Seven Eleven
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?
First of all, lets think about the strategic fit of Seven-Eleven. Convenience stores sell mostly daily necessaries and foods which usually are sold steadily. Also, their main customer is local residents who purchase product rapidly. And there are many convenience stores around the place which separate demand from uncertain situation. So we can say Seven-Eleven has certain demand. Then according to zone of strategic fit, it needs efficient supply chain to make a strategic fit, but Seven-Eleven uses rapid replenishment. It’s because of fresh/daily foods. According to feature of product, fresh/daily foods cannot be stored for long period of time and as fresh/daily food is one of the biggest product category sold in Seven-Eleven, Seven-Eleven has to keep rapid replenishment. But what if fresh/daily foods lose attraction, for example by increasing interest of home-made food? As there is no need for rapid replenishment, its supply chain strategy must be changed which cost a lot of money. Even though they keep the strategy, as they are not strategically fitted, it allows unnecessary cost.
Second risk is oil price. To retain rapid replenishment, Seven-Eleven need to move trucks frequently and it uses a lot of oil. It means transportation cost became more sensitive to oil price. When we consider uncertainty of oil price, future oil price increase can result dramatic loss to Seven-Eleven.
Last risk is distribution center. Rapid replenishment requires well organized distribution system and distribution center is one of them. Each distribution center must have high accessibility to many franchise stores of Seven-Eleven. Actually there is no significant different in distribution center for rapid and normal replenishment, when company is growing. Of course rapid replenishment tends to slow extend of stores as it need additional effort to distribution, but it is not that big risk. What we want to talk about is when company starts to fall. When company starts to fall store will decline too. What about the distribution center? In normal replenishment, company can simply reduce distribution center and transfer their responsibility to remain distribution center. On the other hand, in rapid replenishment case, they can’t simply reduce the distribution center. Even though only one store is left in area, it needs distribution center in that area to keep rapid replenishment system. So company must choose between changing strategy and bearing inefficient system. Whatever they choose results cost.
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