International School of Management Studies

Pune – Maharashtra - India

STRATEGIC SUPPLY CHAIN MANAGEMENT AND LOGISTIC

LEARNING OUTCOME 1, 2, 3, 4 & 5.

Mr. RAHUL KHODE

(MBA INTERNATIONAL)

Statement of Authenticity

I certify that the work submitted in regard to this assignment is my own and wherever the works of others have been
used to support my work, the credit has been duly acknowledged.

Student Email: rahulkhode.isms@gmail.com Date: 25/01/2020

 Extended Diploma in Strategic Management & Leadership
International School of Management Studies, Pune – Maharashtra - India

TABLE OF CONTENTS

Serial No Particulars Page no

1 Executive Summary 03

2 Introduction 04

3 Task 1 05

4 Task 2 06

5 Task 3 08

6 Task 4 10

7 Task 5 11

8 Task 6 11

9 Conclusion 14

10 Bibliography 15

Page 2 of 15
 Extended Diploma in Strategic Management & Leadership
International School of Management Studies, Pune – Maharashtra - India

Executive summary

In the modern world of technology people are worried about their time, there's no compelling reason to state that no
whip hand is often as dependable and long-lasting because the association's productive logistics strategy. To fulfil the
wants of people who are money rich and time-poor, any firm should ensure that they must have the responsiveness the
clients need. There are numerous such organizations which have understood this pattern on schedule and gratitude to
the present have made unbelievable progress in their industry. The great example of such organizations would be the
organization headquartered in Japan. Seven-Eleven is the organization which have used supply chain management so
effectively that everything at the end of the day has secured in its system. This assignment will help me to understand
relationship between supply chain management and organizational business objectives. I will also learn about how to use
information technology to optimize supplier relationship in the organization and role of information technology in supply
chain management. Working on role of logistics and procurement in supply chain management and how to plan a
strategy to improve an organization supply chain will simplify the concept of supply chain management.

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 Extended Diploma in Strategic Management & Leadership
International School of Management Studies, Pune – Maharashtra - India

Introduction:
Supply chain management operates at three levels; strategic, tactical and operational. At the strategic level, company
management makes high level strategic supply chain decisions that are relevant to whole organization. The decisions that
are made with regards to the availability chain should reflect the general corporate strategy that the organization is
following. The strategic supply chain processes that management has got to decide upon will cover the breadth of the
availability chain. These include development, customers, manufacturing, vendors and logistics. Product Development:
Senior Management has got to define a strategic direction when considering the products that the corporate should
manufacture and offer to their customers. As product cycles mature or products sales decline, management has got to
make strategic decisions to develop and introduce new versions of existing products into the marketplace, rationalize the
present product offering or whether develop a replacement range of products and services. These strategic decisions may
include the necessity to accumulate another company or sell existing businesses. However, when making these strategic
development decisions, the general objectives of the firm should be the determining factor. Customers: At the strategic
level, a corporation has got to identify the purchasers for its products and services. When company management makes
strategic decisions on the products to manufacture, they have to then identify the key customer segments where
company marketing and advertising are going to be targeted. Manufacturing: At the strategic level, manufacturing
decisions define the manufacturing infrastructure and technology that's required. Based on high level forecasting and
sales estimates, the corporate management has got to make strategic decisions on how products are going to be
manufactured. The decisions can require new manufacturing facilities to be built or to extend production at existing
facilities. However, if the general company objectives include moving manufacturing overseas, then the choices may lean
towards using subcontracting and third-party logistics. As environmental issues influence corporate policy to a greater
extent, this might influence strategic supply chain decisions with regards to manufacturing. Suppliers: Company
management has got to choose the strategic supply chain policies with regards to suppliers. Reducing the purchasing
spend for a corporation can directly relate to a rise in profit and strategically there are variety of selections which will be
made to get that result. Leveraging the entire company’s purchases over many businesses can allow company
management to pick strategic global suppliers who offer the best discounts. But these decisions need to correspond with
the general company objectives. If an organization has adopted policies on quality, then strategic decisions on suppliers
will got to fall within the overall company objective.

