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David Rawles Question 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? Question 4: Seven Eleven does not allow direct store delivery in Japan with all products flowing through is distribution center. What benefit does Seven-Eleven derive from this policy? When is direct store delivery more appropriate? Question 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? The company Seven-Eleven was established in 1973 in Koto-ku, Tokyo by Mr. Masatoshi.
Today, the company provides their customers with a variety of products carried by regular retailers as well as food retailers.
Seven- Eleven had 10,303 stores in Japan and Hawaii as of 2003
Seven-Eleven has expanded greatly around the world. The major growth has taken place in Asia, and the United States.
Brief Executive Summary: Answer: Answer: Answer: Answer: Answer: Question 6: Depending on the demographics, whether it be address rurally or urbanely, it would most likely have to run two systems.
Given the variety that U.S citizens have it the system in Japan applied in the U.S would not be that lucrative.
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. 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? Pros Cons Question 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 stores verses a company like Seven-Eleven managing its own distribution function? Pros One most important factor to consider would be the increasing amount of convenience stores places throughout the United States. Rapid replenishment is something else that could help convenience store responsiveness. The store should be able to gauge by their normal customer research what products sale the best and how often and quickly they should replenish those items. Convenience stores can be responsive also by trying different things and buying different products. a major risk factor of selling produce or cooked foods would be waste. Customers may or may not buy their fresh items or cooked food. One risk is demand fluctuations which will ultimately lower customer satisfaction. Another risk potential increase in transportation cost. As stated, rapid replenishment basically eliminates inventory in stock, which is why there has to be daily deliveries from the distribution center to the stores. These daily deliveries can be/get very expensive, especially with increasing gas prices. Seven-Eleven Japan facilities are centralized to help lower transportation cost and to make it easier to replenish inventory. Inventory is managed by an advanced information system that helps to collect, process, and give feedback to data in a quick manner. Their information systems also allow the stores to better match supply and demand. Information regarding their products is sent to directly to supplier and distributers. Once the suppliers receive the orders, production begins. The suppliers then send orders by truck to the distribution center where the goods are transferred to the appropriate truck and sent to the stores. Direct store delivery (DSD) lowers the utilization of the outbound trucks from the Seven-Eleven DC. It also increases the receiving costs at the stores due to the increased deliveries. However, Seven-Eleven urges all suppliers to come through the DC. DSD is most appropriate when stores are large and almost full truck load quantities are coming from a supplier to a store. For small businesses, most of the time it is beneficial to have an intermediate aggregation point to lower the cost of freight. Since Japanese customers are satisfied with their products being shipped to the local convenience store, 7dream is the best option. According to logistics, online deliveries can copy Seven-Eleven’s current distribution network in Japan. The online delivery helps supplier sort deliveries for the store. Doing so will increase the utilization of outbound transportation which gives Seven-Eleven the opportunity to offer a lower cost alternative to having a package carrier deliver the product in house. However, the cons are that 7dream will use up storage space and require the store to be able to get certain packages for customers. Some say the concept will be more successful in Japan because of the existing distribution network of Seven-Eleven and the frequency of visits by customers. Online delivery links with the existing network. Japanese approach has been extremely successful and has shown considerable advantages over the current systems in the U.S. through financial and operational metrics.
As the case points out, Seven-Eleven’s 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 system’s efficacy in the U.S. Cons cost; less transportation, material handling, and labor costs for your own system.
possible for the distributors to perform the aggregation/demand smoothing function with minimal intervention by the individual Seven-Eleven franchise. An overall loss of control
An increased number of deliveries to each store
The difficulty of integrating information flows across disparate systems