Course:

Supply Chain Management

Assignment:

Seven-Eleven Japan Co.

Q1 A convenience store chain attempts to be responsive and

provide customers what they need, when they need it,
where they need it. What are some different ways that a
convenience store supply chain can be responsive? What
are some risk in each case?

Ans:

As responsiveness increases, the convenience store chain is exposed to greater uncertainty. A

convenience store chain can improve responsiveness to this uncertainty using one of the
following strategies, especially for fresh and fast foods:

Method for Responsiveness Risk of Method

Integrated information systems
Additional capacity (manufacturing, DCs,
retail stores)
Increased safety inventory
Increased number of deliveries
Increased product variety and availability
Incompatible systems, systems not
completely integrated, but “piecemeal”,
and breakdowns.
Overinvestment in capacity, underutilized
capacity
Additional inventory carrying costs
Increased transportation costs
Additional inventory carrying costs

Q2. Seven-Eleven’s supply chain strategy in Japan can be

described as attempting to micro-match supply and demand
using rapid replenishment. What are some risks associated
with this choice?

Ans:

The greatest risk occurs when the supply and demand are not matched, and
inventory excesses and shortages occur. We also know that forecasts are most
accurate for aggregate products, compared to the SKU level, making forecast
accuracy absolutely crucial to micro-matching supply and demand. However,
their information ordering and replenishment systems can respond quickly to
changes in customer demand to account for forecast errors. This physical rapid
response capability, however, also increases the risk of excess or insufficient
capacity (capacity fluctuations), and additional transportation costs.

Q3. What has Seven-Eleven done in its choice of facility

location, inventory management, transportation, and
information infrastructure to develop capabilities that
support its supply chain strategy in Japan?

Ans:
Facility location:

Seven-Eleven places its stores in “clusters” that are supported by a single

distribution center.

Inventory management:

They have dedicated manufacturing plants to produce fast food, and classify
inventory according to 4 separate categories to assist in transportation. Although
related to their information system, they manage inventory through their graphic
order terminal and receive inventory using the scanner terminal. Their POS
register also tracks inventory at a very detailed level. They also manage
deliveries to match demand by time of day (e.g. dinner items delivered just
before dinner time).

Transportation (& distribution):

Taking advantage of clustering stores around DCs allows Seven-Eleven to

provide efficient and responsive deliveries to their stores. They use a “combined
delivery system” in which single temperature-controlled trucks delivery one
category of food to multiple stores. They also make deliveries during off-peak
hours (although what is meant by “off-peak” is not defined). They also reduce
delivery time by using the scanner terminal. The DCs do not carry inventory, but
are really cross docking facilities.

Information:

The information is key to each of the above drivers. Information is used to

manage inventory and coordinate deliveries – from manufacturing to DC to the
retail store. The ISDN system consists of four major components: graphic order
terminal, scanner terminal, store computer, and POS register. The system uses
a graphic order terminal to not only track and analyze POS data and place orders
with vendors and the DC, but is also used to determine when to convert shelf
space from slow moving to fast moving items. The scanner terminal improves
the efficiency of the delivery process. The store computer, linked to the ISDN
network, communicates among the various input sources to track inventory,
sales, orders, and so on. Finally, the POS register keeps up to date information
 on customer sales and demographic information (gender, age). In summary, the
information system is used to “driver the drivers”, bringing together all the
information necessary to manage facilities, transportation, manufacturing, and
distribution.

Q4: Seven-Eleven does not allow direct store delivery in

Japan but has all products flow through its distribution
center. What benefit does Seven-Eleven derive from this
policy? When is direct store delivery more appropriate?

Ans:

The benefits of this policy is coordination, flexibility, responsiveness, and managing

fewer relationships – retail stores do not have to each work with vendors, but only the
DC.

Direct store delivery is more appropriate for the 7dream delivery concept. For
Seven-Eleven Japan, it seems that direct store delivery would not be appropriate
unless one store, in serving the local preferences, sold an item with high demand
uncertainty that was not sold in any other stores. It may also be appropriate for
an emergency shipment or unique “one-time” items that are heavy or bulky.

Q5: What do you think about the 7dream concept for Seven-
Eleven Japan? From a supply chain perspective, is it likely
to be more successful in Japan or the United States? Why?

Ans:

The 7dream concept for Seven-Eleven in Japan was established as an e-commerce

company. Convenience stores served as drop-off and collection points for Japanese
customers.

I think this is likely to be more successful in Japan because the Seven-Eleven

store network is not as dense as in the U.S. Also, it appears that Seven-Eleven
Japan attracts a different type of customer. Although I can only speculate, I
would be concerned about the security of packages in a Seven-Eleven store in
 the U.S. preferring a home delivery even if I wasn’t at home. After all, that’s the
appeal of e-commerce.

Q6: Seven-Eleven is attempting to duplicate the supply chain

structure that has succeeded in Japan in the United States
with the introduction of CDCs. What are the pros and cons of
this approach? Keep in mind that stores are also replenished
by wholesalers and DSD by manufactures.

Ans:

The “pros” of this approach are illustrated by the success of this concept in Japan:
highly responsive system that has increased its efficiency through the use of
information. They are able to effectively match supply and demand.

The cons of this approach in the U.S. stem from the geographic dispersion of Seven-
eleven stores. The fact that stores are not as clustered as in Japan will impede the
responsiveness that is a cornerstone of Seven-Eleven Japan. Because DSD is also
used, there is more coordination required in the U.S. and more relationships to manage.
The CDCs may also be forced into holding some level of inventory because of the lack
of clustering in the U.S., resulting in lower performance than that in Japan. If the CDCs
become more of a distribution center than a cross docking operation, their strategic
advantage is lost, and the investment may not have been worth it. An additional
downside is the outbound costs, which could be quite high depending on the number of
stores served.

Q7: The United States has food service distributors that also
replenish convenience stores. What are the pros and cons
to having a distributor replenish convenience stores versus
a company like Seven-Eleven managing its own distribution
function?

Ans;

Pros: The largest benefit of having a distributor replenish the store is that they
don’t have to invest in DCs or trucks to perform this task.
Cons: The downside is the lack of control and the increased number of
relationships that must be managed at the store level. Responsiveness may also
not be as great. Some store managers will be more adept at managing these
relationships than others, and service levels will not be consistent among the
stores. This also creates more potential problems for upper management in
overseeing the franchises to ensure consistent customer service.