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 Extended Diploma in Strategic Management & Leadership
International School of Management Studies, Pune – Maharashtra - India
Task 1
A convenience store chain attempts to be responsive and provide customers with 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?
Supply chain helps the corporate to deliver the products to customer at right place, to the correct person on a right time.
Supply chain plays a crucial role to deliver the products to customer because managers of late recognize that getting
products to customers faster than the competition will improve a company's competitive position. To stay competitive,
companies must seek new solutions to big Supply Chain Management issues like modal analysis, supply chain
management, load planning, route planning and distribution network design. Companies must face corporate challenges
that impact Supply Chain Management like reengineering globalization and outsourcing. The shop supply chain is going to
be helpful if company want to understand what their customer need. The stores helped the customer to seek out the
varieties of product they want to buy. They mainly concentrate on customer choice and their needs as every customer is
very important for them. Inventory management could be a compound process, particularly for larger organizations, but
the fundamentals are a similar notwithstanding the organization's size or type. During this process goods are delivered
into the receiving area of a warehouse within the kind of raw materials or components and are put into stock areas.
Inventory helps company to grow more within the market and that they make this process smooth with the assistance of
IT. They don’t deliver the products directly to customer they transfer it to warehouses then the products are delivered to
retail stores. Usually every distributor handles approximately 50 – 60 retail stores, so they don’t have to kept huge
material in place of business. Company make a distinct strategy in order that they directly deliver the products to the
retailer so the customer don’t have to wait for longer period of time. Thus, convenience store uses supply chain
management smoothly and effectively to keep the flow of products at right time and at right place.

Link Between Supply Chain Management and Business Functions within the Organizations:
Supply chain management is that the lively management of supply chain activities with the objectives of maximize
customer satisfaction and attain the sustainable advantage over the competition. the provision chain is parallel together
through physical flows and knowledge flows. Information flows permit a variety of supply chain partners to conquer their
long-term plans. Supply chain management mainly concentrates on the advantage and quality of the merchandise
innovation. There is some function which are related to Seven-Eleven supply chain management such as they identify the
customers values, recognizing Seven-Eleven strengths, understanding the external environment.

Key Drivers for Achieving an Integrated Supply Chain Strategy in an Organization:

Many organizations are putting lot of efforts to their supply chain to compete and attain market share and spending. Skill
and process upgradation of organizations has provided chain excellence is more broadly established as a constituent of
generally business strategy. So, organization has got to determine the key drivers which can help the organization to
realize an integrated supply chain management. They key drivers are facilities, inventory, transportation, information,
sourcing and pricing.
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 Extended Diploma in Strategic Management & Leadership
International School of Management Studies, Pune – Maharashtra - India

Sourcing: Develop a market dominance strategy to enter a new market and build around cluster of 50 to 60 stores
supported by distribution center. This strategy has lot of advantages as it can boost the distribution, system efficiency and
prevent entrance of competitors into dominant areas. This can also contribute to the responsiveness of the supply chain
from the point of short lead time but, it may increase the infrastructure cost and management cost.
Inventory: The convenience store can emphasize on regional merchandizing to cater precisely to local preferences and
increase the number of items available only at their stores. This approach can meet the responsive requirements from
the angle of products but it may find difficult for stores to precisely predict the preferences which may lead to high
uncertainty and usually needs the help of information system.
Facilities: Expand in services by convenience store can provide high level of services to their customers such as payment
forms, bill payments services or being a pick up station for parcel delivery. This also might increase the employees’
burden which will eventually lead to increase in the labour cost.
Information: Convenience store can establish their own e-commerce company without any time restrictions of time. But
It may bring up large amount of money for website for building and making websites. Construct an information system
for each outlet which will be linked to headquarters, suppliers and distribution centers as this will allow stores to match
supply with demand, then increase sales and accelerate inventory turn over rate. The system is basically form by graphic
order terminal, scanner terminal, store computer and POS register. Thus, sharing information with supply chain will easily
lead to the leakage of trade secrets and delay of information transfer will usually lead to difficulty in communication
between different stages.
Transportation: Constructing a combined delivery system which is flexible enough to alter delivery schedule depending
on customer demands can dramatically reduce inventory and transportation cost which will enable rapid delivery of
variety of fresh foods. But if something goes wrong with transportation, inventory or communication with third party
logistics companies there is high risk of uncertainty.

