In order for a convenience store chain to be responsive, which mean providing customer with what they need, when they need it and where they need it, some different ways to do are: a) Have large inventory in terms of quantity, variety and quick replenishment in order to be able to respond quickly to customer demand Risk associated:high cost: warehouse, transportation high Implied Demand Uncertainty: little time to react, risk of inventory that cannot be sold b) Provide highly innovative products in order to provide customer with the best product and/or newest technology
Risk associated:high cost: investment into new product high Implied Demand Uncertainty: because the product is new, demand is uncertain c) Provide high level of service quality Risk associated:high cost: staff, training high Implied Demand Uncertainty: customer expectation becomes high over time 2.
For Seven-Eleven Japan, when trying to micro-match supply and demand using rapid replenishment, they can face the following risks: High cost of transportation: this choice require frequent delivery and a large number of trucks visiting a store per day, since each truck only carries certain types of product (depends on temperature of storage condition required) Human resources: store staff will have to arrange and re-arrange shelves frequently (according to meal time of a day, for instance).
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This may distract them from providing other services to store customer.
When demand fluctuates, products become redundant while shelf space is occupied 3. In order to develop capabilities that support its supply chain strategy, Seven-Eleven Japan has made the following decisions in terms of facility location, inventory management, transportation and information infrastructure: Facility location: high density of stores in area where demand is already known (dominant area).
Stores are located around a Distribution Center (DC).
Inventory management: each store carries an average of 3,000 stock keeping units (SKU) out of 5,000 SKUs that they choose from.
DC does not carry any inventory, they just transfer inventory from suppliers’ trucks to Seven-Eleven distribution trucks. Transportation: Distribution trucks are categorized into four kinds of temperature-controlled trucks: frozen food, chilled food, room temperature processed food and warm food. Each truck will make delivery to a number of stores in the area during off-peak hours. When the truck arrives at the store, the driver dropped the delivery and leave, store clerk does not need to present at that moment. It is operated based on trust and convenience.
Transportation provide by Transfleet Ltd., a company of Mitsui & Co. that serve exclusive to Seven-Eleven Japan. Information infrastructure: the key purpose is to utilize advanced IT to simplify operation. They installed Total Information System, which connect every single store with Head quarter, suppliers and Distribution Center. The system can be briefly described with below components and functionalities: Network: Integrated Service Digital Network (ISDN): linking more than 5000 stores Hardware: Graphic order terminal: used by store manager/owner to place orders. Items are recorded by shelf order.
When placing order, details analysis of POS data, including sales analysis, SUKs, sales trends for 10 weeks/10 day, sales trend for new product, slow moving items etc… will be provided. Orders will be sent via store computer to appropriate vendor and Seven-Eleven distribution center Scanner terminal: used to read barcode and record inventory when receiving incoming delivery from DC Store computer: linked to IDSN, POS register, graphic order terminal and scanner terminal to do all the communication and information flow POS: is used collect point-of-sale information, consisting POS cash registers and terminal control equipment.
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POS register is used by cashiers to record item information, time of sale plus their input about customer: age range, gender. These data is collected by 11pm each day and is ready to be analyzed on the next morning Total Information System helps Seven-Eleven to match supply and demand: shelves arrangement due to daily pattern; non/slow moving items replacement; decision to continue stocking a new item within a week. The key point is not to waste valuable shelf space. 4. When Seven-Eleven does not allow direct store delivery in Japan, but instead has all product flow through its
distribution center, the benefits it can get are: Better reservation of products, hence better quality of products: because at DC, products are classified and transferred to temperature-controlled trucks, they will be in good condition when making their way to store Save on resources: because the delivery trucks that come to each store are Seven-Eleven trucks, delivery is based on trust, the store does not need to assign staff to present at delivery time. They can focus on serving store customer and receive delivery later when there are few customers.
Besides, with delivery from Seven-Eleven DC and trucks, store delivery can be done via Scanner terminal, which makes information transparent and easier to be recorded and controlled. However, direct store delivery will be more appropriate when the density of store is not too high, and each store does not carry such wide variety of products Efficiency and cost saving: The number of delivery trucks required per day for each store is reduced (from 70 trucks in 1974 down to 9 trucks in 2006) 5. The 7Dream concept for Seven-Eleven Japan is a business model that provides convenience, or in other words, value-added service to customer.
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It will help to bring customer to the store and also improve Seven-Eleven’s reputation and brand awareness. From a supply chain perspective, this concept is likely to be more successful in Japan it is in the United States. Reasons are: The frequency that American customers visit their convenience store is not as high as that of Japanese customers Seven-Eleven stores are easily accessed to most Japanese, while this easiness varies widely in America from city to city. Due to cultural reason, American preferred to have their online purchases delivered to their house, even when they are not home at the delivery time.
Both customers and couriers are used to delivery parcels being left on the door of a closing house. 6. Seven-Eleven is attempting to duplicate the supply chain structure that has succeeded in Japan and the United States with the introduction of CDCs. The pros and cons of this approach are: Pros: Enable Seven-Eleven to continue their goal of introducing more fresh food item in order to move their competencies out if traditional gas station food mart market, into a new market segment with Starbuck-like models. CDS allows Seven-Eleven to have more control over these fresh items quality, hence raise their competitive level Cons:
With DSC from wholesalers and manufacturers continue to take place, there will be overlapping of delivery on some certain type of products Moreover, store staff will then have to accommodate deliveries from an increased number of trucks at different time during a day, which put a pressure on store resources. 7. Food service in United States: when having a distributor replenish convenience stores versus a company like Seven-Eleven managing is own distribution function, the pros and cons are: a. Having a distributor replenish convenience stores
