1.

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?
Being responsive accrues benefits to the convenience store chains in
terms of increased store patronage. Therefore, the stores like to have a
responsive supply chain and invest a sizable amount for this end.
Building a responsive supply chain would entail following methods.
Method
Ensuring integration of
transport,
stores,
vendors,
distribution
network to ensure Short
replenishment time
Establishing and fulfilling
Local
Needs
of
customers
Demand forecasting

Associated Risks
Increased upfront investment in integrated
infrastructure
comprising
warehouse,
IT,
transportation, vendors and stores is required.

Economies of scales might be lost. If this is

achieved through franchising further loss in
revenue and profits will occur.
Employs costly tools and back end staff. Deviation
in demand will lead to excess inventory or lost
sales in store.
Transportation Network
Break down will affect timely delivery
Lower Inventory
Less safety margin
Use
of
Information Huge upfront investment
Technology
Vertical Integration
Change in demand pattern might reduce the ROI,
outsourcing cant be used.
Integrating
Supplier Passing of sensitive information, over reliance on
using IT
some vendors
Cross
Docking
Distribution Center
Providing
Services
beyond groceries and
food
Dense Store Location
Sales cannibalization, change in demographics,
preference will affect sales
2. Seven-Elevens 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 Japan micro matches the supply and demand through
following methods.
1. Collecting and analyzing store level POS data and forecasting.
2. Changing the shelf content based on the time of day.
3. Frequent change of product mix around 50% of the items sold
in the SEJ stores are changed each year.
4. Manufacturing start of after receipt of order
5. Rapid order fulfillment through multiple trips to store in a
single day.
6. ISDN network attaching stores, vendors and warehouses
The risks associated with the choice are
1. Shorter forecasting horizon (changing display throughout the day
and changing 50% of the products each year) would result in lower
margins of error and increases risk of stock outs and obsolescence if
the actual demand differs.
2. Break down of transportation network or a glitch in the IT network
would result in complete disruption in material availability affecting
the service level.
3. Frequent ordering would increase the associated labor and IT
infrastructure costs which lead to higher fixed costs, making the
system inherently risky in case of falling demand.
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?
SEJ have a responsive and flexible strategy in place to closely match
the customer demand. This enables them to alter the delivery
schedules based on the customer demand. The supply chain has
several items borrowed from the agile just in time system.
The facility location, transport network, IT infrastructure and inventory
management have been built around this core strategy.
1. Location- SEJ uses a market dominance strategy, where in they
have a scluster of 50-60 stores in a geographic location supported
by a distribution center. This location enables SEJ to aggregate the
demand and ensures viability of multiple trips to the same store.
2. Inventory Management- SEJ has a high inventory turnover of 50,
which shows that the average level of inventory is quite low in the
stores. This is achieved by frequent order fulfilment through

multiple trips per day. Ordering of inventory is done at store level

based on the local needs and utilizing POS data.
3. Transportation System- Transportation is provided by transfleet
which services only SEJ. Trucks are classified as frozen foods, chilled
foods, room temperature and warm foods. The trucks make
deliveries to multiple retail stores in the off peak hours. The
validation of the arrived goods doesnt hold the transporter thereby
saving the time. The entire system enables multiple trips to the
stores to fulfill orders frequently and lowering the order fulfilment
time.
4. Information Structure- SEJ has made huge investment in the
information structure that enables demand forecasting, saves time
in inventory counting and matching, enables vertical as well as
supplier integration for example the order is fulfilled through the
distribution center of SEJ but the demand data is directly sent to the
vendor to enable early start of the manufacturing.
4. Seven-Eleven does not allow direct store delivery in Japan but has all
products flow though its distribution center. What benefit does SevenEleven derive from this policy? When is direct store delivery more
appropriate?
SEJ doesnt follow the direct store delivery in Japan but services the
stores through its own distribution center. SEJ stores are densely
located and are serviced very frequently. Distribution center enables
SEJ to maintain control over the system, enable aggregation of demand
and ensure frequent delivery with minimal disruption at the retail
stores. Frequent deliveries are ensured at off peak hours by SEJ, which
may not be met through the DSD system. Further SEJ will have to share
greater store level POS data with the suppliers to accurately manage
the distribution. DSD delivery may also be store to store basis without
having the advantage of inventory pooling, thereby limiting the service
level.
Direct Store delivery is generally preferred in case of
1. High velocity items
2. High sales volume
3. Standardized items
5. What do you think about the 7dream concept for Seven-Eleven in
Japan? From a supply chain perspective, is it likely to be more
successful in Japan or the United States? Why?

The 7dream concept was conceptualized by SEJ to exploit the existing

distribution and high store density capabilities of SEJ. A recent survey
by Yahoo Japan and Tohan revelaed that 92% of the customers
preferred to pick up their online purchases at the local convenience
stores. From a supply chain perspective it is more likely to be
successful in Japan owing to the following reasons
1. High density of store location in a particular geography. This would
enable the customers the convenience of having the items
delivered at an easily accessible store.
2. Location of the store in Urban areas with high population densityTypically urban consumers would be more enthusiastic about online
purchases hence the concept is more likely to work in the case of
Japan. On the contrary we find that Walmart is mostly located in the
suburbs, these stores will be generally larger format than the
Japanese stores but wont be easily accessible.
3. Frequent replenishment of stores through distribution centers- US
stores rely more on the DSD therefore a single customer order
fulfilment will have to be ensured and packed by the store retailer.
In SEJ however the material is coming through the distribution
center therefore the retailer is not involved in the packing and only
has to handover the material.
4. Integration with IT enabled the SEJ to easily track the order.
6. 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.
Seven-eleven has introduced the CDC (combined distribution center)
for the fresh food items. Fresh food items have to be delivered
frequently to the stores (atleast once a day) but the volumes do not
justify DSD by the manufacturers. Therefore SEJ has introduced the
concept of CDC.
The pros of the CDC are
1. CDC gives SEJ to deliver fresh food every day, volumes of which
might not justify DSD.
2. CDC can be leveraged in future to stock items other than fresh food
similar to Amazon.

The cons of the CDC are

1. SEJ will have to make huge investment in the CDC infrastructure for
the fresh food segment that forms less than 5% of the sales. In case
the fresh food sales doesnt pick up in future the investment might
not get justified.
2. CDC might not work if the stores are located farther apart and will
lead to huge costs.
3. There are just 23 CDCs supporting around 5000 stores in the entire
North America which may increase the transportation cost.
7. The United States has food service distributors like Mc Lane
that also replenish convenience stores. What are the pros and
cons of having a distributor replenish convenience stores
versus a company like Seven-Eleven managing its own
distribution system?
We find that be it SEJ or Walmart both prefer to manage their own
distribution centers. This could be partly on count of the flexibility that selfmanaged distribution centers provide and partly on count of the historical
reasons. We have evaluated the various pros and cons of the food and
service distributors below.
The pros of the food service distributors are
1. Local knowledge and economies of scale will prove to be cheaper
and efficient for the local food distributors to service SEJ.
2. Less spending in the infrastructure will be required. Thereby the risk
gets reduced.
The Cons of the food service distributors are
1. Loss in control for example SEJ prefers store deliveries at off peak
hours, with the food and service distributor that may not be possible.
2. SEJ will have to share the store level demand data with the distributor,
which it may not like to part with for long term competitive reasons.
3. Loss of flexibility in terms of making available the items based on the
local needs. As the food and distributors will like to service only