Task 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?
Seven-Eleven uses advanced information and distribution system to replenish its store three times a day to match the
demand and supply of products. Seven-Eleven supply chain has adopted a strategy to match the demand and supply of
the fast food items like bread and other fresh food are delivered twice a day. The technology that helps in achieving rapid
delivery for variety of fresh and fast-food items is by placing an order by the store manager using graphic order terminal.
The whole Seven- eleven Japan’s Integrated store information system simplified its operations by installing every outlet
linked to the headquarters, suppliers and the seven - eleven distribution centers. As a result, the available product variety
changes at time of a day. Seven-Eleven responds very quickly to the order with store manager placing replenishment
orders but 12 hours before they're supplied. This practice makes supply chain very responsive. However, there are some
risks involved with the choice of using rapid replenishment.

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 Extended Diploma in Strategic Management & Leadership
International School of Management Studies, Pune – Maharashtra - India

Facilities: Seven-Eleven Japan gradually had a different facility stores for different types of products. For items like
sandwiches, delicatessen products and milk they have chilled temperature store and frozen stores for products like ice
cream, frozen foods and ice cubes. For products like box lunches, rice balls and fresh breads they have warm temperature
stores and separate store for room temperature products like canned food, instant noodles and seasoning. The risk
involved in this service is, there might be a change in customers expectation and behavior which may reduce the sales of
the products. Fluctuation in the demand might also be another important factor in this situation. As all the products are
perishable, they need to consume it as early as possible lack of sales might cause a huge problem for the organization.

Inventory: Seven-Eleven Japan developed an extensive franchise network and performed an important role in the daily
operations of the network. The Seven-Eleven included the network of both companies owned stores and third party
owned franchise. To ensure more efficiency Seven-Eleven Japan offered its stores a choice from a set of 5,000 SKUs (stock
keeping units). Each store carried on average about 3,000 SKUs depending on the local customer demand. Since processed
and fast foods contributed about 60% of the total sales at each store, Seven-Eleven Japan had 290 dedicated manufacturing
plants that only produced fast food for their stores Seven-Eleven Japan based its fundamental network expansion policy
on a market dominance strategy. Entry in new market was easy as 50 to 60 stores were supported by distribution centers.
This gave Seven-Eleven high density market presence and allowed it to work an efficient distribution system. The risk
involved in inventories are unexpected purchases or sales. Late in delivery of stock or shortage of stock might be another
risk in the inventories.

Transportation: Seven-Eleven Japan has a very effective transportation service because when supplier receive orders
from Seven-Eleven store they immediately start to fill the orders. The supplier then send order to the distribution centers
by truck. Each store order is separate so that distribution center could easily assign to appropriate store truck using the
order information. At distribution center the delivery of products from different suppliers for products like milk and
sandwiches was directed into single temperature truck. All the deliveries were made during off hours and were received
using scanner terminals. This reduce the delivery time spend at every store. The risk involved in this process was as this
system works on trust there are chances of fraud while receiving the delivery. Having lot of trucks for different seasonal
products which were used only in the particular season will hold the inventory cost. There can many scenarios as truck
may get stuck in traffic and there are chances of late delivery.

