Question

Chapcer&Supply Chain Drivers and Metacs 79 with the goal of introducing "resh" products in Ameriean perfomance, where inventory turis im 1992 the United States. 7-Eleven inuoduced the conceps of were anound 12. combined distribetion cenlers CDCs) around 2000. By 2003, 7-Eleven had 23 CDCs localed throuphout Study Questions North America, supporting about 80 percent of the saore network. CDCs delivered fresh items such as sand. . A coavenience sture ehain athomgss to be responsive and wiches, bakery produets, larcad, produce, and oher per. rovide custoiners with what they need, whes they need it ishables once a day. A varicty of fresh-food suppliers sent product to the CDC throughout the day, where they Ibrcad, produce, and oher perre they need it. What are seme convenience store supply chain ean he respoosive? What for delivery to stones ut night. Requests 2. Seven-Elevea's supply chain straecy in Japun can s from store managers wcre sent un the uearest CDC, and descihed as atempting to miero-mateh pply and by 10:00 p.m, the products were en roMe to the stones.demand using rapid replonishment. What are somme muls are seme isks in eacth case? Relative to Japan, a greater fraction of the food sold, iated wih this ehoice especially hou food such as wings and pizza, was pre- . What bx Sevea-Eleven done in its chokce of facility loca pared in the store. Fresh-food sales in North America n, invenaory suagement, wraasgorodion and inurras- develop capabilises that upport its escceded $450 million in 2003. During this period, tion infrastrcture to DSD by manufacturers and wholesaler delivery to ssores also continned 4. Seven-Eleven does oot alkow diwect store delivery in Japa but has alt produets flow through its distribution ceeter This was a period when 7-Eleven worked very What henefit docs Seven-Eleven derive from this pelicy? hand to iniroduce new tresh-food ilems, with a goal of Wheu is dinact store delivery more appropnate? competing more directly with the likes of Suarbocks . Whant do yus thiok ahout the 7dream conont for Seven- than with traditionsl gas station food anarts. 7-Eleven in evcn Jspan? From a supply hain perspecuive, is it re dan 63 percen or its sales likely to h" more îiceGastul i" lapan or the cartel from non-gasoline products cosupared wich the rest of Statos? Why? the industry. for which this number was closer to 35 pcrcent. The goal was to the fresh-food and fast-food categories with a special Tocus on hot foxds In 2009, revenuc in the United States and Canada hares bore also replenisbed by wholesalers and DSD hy kxaled S 16 0 billion. with abaz 03 perccnt coming Inm 7. The Unand Stats hus food sanse distribuhn Dal also merchaadise and the rest from the sale of gasoline. The Narth American invenuory nmover rate in 2004 was ahout 19, compared to more than 50 in Japan. This, howa coo ever, reprosented a signifieune mprovemcnt in North tion fuaction? .Seven-Filevea is atterepting to duplicane the supply chain continoe to increase sales in struenture tbat has succceded in lapan and the United Sutes with the introduction of CDCs, What ate the pros and coos of this approac h? Keep in mind that CASE STUDY Financial Statements for Walmart Stores Inc. and Macy's Inc. Table 3-7 coniains the financial resuls for Walmat and bused on their supply chalo siraiegy and sunuctune? Com Macy's for 2012. Evaluste the financial porformance of pure the metrics for each company with similar metries each company based on the various metrics discussod in for Amavon and Nordstrom fram Tahlc 3-1. Which met. Soction 3.1, such as ROE, ROA. profit margin, asset rics does each company perform heter on? What supply irns, APT. C2C. ART, INVT, and PPET. Can you chain drivers and metrics might explain this dificrence explain the differences yon see in their performance in performance? Scanned by Easy Scanner

Answer 1

1. A convenience store can be more responsive by doing exactly what Seven-Eleven Japan is doing; many locations, rapid replenishment, appropriate technology deployment, and an equally responsive supplier (vertical integration for many of their SKUs). The risks associated with this system are the costs coupled with demand uncertainty. If demand patterns change dramatically, or the customer base changes, then Seven-Eleven is left with an operation that is not needed. In Seven-Eleven Japan’s case, multiple operations might be shuttered if an apartment building or large employer shuts down or relocates.

