Question 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? [25 marks]

As responsiveness increases, the convenience store chain is exposed to greater uncertainty. A convenience store chain can improve responsiveness to this uncertainty using one of the following strategies, especially for fresh and fast foods: 1. 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 where dinner and lunch sandwiches are assembled on demand. The main risk with this approach is that capacity is decentralized, leading to poorer utilization. 2. Local Inventory Another approach is to have all inventory available at the store at all times. This allows for the centralization of cooking capacity. The main risk is obsolete inventory and the need for extra space. 3. Rapid Replenishment Another approach is to set up rapid replenishment and supply the stores with what they need when they need it. This allows for centralization of cooking capacity and low levels of inventory, but increases the cost of replenishment and receiving. From the case study, Seven-eleven Japan Co. had provided their customers a variety of service that is difference responsive way from usual convenience store concept. 1. 7dream.com Seven-Eleven Japan established an e-commerce company which their customer can choose the product at home and pick the product at the store. Because from the survey, 92% of its customers preferred to pick up their online purchase at the local convenience store rather than have them delivered at home. Since Seven-Eleven Japan have the distribution system that conforms with these drop and pick up system. So Seven-Eleven serve as drop-off and collection points for Japanese people. Instead of providing customers at that time the need is happen, the customers can choose the product at home and then pick up the product later at the store. The risk of this case is normally Seven-Eleven Japan established this system as a way to derive benefit from the existing distribution system. If in the future this system is popular among the Japanese, the capacity of the existing distribution system may not be enough to serve the customers such as a space to storage the goods waiting for customers to pick up (the store in Japan is smaller than other country) 2. In-Store Payment

Instead of selling household goods, food and groceries, a convenience store can be responsive as a payment spot. Seven-Eleven Japan add a variety of services that customers can obtain at its stores for example an in-store payment of Tokyo Electric Power bills, gas, insurance premiums, and telephone. In order to attracted millions of additional customers every year and take advantage of opening hour and number of stores to service customer. The risk of this case is when the company adopt this service every Seven-Eleven store Japan have to link with the data of the payment such as electric bill. If the employees not fully understand how the system works, he or she will misunderstand and take too long to serve customer. Result in lower customer satisfaction and can link to overall brand dissatisfaction. Some customer will stop buying at Seven-Eleven because the long waiting time.

Question 2: Seven-Elevens supply chain strategy in Japan can be described as attempting to micromatch supply and demand using rapid replenishment. What are some risks associated with this choice? [25 marks]

One of the very important elements on a supply chain management would the handling of information. The more the information shared in between the different actors of the supply chain flow, the more flexible and responsive this supply chain would be. In this case we can see how 7eleven Japan applied this whole new system based on information sharing between the shops, distributors and suppliers. This new focus gave 7eleven advantages such as saving time in placing orders, delivery process. Also advantages on demand analysis as they could see which products were bought and at what frequency and time, this helped them to organize the store in relation with their sales. This also permitted 7eleven to study new products entrance and costumer reactions to them. But the main risk for Seven-Eleven is the potentially high cost of transportation and receiving at stores. Risks of micro-match supply and demand for 7eleven using rapid replenishment are: Risk in cost of transportations: Because the wide range of quantities demanded, the uncertainty of number of transport units is always present. Ordering various varieties of products means different ordering time for different products, so the transportation cost will behigh for Seven-Eleven High Transportation cost as the products need to be replenished timely, maybe even several times of the day. As mentioned earlier, Seven-Eleven has fast selling products like food and drinks which need to be replenished timely and this means products

need to be delivered several times because they try to sellfresh products. This will lead to high transportation cost for Seven-Eleven. Risk of delays in replenishment: Since 7eleven does not stock up the products, delays in replenishment will be a major problem. The products which Seven-Eleven sell cannot be stocked up so replenishment should be fast and on time and any delay could hamper the sales of Seven-Eleven High dependence on Information System: As relying intensively on information technologies, they risk to have a major breakdown if a system fails. Seven-Eleven has attributed a significant part of its success to the Total Information System installed in every outlet and linked to headquarters, suppliers, and the distribution centers. The hardware s y s t e m s i n c l u d e d G r a p h i c O r d e r T e r m i n a l s , S c a n n e r T e r m i n a l s , S t o r e computers linked to the ISDN network and POS registers. Thus, Seven-Eleven depended heavily on its Information system and supply was matched with the demand through this technology. Even the distribution depended upon the information network and the store manager could accurately forecast sales through the system. If information systems fail, they will result in mismatch of stocks and demand Risk in the shorten of inventory Even though rapid replenishment helps seven eleven to maintain their inventory level that drive by the demand of the customer, to save their inventory cost. Sometime it might be risk in the shorten of inventory (backlogs) because when seven eleven tried to micro match the demand and supply, seven eleven have to rely on the past purchasing data and the point of sale data. To be able to generate the demand forecast to deliver the product to each of seven eleven chain store. What if the demand has become so fluctuate to the point that it over their inventory level, that time seven eleven will be suffer from the empty shelf. As you know that the favorite items from seven eleven are such as lunchbox, rice ball and sandwich, so most likely if the consumer come during the high demand wont have the food to consume. So most likely the consumer will go to other convenience store to buy the food to serve their need in that curtain time. If this scenario happen more that few time, the consumer most likely to switch the convenient store.