Information: Seven-Eleven Japan has used advanced information technology for simplifying its operation. They attribute
its significant part of its success to total information system which is installed in every outlet and linked with
headquarters, suppliers and distribution centers. The two-way high-speed online communication capability of ISDN
enabled Seven-Eleven Japan to collect process and feedback point of sales data quickly. Sales data was collected in stores
before 11:00 PM and was ready for the analysis next morning. The risk involved in this system was as everything was
online lack of internet connection may lead to loss of data or frauds like hacking the sites may easily lead to a leakage of
trade secret. Page 7 of 15
 Extended Diploma in Strategic Management & Leadership
International School of Management Studies, Pune – Maharashtra - India

Sourcing: Seven-Eleven Japan had total 290 manufacturing plants throughout the country that produced fast food for
only Seven-Eleven stores. These items were distributed through 293 dedicated distribution centers that ensured rapid
and reliable delivery. Not a single distribution center carried any inventory as they merely transferred inventory from
supplier truck to Seven-Eleven distribution trucks. The transportation was provided by Transfleet Ltd a corporation which
was setup by Mitsui and Co for the exclusive use of Seven-Eleven.

Task 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?
Different facilities are the key drivers of the supply chain management in terms of responsiveness and efficiency. They are
location from where the inventories are transported. Seven-Eleven can gain economies of sales when product is
manufactured and stored in only one location. It can increase efficiency but comes at the expense of responsiveness.
However, locating facilities close to the customers increases the number of facilities needed and consequently reduces
the efficiency. Convenience is the basic goal of Seven-Eleven so they locate facilities closer to their customers and they
also take others stores location into consideration for centralized facility. These measures can help Seven-Eleven to
establish a target market of high density and then lower the investment. Thus, due to continuity and stability of market
development Seven-Eleven can manage its stores more efficiently.

Inventory has important role in the supply chain management because of mismatch between supply and demand.
Inventory can increase the amount of demand which can be satisfied by having a product ready and available when
customers wants it thus, it can reduce the cost by exploiting economies of sales which may exit during production and
distribution. Seven-Eleven Japan developed an in-depth franchise network and performed a crucial role within the daily
operations of the network. The Seven-Eleven included the network of both companies owned stores and third party
owned franchise. To ensure more efficiency Seven-Eleven Japan based its fundamental network expansion policy on a
market dominance strategy. Entry in new market was easy as 50 to 60 stores were supported by distribution centers.
Using advanced information and distribution system Seven-Eleven makes better use of its inventory to achieve high
responsiveness and surplus.

Transportation moves product between different stages during a supply chain. Like other driver’s transportation has
significant impact both on responsiveness and efficiency. Faster transportation allows a supply chain to be more
responsive but increase the transportation cost. The type of transportation a company uses also affects the inventory and
facility location the supply chain. Seven-Eleven Japan has a very effective transportation service because when supplier
receive orders from Seven-Eleven store they immediately start to fill the orders. The supplier then send order to the
distribution centers by truck. Seven-Eleven has four categories of temperature-controlled truck and every truck makes
delivers to multiple retails stores from a distribution center.
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 Extended Diploma in Strategic Management & Leadership
International School of Management Studies, Pune – Maharashtra - India

