mpany History and Profile Both Ito-Yokado and Seven-Eleven Japan were founded by Mr. Masatoshi Ito. He started his retail empire after the Second World War when he joined his mother and elder brother and began work in a small clothing store in Tokyo. By 1960, he was in sole control and the single store had grown into a $3 million company. After a trip to 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 chain of superstores in the Tokyo area was instantly popular and soon constituted the core of Ito-Yokado’s retail operations. In 1972, Ito first approached the Southland Corporation about the possibility of opening Seven-Eleven convenience stores in Japan. After rejecting his initial request, Southland agreed in 1973 to a licensing agreement. In exchange for 0.6 percent of total sales, Southland gave Ito exclusive rights throughout Japan. In May 1974, the first Seven-Eleven convenience store opened in Tokyo. This new concept was an immediate hit in Japan, and Seven-Eleven Japan experienced tremendous growth. By 1979, there were already 591 Seven-Eleven stores in Japan; by 1984, there were 2,001. Rapid growth continued (see Exhibit 1), resulting in 10,356 stores by 2004. 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 Southland’s common stock for a total price of $430 million. In 2004, convenience store operations from Seven-Eleven Japan and Seven-Eleven Inc. in the United States contributed 48.2 percent of total revenues and 90.2 percent of total consolidated operating income for the Ito Yokado group. Seven-Eleven Japan contributed 87.6 percent of the total income received from convenience stores by Ito Yokado. Effectively, Seven-Eleven Japan had become the dominant part of the Ito Yokado group. The Convenience Store Industry and Seven-Eleven in Japan As in the United States, convenience stores in Japan provided customers with a variety of products carried by general retailers as well as food retailers. In Japan, the convenience store sector was one of the few business areas that continued to grow during the prolonged 1990s downturn. From 1991 to 2002, the number of convenience stores in Japan increased from 19,603 to almost 42,000. As a percentage of all retail stores in Japan, this represented an increase from 1.2 percent to 3.2 percent. During that period, annual sales at convenience stores more than doubled from just over 3 trillion to 6.7 trillion yen. As a percentage of all retail sales in Japan, this represented an increase from 2.2 percent to 5.0 percent. Japan’s convenience store sector gradually consolidated, with larger players growing and smaller operators shutting down. In 2004, the top 10 convenience store chains accounted for approximately 90 percent of Japan’s convenience stores. As the chains improved their operating structures and better leveraged economies of scale, smaller operators found it hard to compete. Seven-Eleven Japan had grown its share of the convenience store market since it opened. In 2002, Seven-Eleven was Japan’s leading convenience store operator, accounting for 21.7 percent of all convenience stores and 31.5 percent of total store sales. Seven-Eleven was very effective in terms of same-store sales. In 2004, average daily sales at the four major convenience store chains excluding Seven-Eleven Japan were 484,000 yen. Seven-Eleven stores, in contrast, had daily sales of 647,000 yen—more than 30 percent higher than the competition. In 2004, Seven- Eleven’s operating income of 165.7 billion yen positioned it as a leader not only of the convenience store sector but also of Japan’s retail industry as a whole. In terms of growth, its performance was even more impressive. In 2004, Seven- Eleven accounted for 60 percent of the total net increase in the number of stores among the top 10 convenience store chains in Japan. This growth had been very carefully planned, exploiting the core strengths that Seven-Eleven Japan had developed in a) Briefly describe Supply chain strategy of Seven Eleven Japan. b) Briefly describe how Seven Eleven Japan manages its facilities and transportation and discuss the advantages of these facility and transportation decisions. c) Briefly describe how Seven Eleven Japan uses information technology in its operations and discuss the advantages of these information technology decisions.

mpany History and Profile Both Ito-Yokado and Seven-Eleven Japan were founded by Mr. Masatoshi Ito. He started his retail empire after the Second World War when he joined his mother and elder brother and began work in a small clothing store in Tokyo. By 1960, he was in sole control and the single store had grown into a $3 million company. After a trip to 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 chain of superstores in the Tokyo area was instantly popular and soon constituted the core of Ito-Yokado’s retail operations. In 1972, Ito first approached the Southland Corporation about the possibility of opening Seven-Eleven convenience stores in Japan. After rejecting his initial request, Southland agreed in 1973 to a licensing agreement. In exchange for 0.6 percent of total sales, Southland gave Ito exclusive rights throughout Japan. In May 1974, the first Seven-Eleven convenience store opened in Tokyo. This new concept was an immediate hit in Japan, and Seven-Eleven Japan experienced tremendous growth. By 1979, there were already 591 Seven-Eleven stores in Japan; by 1984, there were 2,001. Rapid growth continued (see Exhibit 1), resulting in 10,356 stores by 2004. 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 Southland’s common stock for a total price of $430 million. In 2004, convenience store operations from Seven-Eleven Japan and Seven-Eleven Inc. in the United States contributed 48.2 percent of total revenues and 90.2 percent of total consolidated operating income for the Ito Yokado group. Seven-Eleven Japan contributed 87.6 percent of the total income received from convenience stores by Ito Yokado. Effectively, Seven-Eleven Japan had become the dominant part of the Ito Yokado group. The Convenience Store Industry and Seven-Eleven in Japan As in the United States, convenience stores in Japan provided customers with a variety of products carried by general retailers as well as food retailers. In Japan, the convenience store sector was one of the few business areas that continued to grow during the prolonged 1990s downturn. From 1991 to 2002, the number of convenience stores in Japan increased from 19,603 to almost 42,000. As a percentage of all retail stores in Japan, this represented an increase from 1.2 percent to 3.2 percent. During that period, annual sales at convenience stores more than doubled from just over 3 trillion to 6.7 trillion yen. As a percentage of all retail sales in Japan, this represented an increase from 2.2 percent to 5.0 percent. Japan’s convenience store sector gradually consolidated, with larger players growing and smaller operators shutting down. In 2004, the top 10 convenience store chains accounted for approximately 90 percent of Japan’s convenience stores. As the chains improved their operating structures and better leveraged economies of scale, smaller operators found it hard to compete. Seven-Eleven Japan had grown its share of the convenience store market since it opened. In 2002, Seven-Eleven was Japan’s leading convenience store operator, accounting for 21.7 percent of all convenience stores and 31.5 percent of total store sales. Seven-Eleven was very effective in terms of same-store sales. In 2004, average daily sales at the four major convenience store chains excluding Seven-Eleven Japan were 484,000 yen. Seven-Eleven stores, in contrast, had daily sales of 647,000 yen—more than 30 percent higher than the competition. In 2004, Seven- Eleven’s operating income of 165.7 billion yen positioned it as a leader not only of the convenience store sector but also of Japan’s retail industry as a whole. In terms of growth, its performance was even more impressive. In 2004, Seven- Eleven accounted for 60 percent of the total net increase in the number of stores among the top 10 convenience store chains in Japan. This growth had been very carefully planned, exploiting the core strengths that Seven-Eleven Japan had developed in a) Briefly describe Supply chain strategy of Seven Eleven Japan. b) Briefly describe how Seven Eleven Japan manages its facilities and transportation and discuss the advantages of these facility and transportation decisions. c) Briefly describe how Seven Eleven Japan uses information technology in its operations and discuss the advantages of these information technology decisions.