Seven Eleven Store - Case study - Answer 1 and 2

1. 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?Whatare some risksin each case?
A convenience store can be more responsive by doing exactly what Seven-Eleven Japan is doing; many
locations, rapid replenishment, appropriate technology deployment, and an equally responsive supplier
(vertical integration for many of their SKUs). The risks associated with this system are the costs coupled
with demand uncertainty. If demand patterns change dramatically, or the customer base changes, then
Seven-Eleven is left with an operation that is not needed. In Seven-Eleven Japan’s case, multiple
operationsmightbe shutteredif anapartmentbuildingorlarge employershutsdownorrelocates.
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,
especiallyforfreshandfastfoods:
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
foodrestaurant“Subway”where dinnerandlunchsandwichesare assembledondemand.
Risk: The mainriskwiththisapproachis that capacityis decentralized,leadingtopoorerutilization.
Local inventory: Another approach is to have all inventories available at the store at all times. This
allowsforthe centralizationof cookingcapacity.
The main riskisobsolete inventoryandthe needforextraspace.
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,butincreasesthe costof replenishmentandreceiving.
Risk: when the products are quick replenish in different location, it increase the transportation cost and
capacityalso increase the holdingcost.
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 fixedcostof informationsystemisveryhigh.
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
whichisdirectlylinkedwiththe Headoffice system.
Risk: the entire system heavily dependent on information system there is huge risk of operation go in
haywire incase networkfailure.The fixedinvolve inthe systemimplementationishigh.

2. 2. Seven-Eleven’s supply chain strategy in Japan can be described as attempting to micro-match
supplyand demandusing rapid replenishment.Whatare some risks associated with thischoice?
Micro-matching supply and demand using rapid replenishment assume that each store will repeat the
same demandpatternona dailybasis.
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
blockto make theirpurchases.Some of thisdemandmaypermanentlyshift,causingalocal 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
wouldbe a majorof breakdownif a systemfails.
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
supplychainmanagementeven more challenging.