4.

Discuss different risk factors associated with this type of dynamic supply chain
strategy.
Organization like Seven Eleven Japan experiencing expansion of supply chain rapidly day by
day. Globally, the firm has more than 60,000 convenience stores by 2016 and is the world’s
largest chain in terms of retail outlets. It has become more responsive by establishing more
location, rapid replenishment, appropriate technology deployment and responsive supplier.
Maintaining the huge dynamic supply chain management system is a great challenge for
Seven Eleven Japan. These system associated with some risks also.
Supply chain management system has some risk factors like Demand risk, Supply risk,
Control risk, Process risk, Environmental risk.

ENVIRONMENTAL RISK

SUPPLY PROCESS DEMAND

RISK RISK RISK

CONTROL
RISK

Seven eleven japan also may face these risk while operating their supply chain network. Possible
risks for Seven eleven Japan which we found out in these case study are described here.
DEMAND RISK
With more than 60000 stores worldwide, Seven-Eleven has become the world’s largest
convenience store chain in the industry which is a clear indication of their high customer
demand. Average daily sales per store for the Seven-Eleven chain is \650,000, which is \
150,000 yen higher than the average of Japan's top five convenience store chains excluding
Seven-Eleven. This huge demand may fall in risk if demand patterns change dramatically, or the
customer base changes, then Seven-Eleven’s current operation system will not work properly. In
Seven-Eleven Japan’s case, multiple operations might be shuttered if an apartment building or
large employer shuts down or relocates. Seven eleven has figured out a demand pattern of their
product sale per day. If suddenly a group of unanticipated customers comes to the store and buys
all of a type of product then regular customer will not get their products according to their daily
need. During such incident, the store will likely stock out and customers may visit the next
Seven-Eleven shop to make their purchases. Some of this demand may permanently shift,
causing a local ripple; the replenishment may be excessive at one site and insufficient at an
adjacent site for the next cycle.

Besides that, misconduct on the part of subsidiaries or in franchised stores may affect the overall
brand image. As a result, consumers’ trust on seven eleven can decrease. It could be difficult to
secure the company image, which could affect the business performance and financial condition.

SUPPLY RISK
Supplier disruption may be a great risk for Seven eleven japan. It has almost 1200 – 1500
suppliers like Pepsi, coca cola, Unilever, P&G etc. Any kind of accident with these supplier will
effect badly seven eleven.
Sudden excessive demand also may be a threat for seven eleven. A fix number of supplies is
daily loaded in seven eleven shop. If one day they need of extra products without any previous
information, suppliers may fail to provide that extra products.
Seven-Eleven’s inventory system is run on an information system that transmits directly to the
supplier and distribution center. IT system can be fall in anytime or may be attacked by the virus.
This is may draw a huge problem in exchanging information with the suppliers and distributors.
PROCESS RISK
Seven eleven has difference distributer for warm temperature food, chilled temperature food,
frozen temperature food etc.so that frozen food can be transported at minus 20 degrees
Centigrade, chilled goods and beverages at 5 degrees, and cooked rice dishes at 20 degrees.
Electricity failure or any kind of systematic failure may hamper the temperature of the food
which can damage the food products.

Another possible risk associates with delays in transportation. All the food trucks have different
schedule to reach the destination. For example, by 7am sandwich need to be delivered to the
stores. If distributors fail to deliver foods on time seven eleven will lose some customer. So, any
kind of disruption in traffic flow will result in low service levels for the next wave of demand.

In addition, as network and information systems have become increasingly important to

operating activities of seven eleven. network and information system shutdowns caused by such
unpredictable events as power supply disruption, disasters, hardware or software defects, or
computer viruses and computer hacking affect badly on whole supply chain process of seven
eleven as the managers analyze the data frequently to figure out the supply and demand quantity,
quality. With the help of information system data flows from stores to suppliers and
manufacturers, and material flows from manufacturers to stores. The entire network may face
great risk because of any problem in information system.

CONTROL RISK
Information system can be hacked or attacked by malicious things which results in information
disruption. Confidential issues may leak which is a threat for Seven eleven. Besides that, if the
law against copyright is not maintained well other local companies may duplicate the foods and
other product of seven eleven.

Seven eleven has to follow some environment-related laws and regulations such as those relating
to food recycling, containers and packaging recycling, waste management, and global warming.
These laws and regulations may become more stronger or additional laws and regulations may be
added in the future, which may cause the company to incur additional compliance costs.

In addition, the introduction of new tax systems which is not predictable, can affect its business
operation and financial condition.
ENVIRONMENTAL RISK
Natural calamities like earthquakes, typhoons, floods, and tsunamis and other disasters such as
fire event, nuclear power plant disasters, and illegal activities such as terrorist attacks may lead
to a halt of business activities or incurring expenses related to such damages, which may impact
badly on the operations of Seven eleven. Moreover, it’s known that Japan has high risk of earth
quake. In these type of incident, business performance and financial condition will face great
risk.

Conclusion
Supply chain management is not only a major factor to the retail business, but also the mutual
benefits shared across all the parties in supply chain. However, supply chain management may
not be properly operated if it lack cooperation between parties. A firm may implement business
strategy to gain advantages over its competition but the imitation might overwhelm the whole
supply chain’s competitive edge. The resources to improve the supply chain take longer time to
achieve. So, the correct mix of capabilities and the tools are required to sustain the competitive
advantages. 7-Eleven supply chain is an example of good collaborations of chain member in
which they can maintain sustainable competitive advantages. The firm makes use of the unique
strategies to run a superior logistics and distribution management, supporting the proactive
market scheme.

REFERENCES
1. https://www.7andi.com/en/ir/management/risks.html
2. https://www.slideshare.net/xtrmn8R/scm-at-7-eleven
3. https://www.scribd.com/doc/218053990/Seven-Eleven-Case-Study-Answer