Structure of the Seven-Eleven Japan Supply Chain Case Study
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?
In order to become responsive, a supply chain for convenience stores can be organized using three main models: the dependence on distribution centers, the direct provision of goods, and the local production of fresh foods. A supply chain that includes distribution centers is effective when it is necessary to provide many stores with a certain amount of products regularly. As a result, a convenience store is responsive because it guarantees the provision of many facilities with the necessary amount of goods in the most efficient manner. Seven-Eleven Japan uses this system (Chopra 7). Still, risks are in changes in demand.
If demand decreases unexpectedly, there are many products in a distribution center that should be sold. Direct store delivery is another approach that is used in small local convenience stores that do not belong to chains, and risks are in delays and inabilities to address demand. The third approach to developing a responsive system is the local production of goods. However, this system is not appropriate for stores where the flow of consumers is extremely high because of the limited capacity related to producing fresh and cooked foods.
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 locations of Seven-Eleven Japan are selected with reference to the principle of market dominance. More new stores appear in those areas where there is a cluster of Seven-Eleven Japan stores to guarantee the effective distribution and rapid provision of products. Inventory management and transportation are based on the work of distribution centers and the provision of many goods. In this context, regional merchandizing guarantees a focus on customers’ needs.
The company works to decrease the number of used vehicles, but the increase in productivity is observed (Chopra 7). Organization of the work of stores, suppliers, manufacturers, and distribution centers, and transportation are based on the implemented Total Information System. This network allows for ordering and communicating between store managers and distribution centers.
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?
While using distribution centers in order to control the delivery of products, Seven-Eleven Japan guarantees that all stores will be provided with goods on time, the delivery will be properly scheduled, and customers’ needs will be addressed. It is important to use distribution centers for chains that include many convenience stores because of the necessity to organize deliveries several times a day (Chopra 6-7). Direct store delivery can be selected when a store needs certain products to be provided only a few times a week or when small stores choose to cooperate with local suppliers. In this case, it is almost impossible to address the problem of delays and increasing demands.
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 benefits of using combined distribution centers are in possibilities to control the whole supply chain and organize it according to the store’s needs, to monitor the amount and quality of goods, and to increase the productivity related to the workload and transportation. Furthermore, combined distribution centers allow for focusing on the particular needs of customers because of the ability to regulate the amount of proposed fresh products, cooked products, or manufactured goods.
However, the disadvantages of such an approach are in the necessity to adapt the distribution system applied in Japan to the requirements of the US market (Chopra 8). It is possible to state that combined distribution centers are more difficult to manage in comparison to centers organized in Japan. Furthermore, combined distribution centers in the context of the US market can be discussed as less appropriate than the direct store delivery system.
Chopra, Sunil. Seven-Eleven Japan Co. Battle Creek: Kellogg School of Management, 2005. Print.