Seven Eleven Store - Case study - Answers

Seven Eleven Store - Case study - Answers

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  1. A conveniencestore 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.
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  2. Seven-Eleven’s supplychain 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.