Seven Eleven Case Study
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?
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:
Method for Responsiveness Risk of Method
Integrated information systems Incompatible systems, systems not completely integrated, but “piecemeal”, and breakdowns.
Additional capacity (manufacturing, DCs, retail stores) Over-investment in capacity, underutilized capacity
Increased safety inventory Additional inventory carrying costs
Increased number of deliveries/ Rapid Replenishment Increased transportation costs, Increased replenishment cost, Increased receiving cost
Increased product variety and availability Additional inventory carrying costs
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 greatest risk occurs when the supply and demand are not matched, and inventory excesses and shortages occur. We also know that forecasts are most accurate for aggregate products, compared to the SKU level, making forecast accuracy absolutely crucial to micro-matching supply and demand. However, their information ordering and replenishment systems can respond quickly to changes in customer demand to account for forecast errors. This physical rapid response capability, however, also increases the risk of excess or insufficient capacity (capacity fluctuations), and additional transportation costs.
3. What has Seven-Eleven done in its choice of facility location, inventory management, transportation, and information infrastructure to
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:
Method for Responsiveness Risk of Method
Integrated information systems Incompatible systems, systems not completely integrated, but “piecemeal”, and breakdowns.
Additional capacity (manufacturing, DCs, retail stores) Over-investment in capacity, underutilized capacity
Increased safety inventory Additional inventory carrying costs
Increased number of deliveries/ Rapid Replenishment Increased transportation costs, Increased replenishment cost, Increased receiving cost
Increased product variety and availability Additional inventory carrying costs
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 greatest risk occurs when the supply and demand are not matched, and inventory excesses and shortages occur. We also know that forecasts are most accurate for aggregate products, compared to the SKU level, making forecast accuracy absolutely crucial to micro-matching supply and demand. However, their information ordering and replenishment systems can respond quickly to changes in customer demand to account for forecast errors. This physical rapid response capability, however, also increases the risk of excess or insufficient capacity (capacity fluctuations), and additional transportation costs.
3. What has Seven-Eleven done in its choice of facility location, inventory management, transportation, and information infrastructure to