Name: Koya Akhil Reddy

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 manufacturers.

Ans: The “pros” of this approach are illustrated by the success of this concept in Japan: a 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.