inefficiency An accuracy of the demand

forecast significantly affects safety stock and inventory levels, inventory holding costs,

and customer service levels When the demand is highly seasonal, it is unlikely that an

accurate forecast can be obtained without the use of an appropriate forecasting model

The demand forecast is one among several critical inputs of a production planning

process When the forecast is inaccurate, the obtained production plan will be unreliable,

and may result in over- or understock problems To avoid them, a suitable amount of

safety stock must be provided, which requires additional investment in inventory and

results in an increased inventory holding costs

- Forecasting time horizons: Short — range 7- Eleven is a retail chain with a lot of variety items from different sources If we forecast over a too long period of time, immediate response to customer needs will not

be guaranteed For example, when the summer changes, the demand for water and soft

drinks will increase We can only forecast for about one to two weeks to find out what

products customers are liking during this time

- Forecasting method: Quantitative method and qualitative method Qualitative methods are often called judgmental methods, air methods based on subjective opinions and judgment of individuals, such as managers, sales staff, or

customers Asking customers whether they would buy a particular product, called

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“intention surveys,’’ is a type of qualitative forecasting method Another one is called

“‘sales force composite’’ and occurs when the salesstaff make a group forecast of

upcoming sales Qualitative methods are made by people and, as a result, are subject to

human biases

Quantitative methods, on the other hand, are based on mathematical modeling These

methods are objective and consistent, are capable of handling large amounts of data and

uncovering complex relationships Provided that good data are available, these methods

are generally more accurate than qualitative methods

2.3 Identifying major factor that influence the demand forecast

It is difficult to accurately predict customer needs, so they need to rely on a number of factors to be able to predict the future This report will focus on the 4 main

factors that influence the needs of customers when coming to 7-eleven

First of all, we should mention trendy When researching customer needs, trends provide an overview If all companies can grasp the market trend, they will be able to

meet the needs of their customers For example, if 7-Eleven is aware of the current trend

of customers preferring lemon tea over coffee, they can order more tea to satisfy customer

demand

Secondly, Customer satisfaction also impacts the demand of customers A company's success is defined by customers returning for a second and third purchase If

your products and services satisfy customers, a consistent portion of your revenue will

come from loyal customers As a result, polling previous customers will assist 7-Eleven

in determining a specific need

Thirdly, It is necessary to focus on purchasing habits When selling, the first step 1s to understand the customer So, what do your customers expect and want? If you know

that your customers prefer to buy online rather than in store, you should concentrate on

online marketing

Last but not least, price is one of the most important factors impacting the demand forecast Many customers’ purchasing decisions are influenced by price If you don't

provide enough benefits, they'll go with the cheaper option As a result, you must inform

customers about the advantages of purchasing products from 7-Eleven convenience

stores Customers will no longer be concerned about price if you satisfy them in other

ways

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2.4, Understanding and identifying customer segment There are a lot of customer files for convenience stores 7-eleven caters to customers between the ages of 15 and 25 years old These are folks that like to experiment

with new sensations and eat a wide variety of meals The product diversity at 7-Eleven

can accommodate this The product diversity at 7-Eleven can accommodate this

Furthermore, they concentrate on office workers because they don't have much time off

at lunch and need quick meals to save time

2.5 Determining the approach forecasting technique Time series models generate the forecast from an analysis of a “time series’ of the data A time series is simply a listing of data points of the variable being forecast over

time taken at regular intervals

Causal models assume that the variable being forecast is related to other variables

in the environment.Time series models are generally easier to use than causal models

They are also more readily available in forecasting software Causal models, on the other

hand, can be more complex, especially if relationships between multiple variables are

being considered However, time series models can often be just as accurate and have the

advantage of simplicity They are easy to use and can generate a forecast more quickly

than causal models, which require model building 7-Eleven chose both of the models

above to forecast the customers demand

2.6 Establishing measures of performance and error for forecast The quantitative method, on the other hand, will be more appropriate for 7- Eleven Because of the large number of customers who come to buy goods at a variety of

establishments selling a variety of products every day To calculate customer needs, we

only need to check the amount of inventory and check-in times at the store This will

allow me to forecast goods more accurately and in larger quantities

However, there are still some problems with predicting customer needs: Forecasts are

often inaccurate and can change constantly and prediction is usually only 80% correct

3 Logistic

7 Eleven operates Globally, they have relationships with over thousand partners worldwide It is the No.1 convenience store chain in Japan and has become popular in

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many countries To get that position, 7 Eleven has a good logistic process

The study focuses on logistics processes from the DC to the retailers Many activities take place in and around DC Working flows within a distribution center are

represented by the flows in the dash box The total process is depicted in the next picture,

and two types of processes at a 7-Eleven distribution center can be classified into inbound

and outbound operations

3.1 The inbound activities The process of receiving commodities corresponds to the inbound operations

Purchasing plan: All products are divided into categories such as food, non-food, food service, and supply used in the purchasing plan 500 SKUs are monitored by one

person The lead time for the purchasing strategy is generally three working days The

forecasting is based on the Moving Average technique The Purchasing department must

additionally monitor the fill rate of the stores where the weekly meeting will be held with

the company's Supply Chain team

Receiving goods: The procedure starts with a check of the supplier's purchase documentation to ensure that the items arrive in DC on time The activity of receiving

items is based on a Case Receive Each day, there are three shifts of receiving items, with

a ratio of 30:30:50 The biggest suppliers (those with a significant volume of shipments)

will, in most cases, be scheduled for the night shift

Storage activity: To store the product in the DC

Inventory Control: The process acts as double-checking process in receiving and storing the goods,

3.2.The outbound activities

Outbound activities refer to the distribution of commodities to each store within the DC's serving region The data from 7-Eleven stores is pulled to the DC at the start of

the procedure These records contain information about the store as well as purchase

orders

Preparation of Goods Data inflow: The DC receives purchased orders from 7-Eleven stores These inbound data will be transferred to the Warehouse Management System (WMS), where

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