This distribution enables Seven-Eleven to scale back the number of vehicles required for daily delivery service to every
store, albeit the delivery frequency is sort of high. Each store order is separate so that distribution center could easily
assign to appropriate store truck using the order information. At distribution center the delivery of products from
different suppliers for products like milk and sandwiches was directed into single temperature truck. All the deliveries
were made during off hours and were received using scanner terminals. This reduce the delivery time spend at every
store.
Information deeply affects every part of supply chain and impacts every other driver. As a key driver information can be
used to provide higher responsiveness and improve efficiency. Seven-Eleven Japan uses information to enhance product
availability while decreasing inventory. Seven-Eleven Japan has used advanced information technology for simplifying its
operation. They attribute its significant part of its success to total information system which is installed in every outlet
and linked with headquarters, suppliers and distribution centers. The two-way high-speed online communication
capability of integrated services digital network (ISDN) enabled Seven-Eleven Japan to collect process and feedback point
of sales data quickly. At the store, there is the Point-of-sales (POS) system consisting of cash registers and terminal
control equipment and personal computers linked to the POS cash registers and to the online network. Data accrued
from the various analyses is essential for the generation of projections enhancing the capacity to micro-match demand
and supply. Sales data was collected in stores before 11:00 PM and was ready for the analysis next morning. The
information system allows Seven-Eleven stores to raised match supply with demand.
Facility Location:
Seven-Eleven wanted to use of the advantage of ‘close by convent stores’ to serve its customers efficiently and at the
same time be profitable by designing strategies that demands minimal cost for investment in opening of multiple
convenience stores. The selection of facility location is predicated on the elemental network expansion policy focused on
market-dominance strategy which is made by clustering 50 to 60 stores by a standard distribution center. The main
advantage of the market-dominance strategy is that it provides high density market presence and allows chances the
distribution system efficiently. The combined delivery center is actually a cross-docking center, an important node that
permits consolidation and combination of product categories. Items supplied by different manufacturers are combined at
the delivery center into distribution trucks which then service the stores counting on their individual orders. This use of
distribution centers helps the corporate in its supply strategy by reducing time interval also because the inventory and
logistical costs throughout the chain. It enables faster replenishment through frequent supply by its distribution trucks
several times each day.

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 Extended Diploma in Strategic Management & Leadership
International School of Management Studies, Pune – Maharashtra - India

Task 4

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?
Distribution center (DC) is an additional layer between suppliers and buyer location. By storing inventory or serving as a
transfer location, DCs can help a supply chain achieve economies of scale for inbound transportation to some extent on
the brink of the ultimate destination because each supplier sends a large shipment to DC that contains product for all
location it serves. By cross-docking in DCs little inventory must be held and merchandise flows faster within the supply
chain. Cross-docking also saves on handling cost because products don’t need to be moved into and out of storage.
However, it requires significant degree of coordination and synchronization between the incoming and outgoing
shipments. Typical Seven-Eleven stores are small with only 150 square meters but it offers more than 3000 kinds of daily
necessities. As we can see its difficult for stores to have ideal space for large scale inventory so, all goods must be
frequently replenished through the distribution centers.

Some benefits of this policy:

 Seven-Eleven goal of carrying products in its store to match the needs of customers as they vary by geographic
location or time of day it has to replenish its store several times a day. So, products from different supplier are
aggregated on trucks according to the required temperature to help achieve very frequent deliveries at a
reasonable cost.
 By using DC, it decreases the transportation and receiving cost while ensuring that product availability closely
matches customers’ demands.
 Joint distribution can significantly reduce the delivery vehicles, traffic congestion and protect the environment by
saving fuel. Moreover, it reduces delivery cost and enables rapid delivery of a variety of fresh foods. Unlike
transport by DC direct store delivery means all shipments come directly from each supplier to each buyer
location.
 In direct shipment network the routine of each shipment is specified and the supply chain manager only needs to
decide on the quantity to ship and the mode of transportation to use. The major advantage of this option is the
elimination of intermediate warehouse and its simplicity of operation and coordination.

However, it is justified only at demand at buyer location is large enough that optimal replenishment lot sizes are close to
the maximum load capacity of the truck from each supplier to each location. With smaller buyer location it tends to have
high cost. From this angel they want to delivery large quantity which will result in high supply inventory.

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 Extended Diploma in Strategic Management & Leadership
International School of Management Studies, Pune – Maharashtra - India

