The 24-Hour Supply Chain - InformationWeek

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1/23/2004
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The 24-Hour Supply Chain

7-Eleven depends on store managers for the accuracy of its 'centrally decentralized' system

When Hurricane Isabel struck on Sept. 18, wreaking havoc throughout the Northeast corridor, some residents in Annapolis, Md., and suburban Baltimore could take heart from at least one thing: Their local 7-Eleven stores would have plenty of supplies on hand. That's because Pinto Soin, who operates four stores in the area, had been following the storm's path and his own intuition. A 7-Eleven Inc. franchisee for 13 years, Soin upped his orders for the stores he operates in residential areas, which he knew would be inundated.

7-Eleven's CIO Keith Morrow

Most of 7-Eleven's IT staff is focused on high-end analytics and data modeling, CIO Morrow says.

Photo by Brent Humphreys
This is one example of the key role 7-Eleven's store managers play in what CIO Keith Morrow describes as the convenience-store chain's massive "centrally decentralized" supply chain. A data repository provides store managers with information on what's selling, but the managers use their own on-the-spot knowledge of the neighborhood to make final ordering decisions. "We could never predict a busload of football players on a Friday night, but the store manager can," president and CEO Jim Keyes says.

This approach lets 7-Eleven combine the management efficiency and purchasing clout of a national chain with the entrepreneurial feel of a mom-and-pop store. By adding local control of the ordering process, 7-Eleven takes the opposite approach to Wal-Mart Stores Inc.'s much-heralded replenishment supply-chain model, in which products are automatically reordered once stocks fall below a certain level.

A highly centralized approach could never work in a convenience-store environment, Soin says. "You can't do it on a national level; it has to be done at the store level, based on your location, geography, and knowledge."

The convenience-store chain emulates Wal-Mart in other ways, though. As with its large-retailer brethren, business technology lies at the heart of 7-Eleven's strategy. "Technology has given us the ability to understand what's selling in every store, item by item and hour by hour," Keyes says. "Technology has transformed us."

That transformation starts with each purchase. No sooner has a customer paid for a newspaper and coffee than the transaction is on its way to a data center in Dallas, to be stored and analyzed along with those of the 6 million other U.S. customers who visit the chain's outlets each day. 7-Eleven tracks purchases at the store, regional, and national levels and quickly provides that analysis to managers at all levels.

The company uses technology to tighten links to its suppliers, as well. With $33 billion in worldwide sales, it's able to negotiate on price with major name-brand manufacturers such as Procter & Gamble Co. It also has the clout to cut product and merchandising deals, whether that's working with South Beach Beverage Co. to develop SoBe energy gum or with Anheuser-Busch Inc. to design a refrigerated single-serve beer dispenser.

With 3,300 franchise-owned stores and 2,500 company-owned stores, 7-Eleven easily outdistances other convenience-store chains such as Couche-Tard Inc., which operates 2,000 Circle K stores in the South and Southwest; Casey's General Stores Inc., with 1,800 stores in the Midwest; and The Pantry Inc., with 1,400 stores in the Southeast.

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