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? Facility Location Seven-Eleven Japan has based its fundamental network expansion policy on a market dominance strategy. Wherever Seven-Eleven Japan entries into any new market, it was built around a cluster of 50 60 stores supported by a distribution center. The main reason of applying clusters strategy, it is that clustering gave Seven-Eleven Japan a high-density market presence and allowed it to operate an efficient distribution system. Inventory Management For inventory management, what Seven-Eleven Japan had done to develop capability that support its supply chain strategy is to offer its stores a choice from a set of 5,000 stock keeping units and each store could carry on average about 3,000 stock keeping units depending upon the local customer demand. Seven-Eleven emphasized regional merchandizing to cater precisely to local preferences. The highest generated sale of Seven-Eleven is under food category, and under SevenEleven Japan concept, the food items were classified in four broad categories including Chilled items, Warm items, Frozen items, and Room-temperature. Transportation For transportation or distribution system of Seven Eleven Japan, the system was tightly linked the entire supply chain for all product. Its main objective is to carefully track sales of items and offer short replenishment cycle times. Its distribution system was flexible enough to alter delivery schedules depending on customer demand. When a store placed an order, it was immediately transmitted to the supplier as well as the distribution center. The supplier received orders from all Seven Eleven stores and started production to fill the orders. The supplier then sent the orders by truck to the distribution center. The key to store delivery was what Seven Eleven called the combined delivery system. At the distribution center, delivery of like products from different suppliers was directed into a single temperature controlled truck. There were four categories of temperaturecontrolled trucks such as frozen foods, chilled food, room temperature processed foods, and warm foods. The number of stores per truck depended on the sales volume. The items were distributed through 293 dedicated distribution centers that ensure rapid and reliable delivery. None of their distribution centers carried any inventory, they merely transferred inventory from

supplier trucks to Seven Eleven distribution trucks. Transfleet Ltd., a company set up by Mitsui and Co. for exclusive use of Seven Eleven Japan, provided this transportation. Information infrastructure For information infrastructure, Seven Eleven Japan attributed a significant part of its success to the Total Information System installed in every outlet network linking the head office, stores, and the Seven Eleven distribution centers. This system enables Seven Eleven to collect, process, and feedback point of sales data quickly. Sales data generated in each stores by 11.00p.m., was processed and ready for analysis the next morning. The examples below are about the hardware which used in total information system. - Graphic Order Terminal, this was used by the store owner or manager to place the order. Once all the orders were placed, the terminal was returned to its slot, at which point the orders were relayed by the store computer to both the appropriate vendor and the Seven Eleven distribution center. - Scanned Terminal, these scanners read bar codes and recorded inventory. They were used to receive product coming in from a distribution center. This was then automatically checked against a previously placed order and the two were reconciled. This scanner terminal was also used when examining inventory at stores. - Store Computer, this linked to the ISDN network, the POS register, the graphic order terminal, and the scanner terminal. It communicated between the various input sources, tracked store inventory and sales, places orders, provided detailed analysis of POS data, and maintained and regulated store equipment. - POS register; this POS data was automatically transmitted online to a host computer. 4. 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 manufacturer? There has been useful advantage 2 distribution systems are direct store delivery (DSD) and combined distribution center (CDC) as a center of distribution operation. By Seven Eleven U.S. has begun to introduce CDC concept around 2000 for variety of fresh-food supplier sent product to CDC throughout the day where they were sorted for delivery to store at night. The

CDC will deliver fresh items such as sandwiches, bakery product and other perishables once a day. Pros: The customer easily to get fresh-food nearby their home. It was advantage over than competitor such as fresh-food market because of their open 24 hour; customer can get fresh-food within every time that they want. Receiving fewer for delivery. In advantage that store no need to waste for different distributor to delivery each product. It wills delivery from CDC for all of fresh-food. Delivery product in scheduled so you will know when there expect it. You reduce the chance of running out of stock because you can replenish items daily. Reduce the holding inventory cost because delivery only amount that they need to sell and can guarantee that the product always freshness. Reduce cost of transportation because of their using large truck for fulfill large amount of product to delivery in many branch in one time. Supervision and control for products and supply chain; the process can control from the single center which reduce supervision and controlling cost. Cons:Difficult to control effectively: According to CDC is very effective in the process of distributing the product, it rather difficult to control effectively because the process dependent on one distribution center. In addition, the stores may have less control over replenishment cycles and quality of items. Difficult to changing the management of new distribution system: To introduce new distribution system is not easy to do because it takes time to adjustment, especially for managers or employees who are familiar with the old distribution patterns. Difficult to implement distribution: Regarding to the amount of the existing store is so many in different areas. And the number of product to distribute to the store is a little so the managing of supplier of the product becomes harder. Inflexible distribution system: Under CDC, the delivery of inventory is made in a fixed time schedule. Therefore, the supply chain cannot be modified. Due to one truck have to deliver too many stores in one trip so the last store need to wait until the last queue. Inability to reflect the customer need: In accordance with the difficult to control over distribution system. If the distribution center deliver a few number of product during the day,

but customer traffic is heaviest. Therefore, the store may loss the opportunity to sale more products. Higher dependency: All of the outlets depended on the centralize warehouse, the failure to receive inventory in time leads to lower sales for the outlet. Slower compared to DSD: CDC can be considered to be slower than DSD, because CDC take more time to receive order and deliver the product. In term of DSD outlets can enjoy dependence; they can directly place an order and direct delivery with vendor. Conclusion Thus we realize that by integrating the supply chain management system can be minimize the constraint of business and improve the level of customer service through the extensive use of information technology. With the model of CDC and DSD can improve the efficiency of supply chain network. The seven eleven company in its business service used effective supply chain practices and IT infrastructure within their distribution centers enabling effective information flows and streamline logistics.