SEVEN ELEVEN CASE ANALYSIS

Monika Asthana(FT172048)

Natasha Sinha(FT172050)

Sravana Reddy(FT172087)

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?

A convenience store can be responsive in many ways. Following are some of the
responsive methods and the risks attached to each of them.

Increase reach: Penetrate into the market by placing a store at every location
possible. This comes with a great deal of capital cost.
Efficient supply chain: The supply chain to replenish the stock in the store
must be efficient so that the store never runs out of stock for any individual
product. For a store like 7-eleven that has multiple branches at different
locations, it is difficult to manage the supply chain.
Faster billing: The staff at each store must be well equipped with skill and
technology so as to avoid long queues at the billing station. This would
require skilled labor or costs to train them.
CRM system: A store like 7-eleven that has stores across the globe would witness
the same customer visiting stores at different locations. The store could fit in a CRM
system that identifies customers across all stores and provide appropriate offers

2. Seven-Elevens 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 replenishment believes that each

store will have the same demand pattern on day to day basis. The tour bus
phenomenon might cause difficulty for the regular customers. In that case
the store will stock-out and customers may visit the next Seven-Eleven store
down the site to buy things.
 Some the demand may permanently shift , causing a local ripple, the
replenishment may be more at one site and insufficient at an adjacent site for
the next cycle.
Another possible issue might result from delays in transportation, although
deliveries are scheduled for off-peak hours, a disruption in traffic flow will
result in low service levels.

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?

Facility Location: Seven-Eleven stores are usually located in clusters supported by

a single distribution center enabling them to provide efficient and responsive
deliveries to their stores.

Inventory Management: They manage inventory through their graphic order

terminal and receive inventory using the scanner terminal. POS register is used to
track inventory levels. They have dedicated manufacturing plants to produce fast
food. Seven-eleven classifies their inventory into four separate category.

Transportation: Store clustering around the distribution centers enables 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. They also reduce delivery time by using the scanner terminal. The DCs do
not carry inventory, but are really cross docking facilities.

Information Infrastructure: Information is used to manage its inventory and

coordinate the deliveries right from manufacturing to DC to the retail store. It brings
together all the information necessary to manage facilities, transportation,
manufacturing, and distribution. The basically use the ISDN system which consists
of:

1. Graphic order terminal: It is used to track and analyze POS data and place
orders with vendors and the DC. It is also used to determine when to convert
shelf space from slow to fast moving items.
2. Scanner terminal: It improves the efficiency of the delivery process.
3. Store computer: It is linked to the ISDN network and communicates among
the various input sources to track inventory, sales, orders, etc.
4. POS register: It keeps up to date information on customer sales and
demographic information. In summary, the information system is used to
driver the drivers, bringing together all the information necessary to
manage facilities, transportation, manufacturing, and distribution.
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?

Gives control of the entire system. It gives a better aggregation of demand

and nominal disruption at the retail outlets.
Facilitates coordination, flexibility and responsiveness.
Enables store managers to focus on the customer service rather than taking
care of the suppliers.
Maintain fewer relationships as retail stores do not have to each work with
vendors, but only the DC.
DC concept allows pooling of inventory which increases their overall service
level while minimizing total system inventory of those items.

5. What do you think about the 7dream concept for Seven-Eleven in Japan?
From a supply chain perspective, is it likely to be more successful in Japan
or the United States? Why?

Seven-Eleven can be used by various e-commerce sites as drop and collection

points under the 7dream concept. This concept though very cost effective for the
courier service provider, would cause a lot of inconvenience for the customers
especially if the stores are located far away from their home or office. With over
17,000 stores in Japan and over 8000 stores in United States, and considering the
area of each of these countries, the 7dream concept would be successful in Japan
rather than in the US.

6. 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.

The supply chain structure for the US market can be close, but it can never
be exactly as it is in Japan. Some of this is because of the culture and the
corporate culture.

The disadvantages of this system is that Seven-Eleven in the U.S. is that they
might have to probably run two system depending on whether the area could
be treated as a dense urban location or a suburban or rural outpost. The cost
of running the Seven-Eleven Japan system in middle-America would be
prohibitive. The U.S. consumer in that region has too many alternatives that
have 24 hour operations and are within a short drive.
 As the case points out, Seven-Elevens performance in the U.S. has been
abysmal; clearly more of the same strategy and operations will result in
continued failure. Perhaps a hybrid system can be applied in select markets
to test the systems efficacy in the U.S.

7. The United States has food service distributors like McLane 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?

The advantage of distributor replenishing stores is most importantly the cost;

less transportation, material handling, and labor costs for your own system.It
might be possible for the distributors to perform the aggregation/demand
smoothing function with minimal intervention by the individual Seven-Eleven
franchise and that depends on how supply and reordering operations are
designed.

The disadvantage of the outsourced replenishment service is an total loss of

control, an increased number of deliveries to each store, and the trouble of
integrating information flows across disparate systems.