By Kim S. Nash  |  Posted 2002-11-01 Print this article Print

Will the uniqueness of 7-Eleven's home-grown information system—which tracks Slurpee sales by the hour—isolate the company from its suppliers?

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Stoney Miller, assistant manager at a 7-Eleven store in Plano, Texas, not only knows how many pastries he sold the day before; he also knows how the sales were distributed over two-hour increments, and how well, for instance, the apple fritters fared versus the pumpkin cream-cheese doughnuts. On a recent day in October, Miller sold 153 muffins and doughnuts, 68 of which went between 6:00 a.m. and 8:00 a.m., with another 40 sold by 10:00 a.m. "That's the commuter coffee hour," he explains. "You've got to be well-stocked then."

Miller also knows, from data analysis, that his store typically sells seven 16-oz. loaves of Texas' most popular bread, Mrs. Baird's Extra Thin White, every few days. On the same October morning, he had four loaves on hand, so he put three more on order.

"I came from a competitor. We had nothing like this," he says. Miller was previously a store manager at both Circle K, which is part of the 6,300 convenience stores owned by Tosco Corp. in Greenwich, Conn., and Diamond Shamrock, a 4,500-store chain now owned by Valero Energy.

"7-Eleven is as good as it gets in their particular sector of convenience stores," says Jeff Roster, an analyst at technology consulting firm Gartner Inc. in Stamford, Conn. A lot of the detailed sales-trend data that companies strive for today, with suites of customer relationship management software, is what 7-Eleven has already accomplished, Roster says.

The concept inherent in 7-Eleven's system—THAT store managers order items to stock their own stores—seems logical, but it isn't how the grocery business grew up. Traditionally, the truck drivers who deliver products from individual vendors directly to the stores were the people who tracked shelves and re-ordered. 7-Eleven went against the retail grain when it sought to take those duties away from drivers and give them to store operators. Roughly 60% to 70% of the chain's manufacturers now do business with 7-Eleven this way, Morrow says.

But there are important holdouts, including Anheuser-Busch, Frito-Lay and Coca-Cola. The politics are sticky. Beverages are 7-Eleven's biggest-selling products, representing 33% of sales last year. And these suppliers don't want to give up control over 7-Eleven's—or any retailer's—shelves. "Those drivers are commissioned salesmen," says Abell of AMR Research. "They feel they merchandise the inventory better than many of the store operators would."

That depends on the driver. Some are good. Others may try to unload merchandise that is being promoted. CIO Morrow remembers one of his early days on the job at 7-Eleven. He visited a local store and couldn't navigate an aisle because it was crowded with cases of Funyuns, Frito-Lay's onion-flavored snack ring of limited popularity. "I asked, 'What the heck is this?' " he recalls. "And the operator said that that's what the guy had on his truck." Morrow sighs. "They had union drivers and a sales force built around that model for decades."

In efforts now to collaborate with suppliers, 7-Eleven doesn't want to go against the grain again; it doesn't want to force suppliers to conform to the way its business routines—and supporting information systems—are set up. "The goal is to have a solution agreed upon beforehand, and then roll it out quickly together," says Ingram, 7-Eleven's logistics expert. "This comes from lessons learned in store-level ordering."

Morrow hopes Web technologies will bring 7-Eleven safely through the transition. The plan is to use Java and .NET to modernize RIS. And within two to three years, Morrow wants all of 7-Eleven's suppliers to use webMethods or other Web technologies to bridge between their systems and those of the convenience store. If they don't, 7-Eleven may find itself increasingly isolated on the well-ordered software island it has created.

Editor's note: This story has been updated to more accurately reflect 7-Eleven's technology budget. Since RIS development began in 1993, the company's expenditures have totalled $400 million, not, as initially reported, $1.3 billion.

Senior Writer
Kim has covered the business of technology for 14 years, doing investigative work and writing about legal issues in the industry, including Microsoft Corp.'s antitrust trial. She has won numerous awards and has a B.S. degree in journalism from Boston University.

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