Bangladesh University of Professionals (BUP)

Mirpur Cantonment, Dhaka-1216

Assignment 01
on
Seven-Eleven Japan Co

Course name: Supply Chain Management

Course code: MKT-3203

Submitted to,
Dr. Imranul Haque
Professor
Department of Marketing

Jagannath University

Submitted by,

Name ID Marks

Nayeem Hossain 2025171002

Moshiuzzaman Chayon 2025171004

Md Tanjil Islam 2025171052

Md Abu Bakar Siddique 19251026

Ashraful Islam 19251106

Tashfia Tasnim 2025171088

Submission Date: 22, September,2022

1. A convenience store chain attempts to be responsive and provide customer 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?

As responsiveness increases, the convenience store chain is exposed to gather uncertainty A

convenience store chain can improve responsiveness to this uncertainty using one of the
following strategies, especially for fresh and fast foods:

Local capacity: The convenience store chain can provide local cooking capacity at the stores
and assemble foods almost on demand. Inventory would be stored as raw material. This is
seen at the U.S. fast food restaurant franchise Subway were dinner and lunch sandwiches are
assembled on demand. The main risk with this approach is that capacity is decentralized,
leading to poorer utilization. Local inventory: Another approach is to always have all
inventory available at the store. This allows for the centralization of cooking capacity. The
main risk is obsolete inventory and the need for extra space.

Rapid replenishment: Another approach is to set up rapid replenishment and supply the stores
what they need and when they need it. This allows for centralization of cooking capacity, low
levels of inventory, but increases the cost of replenishment and receiving.

2. Seven-eleven’s 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?

The main risk for Seven-Eleven is the potentially high cost of transportation and receiving at
stores. 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.

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?

All choices made by Seven-Eleven are structured to lower its transportation and receiving
costs. For example, its area dominance strategy of opening at least 50-60 stores in an area
helps with marketing but also lowers the cost of replenishment. All manufacturing facilities
are centralized to get the maximum benefit of capacity aggregation and also lower the
inbound transportation cost from the manufacturer to the distribution center (DC). Seven-
Eleven also requires all suppliers to deliver to the DC where products are sorted by
temperature. This reduces the outbound transportation cost because of aggregation of
deliveries across multiple suppliers. It also lowers the receiving cost. The information
infrastructure is set up to allow store managers to place orders based on analysis of
consumption data. The information infrastructure also facilitates the sorting of an order at the
DC and receiving of the order at the store. The key point to emphasize here is that most
decisions by Seven-Eleven are structured to aggregate transportation and receiving to make
both cheaper.

4. Seven-eleven does not allow direct store delivery in Japan, with all products following
through its distribution center. What benefit does seven-eleven derive from this policy?
When is direct store delivery more appropriate?

Direct store delivery (DSD) would lower the utilization of the outbound trucks from the
Seven-Eleven DC. It would also increase the receiving costs at the stores because of the
increased deliveries. Thus, Seven-Eleven forces all suppliers to come in through the DC.
DSD is most appropriate when stores are large and nearly full truck load quantities are
coming from a supplier to a store. This was the case, for example, in large U.S. Home Depot
stores. For smaller stores it is almost always beneficial to have an intermediate aggregation
point to lower the cost of freight. In fact, Home Depot itself is setting up these intermediate
facilities for its new stores that are often smaller.

5. What do you think about the 7-dream concept for seven-eleven Japan? From a
supply chain perspective is it likely to be more successful in Japan or the United States?
Why?

7dream makes sense given that Japanese customers are happy to receive them shipments at
the local convenience store. From a logistics perspective, online deliveries can piggyback on
Seven-Eleven’s existing distribution network in Japan. Deliveries from the online supplier
can be brought to the DC where they are sorted along with other deliveries destined for a
store. This should increase the utilization of outbound transportation allowing Seven-Eleven
to offer a lower cost alternative to having a package carriers deliver the product at home. The
primary negatives are that 7dream will use up storage space and require the store to be able to
retrieve specific packages for customers.

One can argue that the concept may be more successful in Japan given the existing
distribution network of Seven-Eleven and the frequency of visits by customers. Online
delivery can link with the existing network. The high visit frequency ensures that packages
are not occupying valuable store shelf space for a long time. Also, the frequent visits ensure
that the marginal cost to the customer of picking up at a Japanese Seven-Eleven is small. This
is less likely to be the case in the United States.

6. Seven-eleven is attempting to duplicate their successful Japanese supply chain

structure 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 difficulty of duplicating the Japan supply chain structure in the United States follows
primarily from the much lower density of U.S. Seven-Eleven stores. This is compounded by
the fact that Seven-Eleven stores are getting both direct store deliveries as well as wholesaler
deliveries to its stores. Setting up its own DCs does not allow Seven-Eleven to get the same
level of transportation aggregation as it gets in Japan. Its own distribution system would help
more if all wholesaler deliveries and direct store deliveries were stopped and routed through
the DC. Even then, having its own distribution system would add much less value than in
Japan given the lower density of stores and larger distance between stores.

7. The United States has food service distributors like Mclean that also replenish
convenience stores. What are the pros and cons a comply like Seven-eleven managing its
own distribution function?

One can contend that a distributor brings much more value to the table in the United States
relative to Japan. Given the lower density of stores, a distributor can aggregate deliveries
across many competing stores. This allows a distributor to reach levels of aggregation that
cannot be achieved by a single chain such as Seven-Eleven. The big disadvantage to having
all deliveries done through a distributor is that Seven-Eleven is unable to exploit having many
stores. In fact, it may be argued that going through the distributor has Seven-Eleven subsidize
deliveries to competing smaller chains that may also be using the same distributor.