Tanpin Karin is a demand-oriented method of chain management successfully used by Seven-Eleven`s Japan. It`s credited to the company`s CEO, Toshifumi Suzuki, who started to develop it during the 70`s in response to a shift in the market from a seller`s orientation to a buyer`s drive. Until then, the inventory decision-making process was led by supply-chain management practices – items were seen as commodities and replenished according with the amounts that they had sold in the past.
In contrast, the Tanpin Karin system changed the practice to an item-by-item store-level inventory analysis framework to fulfill decision-making based on human knowledge. Under this system, employees use POS data combined with customer demographics and other unique factors (like weather, time of the day, retail context, neighborhood events) to form educated hypotheses about demand and then place orders. The method is supported by innovative technologies as an IT system continuously upgraded to share data with suppliers and between locations and tablet PCs order books, besides comprehensive work-force trainings.
In 2004, under Suzuki`s direction and mostly because of its innovative inventory management method, Seven Eleven was the country`s highest grossing retailer with sales of 2. 343 billions of yens. Seven-Eleven used a mix of technology and human knowledge to develop a competitive advantage that, as far as 2004, any competitor has been unable to achieve. Its differential resides in the human interpretation of good quality data that drives all the decision-making concerning chain value management. With the information provided, we can assume that the company operates between stages 4 and 5 in regards of data and IT analytical capabilities.
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We can also assume, with some risks, that having used this practice for the last 30 years, it`s pillars (technology innovation, human resource investment and supply relationship) are already strongly rooted in the company`s culture and contemporary leadership. In this scenario, the company`s chain management system seems sheltered against internal causes of failure and prepared enough to battle external threats like changes in technology, new entrants with cost-efficient practices or larger economies of scale. Hence the key to keep its competitive advantage is to keep excelling in the demand management.
So, assuming that Seven-Eleven Japan is well-prepared to keep maintaining and rebuilding its innovative practice to manage the value chain, there are two activities – Marketing & Sales and Service – that could be improved. The illustration bellow provides a visual scheme of the value chain: The company`s business intelligence architecture is mostly directed to do the demand chain management, but Seven-Eleven could go further in the application of its data analysis to build new strategies regarding CRM, Sales and Marketing efforts.
The company already has great expertise in how to keep and satisfy the customer once he reaches the point of sale. Going one step further, the company would use its data analysis capacity to communicate and attract a customer that every day becomes more informed and subject to distraction in the buying-decision process. The following are recommendations: 1. Make deeper use of analytical data to not only predict inventory but also to anticipate customer needs and communicate it to them. This could be done by the traditional fidelity channels – as customer cards that accumulate points or partnerships with credit card companies.
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The cards could storage personalized information about how often the customers visit the location, which locations, what kind of products buy etc. This information would generate a database used to customize product promotions and marketing to be sent by text message, e-mail or mail direct to the customer. According with the case, Seven-Eleven POS system retrieves this kind of information without personalization. 2. Establishing mobile payment methods that would also drive to more personalized data gathering and customized CRM. Japanese are heavy users of mobile technology and the method could allow buying a prepaid amount to use in stores.
With the right approach, this could mitigate the decrease in sales during the days that anticipate workers payment day. 3. Reaching the customer via mobile technology. Use of the data gathered by the payment method to send promotions and advertising by SMS or WAP (the technologies used in 2004).
4. Making partnerships with online outlets to enter the e-business using features like online ordering, catalog online, featured promotions/sales of the day etc to take-out at the store. At the time, didn’t make sense to Seven Eleven to develop the expertise to do it by itself because most of the sales were not premeditated by the users.
Selling-machines in high traffic areas to take advantage of the local culture of using this kind of nontraditional POS. They should be distributed in subway and JR stations and areas of high concentration of people in transit. The machines could use the card or mobile payment method to generate data information. The selling-machines would be loaded with products according with the demographic data gathered by the stores in the region. 6. Using subway electronic displays to announce day-by-day sales by demographics and factors like weather, time of the day, events etc. 7.
Using geolocation services to “speak” to the customer. Mobile phones and portable gadgets are used by almost everyone in Japan, from children to elderly people. SE could address advertising and coupons by geolocation, in some kind of system integrated with the mobile payment method. This would be a more rudimental system, not as sophisticate as the ones brought by the future (i. e. foursquare).
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Overall, the idea at this point is to create innovative and unique ways of exploring and using the data information that the company already has in its hands to generate value in the delivery of services, marketing and sales efforts.
This approach brings risks: overestimating how solid the rest of the value chain really is and understanding that the process of improve data analysis does not mean a change of focus. Will the Tanpin Karin method survive without Suzuki`s leadership? Thinking about Japanese culture, we can expect that yes, it will survive. But we really don’t know. Also, a new approach of using data that seeks to look to the outside of the company could confuse management causing it to lose focus on their expertise.
