DEPARTMENT OF MANANGEMENT SCIENCES

HAZARA UNIVESRITY MANSEHRA

Assignment 03

Subject : Supply Chain Management

Submitted to: Dr. Sajjad Afridi

Submitted by: Syed Noman Ashraf

Topic

7 Eleven
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?
As responsiveness increases, the convenience store chain is exposed to greater uncertainty. A
convenience store chain can improve responsiveness to this uncertainty using 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 fast food
restaurant “Subway” where dinner and lunch sandwiches are assembled on demand.

Risk:
The main risk with this approach is that capacity is decentralized, leading to poorer utilization.

Local inventory:
Another approach is to have all inventories 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The main risk is obsolete inventory and the need for extra space.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 what they need and
when they need it. This allows for centralization of cooking capacity, low levels of inventory, but
increases the cost of replenishment and receiving.

Risk:
When the products are quick replenish in different location, it increase the transportation cost
and capacity also increase the holding cost.

Extensive use of information technology:

This can help predict demand with great accuracy and help the store decrease the associated
costs with inventory replenishment like transportation cost, holding cost e.t.c...The fixed cost of
information system is very high. Seven eleven Japan applied this whole system based on
information sharing between the stores, distributors, suppliers and head office. This focus gave
the time saving, order placing and delivery process. As POS register that gives the complete info
about the products and inventory at all stores which is directly linked with the Head office
system.
Risk:
The entire system heavily dependent on information system there is huge risk of operation go in
haywire incase network failure .The fixed involve in the system implementation is high.

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?
Micro-matching supply and demand using rapid replenishment assume that each store will repeat
the same demand pattern on a daily basis

Risk of Delay in Replenishment

The group of unexpected customers comes to the store and buys all type of products which are
use to sell daily basis, will cause difficulty for regular customers. During such an event, the store
will likely stock out and customers may visit the next Seven-Eleven site down the block to make
their purchases. Some of this demand may permanently shift, causing local ripple.

Risk of Delay in Transportation

Another possible issue would result from delays in transportation; although deliveries are
scheduled for off-peak hours, a disruption in traffic flow will result in low service levels for the
next wave of demand and it is potentially high cost of transportation and receiving at stores.

High dependency of information system

Seven eleven has attributed its success to the total information system installed in very store and
linked to the supplier, distributor and head office. The hardware system included graphic order
terminal, scanner terminal. Store computers linked to the ISDN network and POS registers.
Thus, seven eleven heavily depend on its information system and its supply chain is matched
with the demand through this technology. As relying on information technology there would be a
major of break down if a system fails.

Sensitive Regularities
The process from ordering the products to selling them needs to be done accurately and on
timely basis. If there is interference in any part of the process, seven eleven will face lot of
difficulties. Irregularities and disruptions occurring at any point in the system make responsive
supply chain management even more challenging.
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?
Facility location

 One distribution catering 50-60 stores

 High density market presence

Inventory management

 No inventory because of cross docking

 Real time information flow to reduce stock out

 Micro-match between supply and demand helping in increased responsive

Transportation

 Dedicated vehicle for each category

 Delivery during off- peak hours

 Delivery using scanner terminals

 Allocation of stores per truck dependent on sales volume

Information Infrastructure

 Graphic order terminal

 Scanner terminal

 Store computer linked to ISDN network

 POS register linked to store computer

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?
Benefits

 Reduced complexity at store level

 Segregation of food products at the DC based on temperature

 Reduced cost of receiving at stores due to less frequent visits

 Each outbound truck made deliveries to multiple retail stores

When Direct Store Delivery

 Variety of products is less

 Order size is more

 Delivery Destinations are few

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?

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.

Country No of Stores
Japan 10615
US 5798
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.

 More convenient in Japan to pick delivery from any store because of number of stores
 Transportation cost will increase in US as there is different distribution structure and
consumer prefer home delivery

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.
Pros
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.

Cons
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?
Pros
 Backward integration
 Scope for future expansion
 Control over SC
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.