7-11 Japan

1) A Supply chain could accurate its responsiveness if it is able to improve in these criteria:

- Respond to wide ranges of quantities demanded

- Meet short lead times

- Handle a large variety of products

- Build highly innovative products

- Meet a very high service level

Nowadays highly dynamic, globalized and competitive environment, companies are under pressure to improve their supply chain strategies in order to be more responsive to customer demands. In the case of convenience stores, as this type of business doesn’t have a very certain demand, the need of having a supply chain system that can act responsively is important for the success of the stores.

One of the very important elements on a supply chain management would the handling of information. The more the information shared in between the different actors of the supply chain flow, the more flexible and responsive this supply chain would be. In this case we can see how 7eleven Japan applied this whole new system based on information sharing between the shops, distributors and suppliers. This new focus gave 7eleven advantages such as saving time in placing orders, delivery process. Also advantages on demand analysis as they could see which products were bought and at what frequency and time, this helped them to organize the store in relation with their sales. This also permitted 7eleven to study new products entrance and costumer reactions to them.

Risks:

- Irregularities and disruptions occurring at any point in the system make responsive supply chain management even more challenging.

- As relying intensively on information technologies, we risk to have a major break down if a system failures

- As lead times decreases, any malfunction of the parts will have much more impact on it.

- Because the wide range of quantities demanded, the uncertainty of number of transport units is always present

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 (SE) works in a “push” environment. SE actually tries to anticipate the customer order by integrating seasonal variables in their product demand. SE also seems to have a good ERP system and based on it, SE is able to compute very accurate statistics in order to forecast the customers demand.

SE’s goal is to determine the service-level they want to assure. When defined, the main risks are: to have a too large quantity of products (some are perishable); to have a too large variety of products; to be out of a certain product. These threats have to be moderated because SE has a very responsive supply chain and every point of sale can be provided extremely fast.

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?

The business model of Seven-Eleven Japan is based on both company owned stores and third-party-owned franchises. The development of this extensive franchise network gives them a better performance in the daily operations of the network.

When Seven-Eleven decides to entry into a new market, the company applies a market-dominance strategy. To achieve it, Seven-Eleven built its entry around a cluster of 50 to 60 stores supported by a distribution center. This strategy gives the company the necessary infrastructures to develop business and consequently high-density market presence that allows operating an efficient distribution system.

The system of franchises permits to divide responsibilities and risks. The part supported by the Seven-Eleven Japan layout the back office structure and it is quite standardized, and the part of franchise owner is related to management cycle. (Processes, labor, customer satisfaction,...)

Seven-Eleven Japan offers its stores a choice from a set of 5’000 stock keeping units, but each store carries on average about 3’000 unit that fit with the local demand (principle of regional merchandizing). The store’s content is standardized in terms of products. The company introduces a service’s platform.

In order to simplify its operations Seven-Eleven uses an advanced information technology: Total Information System that linked to headquarters, suppliers, and the Seven-Eleven distribution centers. The interface is standardized for all stores and the information is collected directly from point of sales (with terminal control equipment).

The Seven-Eleven distribution system linked the entire supply chain for all product categories (the information network is very important here). This system allows forecast sales and corresponding orders. The distribution system supports the supply chain and is flexible enough to alter delivery depending on customer demand. Seven-Eleven uses what they call combined delivery system based on a single temperature-controlled truck. The system worked on trust and did not require the presence of a delivery person. That process reduced the delivery time spent at each store.

The transportation is provided by Transfleet Ltd, a company for the exclusive use of Seven-Eleven Japan. This system enables Seven-Eleven to reduce the number of vehicles required for daily delivery service to each store, even though the delivery frequency of each item was quite high.

Seven-Eleven had a total of 290 dedicated manufacturing plants that only produced for Seven-Eleven stores. The items were distributed through 293 dedicated distribution centers that ensure rapid, reliable delivery. None of these centers carried any inventory. The transfer flow from suppliers to stores through the distribution center is direct.

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?

This kind of policy has a lot of benefits :

The possibility of collecting, processing and feeding back point of sales data quickly.

It links the entire supply chain for all product categories,