Seven Eleven Japan Co.

Seven Eleven Japan Co.

Questions

1. 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 RISKS IN EACH CASE?

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:

Local Capacity. The convenience store chain can provide local cooking capacity at the stores and assemble foods almost on demand. Inventory would be stored as raw material. This is seen at the U.S. fast-food restaurant franchise Subway where dinner and lunch sandwiches are assembled on demand. The main risk with this approach is that capacity is decentralized, leading to poorer utilization.

Local Inventory. Another approach is to have all inventory available at the store at all times. This allows for the centralization of cooking capacity. The main risk is obsolete inventory and the need for extra space.

Rapid Replenishment. Another approach is to set up rapid replenishment and supply the stores with what they need when they need it. This allows for centralization of cooking capacity and low levels of inventory, but increases the cost of replenishment and receiving.

2. 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?

The main risk for Seven-Eleven is the potentially high cost of transportation and receiving at stores.

3. 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?

All choices made by Seven-Eleven are structured to lower its transportation and receiving costs. For example, its area-dominance strategy of opening at least 50 to 60 stores in an area helps with marketing but also lowers the cost of replenishment. All manufacturing facilities are centralized to get the maximum benefit of capacity aggregation and also lower the inbound transportation cost from the manufacturer to the distribution center (DC). Seven-Eleven also requires all suppliers to deliver to the DC where products are sorted by temperature. This reduces the outbound transportation cost because of aggregation of deliveries across multiple suppliers. It also lowers the receiving cost. The information infrastructure is set up to allow store managers to place orders based on analysis of consumption data. The information infrastructure also facilitates the sorting of an order at the DC and receiving of the order at the store. The key point to emphasize here is that most decisions by Seven-Eleven are structured to aggregate transportation and receiving to make both cheaper.

4. SEVEN-ELEVEN DOES NOT ALLOW DIRECT STORE DELIVERY IN JAPAN, WITH ALL PRODUCTS FLOWING THROUGH ITS DISTRIBUTION CENTER. WHAT BENEFIT DOES SEVEN-ELEVEN DERIVE FROM THIS POLICY? WHEN IS DIRECT STORE DELIVERY MORE APPROPRIATE?

Direct store delivery (DSD) would lower the utilization of the outbound trucks from the Seven-Eleven DC. It would also increase the receiving costs at the stores because of the increased deliveries. Thus, Seven-Eleven forces all suppliers to come in through the DC. DSD is most appropriate when stores are large and nearly-full truck load quantities are coming from a supplier to a store. This was the case, for example, in large U.S. Home Depot stores. For smaller stores it is almost always beneficial to have an intermediate aggregation point to lower the cost of freight. In fact, Home Depot itself is setting up these intermediate facilities for its new stores that are often smaller.

5. 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?

7dream makes sense given that Japanese customers are happy to receive their shipments at the local convenience store. From a logistics perspective, online deliveries can piggy back on Seven-Eleven’s existing