2. Micro-matching supply and demand using rapid replenishment assumes that each store will repeat the same demand pattern on a daily basis. The tour bus phenomenon, where a group of unanticipated customers comes to the store and buys all of a type of product will cause difficulty for regular customers. During such an event, the store will likely stock out and customers may visit the next Seven-Eleven site down the block to make their purchases. Some of this demand may permanently shift, causing a local ripple; the replenishment may be excessive at one site and insufficient at an adjacent site for the next cycle. Another possible issue would result from delays in transportation; although deliveries are scheduled for off-peak hours, a disruption in traffic flow will result in low service levels for the next wave of demand.

3. Seven-Eleven Japan has chosen to operate a highly responsive operation and has chosen a supply chain design that supports this strategy. Their facility location choices are to saturate an area with stores, thereby making it easy for customers to shop and their own delivery trucks to move from store to store to replenish inventory. Seven-Eleven’s inventory system is run on an information system that transmits directly to the supplier and distribution center; goods are produced using a pull system to replace what has been sold during that delivery period. The transportation system is flexible to maximize responsiveness while also achieving efficiency.

4. The benefit of delivery through its own distribution center is total control of the system, aggregation of demand and minimal disruption at the retail outlets. If several suppliers tried to make two or three deliveries every day, it would detract from the store manager’s ability to provide customer service. Each of these suppliers would likely prefer their own way of doing things, their own inventory system, truck size, etc., which would make things more difficult for the Seven-Eleven system. The demand and production data would have to be shared rather than residing on Seven-Eleven’s system from cradle to grave. For items that cannot be prepared quickly, pull production may not provide the responsiveness that Seven-Eleven desires. In this case, the DC concept allows pooling of inventory which increases their overall service level while minimizing total system inventory of those items. Direct store delivery might be more appropriate if the items being delivered do not need bulk broken at a DC, have special handling requirements (lottery tickets, newspapers, or alcoholic beverages), or the supplier has a system that is consonant with Seven-Eleven’s (perhaps a regular bread run that has an information system that integrates with Seven-Eleven’s).

5. The 7dream concept allows e-commerce sites to use Seven-Eleven stores as drop-off and collection points for Japanese e-commerce customers. It has been extremely successful; a recent survey revealed that 92 percent of the customers of one e-commerce company preferred to have their items shipped this way. It seems likely that this concept would work only for high density urban areas; I can see it being established in congested, less-safe urban areas for a service like package delivery. Suburban customers in the US would likely find it incredibly inconvenient and avoid it unless home delivery was not possible and the alternative was to pick up a package (for example, one that must be signed for) at the local carrier’s office.

6. The supply chain structure for the US market can be close, but it can never be exactly as it is in Japan, and will probably not operate as smoothly as in Japan. Some of this is attributable to the culture and the corporate culture. Regardless of how like-minded supply chain partners claim to be, it would be extremely difficult to duplicate the collective spirit that permeates Seven-Eleven Japan.

The disadvantages of this system is that Seven-Eleven in the U.S. would probably have to run two system depending on whether the area could be treated as a dense urban location or a suburban or rural outpost. 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. Nonetheless, the 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.

7. The advantage of someone else replenishing stores is primarily cost; less transportation, material handling, and labor costs for your own system. Depending on how supply and reordering operations are designed, it might be possible for the distributors to perform the aggregation/demand smoothing function with minimal intervention by the individual Seven-Eleven franchise.

The disadvantage of the outsourced replenishment service is an overall loss of control, an increased number of deliveries to each store, and the difficulty of integrating information flows across disparate systems.