Task 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?
I think the 7dream concept for Seven-Eleven Japan is extremely practical and meaningful. When it is compared with the
traditional business 7dream can allow Seven-Eleven Japan to offer greater product variety and improve product
availability by centralizing inventory. This can also improve the customers experience by providing 24 hours access and
allowing more customized experience. It can reduce facility cost if there is no significant loss of customer participation.
But it usually requires large amount of money up front for building and maintaining the website. Specifically, with the
existing distribution system and the fact that stores are easily accessible to most Japanese. 7dream can increase the
visiting frequency by making stores as a drop of and collection point. By combining offline and online sales form Seven-
Eleven can compete with the large stores with rich commodities and convenient services. It can also enhance its
competitiveness by competing with pure online stores depending on its advantage of advanced management, stable
customers, professional logistics service and good reputation. I think this concept will be more successful in Japan
because it has more stores than US which means Seven-Eleven stores are widely setup in Japan. Considering customers
satisfaction people usually need to consult after their online shopping or for security reasons people may prefer to pay
their bills in the store. High density and widely distributed areas in Japan are more preferable for 7dream concept. As all
products are shipped through distribution centers in thus, online shopping is characterized by high frequency and small
batch so different supplier can shipped larger quantity of products to distribution centers and DCs can then delivery the
products to different stores according to the order. This distribution way can improve supply efficiency, save
transportation time, reduce cost and better meet customer’s needs.

Task 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. What are the pros and cons of this approach? Keep in mind that stores are also
replenished by wholesalers and DSD by manufacturers.
CDCs means combine distribution centers while DSD means direct store delivery.
Pros of CDCs are:
 CDC and the structure of supply chain has successfully run the Japan so it helps effectively scientific management
and improves responsiveness to customers needs and it generates enormous benefits which will provide practical
preference for US to introduce the CDC.
 In US DSD is use to replenish by wholesalers and manufacturers. Using DSD can meet the requirement of frequent
replenishment and its usually for large quantity orders. It reduces delivery cost and improves responsiveness.
 CDC is more suited to small batch orders and it realizes differentiated services by classifying products. As a result,
the combination of DSD and CDC will be more effective in terms of responsiveness and reducing losses caused by
shortages. Page 11 of 15
 Extended Diploma in Strategic Management & Leadership
International School of Management Studies, Pune – Maharashtra - India

 With the help of Japans supply chain structure and the CDC the US enterprise can timely and accurately get all
data including sales and inventory. They can also make significant forecast about demand in order to provide
rapid response and high service level in future.

Cons of CDCs are:

 In order to introduce CDC in US companies need to own or lease some infrastructure and they need to decide
how to distributes products whether by themselves or outsourcing. Beside this they should also construct an
information management system by investing lot of money and manpower thus, operating cost will significantly
increase.
 There are enormous chances that conflicts will arise when both DSD and CDC are used for replenishment but
when the order is arrived companies need to choose between DSD and CDC.
 The company must approve the existing information system using DSD replenishment only to achieve docking
with graphic order terminal, scanner terminal, store computer and POS register.
 A set of strict criteria should be made for selecting proper replenishment method. All risk and cost in DSD are
undertake by manufacturers while in CDC only part of them are undertaken by manufacturers. Thus, introducing
CDC will increasing the risk and cost of enterprise.

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 Extended Diploma in Strategic Management & Leadership
International School of Management Studies, Pune – Maharashtra - India

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 Extended Diploma in Strategic Management & Leadership
International School of Management Studies, Pune – Maharashtra - India

Conclusion

From the above assignment I would like to conclude that supply chain management plays important role for maintaining
the balance between efficiency and responsiveness. I have discussed about the key drivers for achieving an integrated
supply with effectiveness of strategies used by an organization to maintain supplier’s relationship. I have understood
about Information Technologies role in the supply chain management and how to use it to optimize supplier relationship
in the organization. With reference to the case of Seven-Eleven Japan I have understood the role logistic and
procurement in supply chain management.

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 Extended Diploma in Strategic Management & Leadership
International School of Management Studies, Pune – Maharashtra - India

Bibliography

SearchERP. (2019). What is inventory management? - Definition from WhatIs.com. [online] Available at:
https://searcherp.techtarget.com/definition/inventory-management. [Retrieved on 21/01/2020].

Food Logistics. (2010). CDC Supply Chain WMS From: CDC Software. [online] Available at:
https://www.foodlogistics.com/technology/product/10168601/cdc-software-cdc-supply-chain-wms [Retrieved on
21/01/2020]

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