Question

7-Eleven stores in the U.S. are replenished by wholesalers and by manufacturers (DSDs). 7-Eleven in the U.S. is attempting to duplicate the supply chain structure that has succeeded in Japan by introducing distribution centers (DCs). Can a DC achieve economy in inbound (suppliers-to-DC) and outbound (DC-to-stores) transportation as in Japan? Is it feasible to design a new 7-Eleven’s own (vertically integrated) distribution system in the U.S. and what are issues?

Answer 1

By having the 7-Eleven stores directly serviced by either wholesalers or manufacturers, it will not help address the variability of demand at the store side owing to lack of regular and timed replenishment of inventory at the store level.

By having a distribution system in place, it will help the supplier follow "make to stock" approach wherein the produced/finished goods from the manufacturer can be stored in centralized or localized Distribution centers (DCs). The inventory at the DCs can then be utilized to fulfill the demand at the 7-Eleven Stores. This kind of supply chain model will help reduced the overall freight and distribution costs. Also, the time to service the market and also to fulfill the demand during uncertain conditions can be addressed. So, the vertical integration of tie-up between supplier-manufacturer will help in integrated communication and decision-making and reduce costs.

The major issue will be to design the supply chain, in terms of where to locate the DC and how to develop the process to optimize the inventory storage costs and freight costs.