Report on: 7-Eleven Case Study

Submitted To:

Mahmudul Hasan Fouji

Associate professor
Department of Marketing
Jagannath University

Submitted By:

Name ID Remark

Mahabub Hasan Id-M22020204504

Saima Sultana Dipa Id-M22020204508
Abdur Rahim Riad Id-M22020204509
Sadia Mim Id-M22020204513
Mehedi Hasan Zim Id-M22020204522
Safin Rahman Id- M22020204530
Parvez Rony Id- M22020204540

Submission Date: 3 November 2, 2023

Seven Eleven Case Study Group Answer

Question Number 1: A convenience store chain attempts to be responsive and provide

customers with what they need when they need it, and 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?

Answer: The ways that a convenience store supply chain can be responsive:-

1. Local capacity.

2. Local Inventory.

3. Rapid replenishment.

Let a fast food restaurant.

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 USA fast food restaurant franchise Subway where dinner and lunch sandwiches are
assembled on demand.

Risk: - The risk with this approach is that capacity is decentralized, leading to poorer utilization.

Local Inventory: - Another approach is to have all inventories available at the store at all times
this allows for the centralization of cooking capacity.

Risk: - The main risk is obsolete inventory and the need for extra space.

Rapid Replenishment: - This approach is to set up rapid replenishment and supply the stores
with what they need and when they need it. This allows for the centralization of cooking capacity
and low levels of inventory.

Risk: - Increasing the cost of replenishment and receiving

Question Number 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?

Answer: Micromatching supply and demand using rapid replenishment assumes that each store
will repeat the same demand pattern on a daily basis

Risk of delay in Replenishment: A group of unexpected customers comes to the store and buys
all types of products that are sold on sell daily basis, which will cause difficulty for regular
customers. During such an event, the store will likely stock out and customers may visit the next
seven-even site down the block to make their purchases. Some of this demand may permanently
shift, causing a local ripple.

Risk of delay in Transportation: 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 and it is potentially high cost of
transportation and receiving at stores

High dependency on information systems: Seven eleven has attributed its success to the total
information system installed in every store and linked to the supplier, distributor, and head
office. The hardware system included a graphic order terminal, scanner terminal, store computers
linked to the ISDN network, and POS registers. Thus seven Seven-Eleven heavily depends on its
information system and its supply chain is matched with the demand through this technology. As
relying on information technology there would be a major breakdown if a system fails.

Sensitive Regularities: The process from ordering the products to selling them needs to be done
accurately and on a timely basis. If there is interference in any part of the process, seven eleven
will face a lot of difficulties/Irregularities and disruptions occurring at any point in the system
make responsive supply chain management even more challenging

Consumer behavior changes: Rapid replenishment is highly responsive to consumer behavior.

If there are sudden shifts in consumer preferences or behaviors, it may be challenging to adopt
the supply chain quickly.
Question Number 3: What has 7-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?

Answer: Seven Eleven, a global convenience store chain, has developed a highly efficient
supply chain strategy in Japan. Here are some key aspects of what they have done in facility
location, inventory management, transportation, and information infrastructure to support their
strategy

1 Facility location

Dense Store Network: - Seven-Eleven has strategically located its stores in high-traffic areas in
urban and suburban regions across Japan. This dense network of stores allows them to serve
customers efficiently and maintain shorter supply chains

2 Inventory management

Just-in-Time (JIT) Inventory: - Seven-Eleven is known for its efficient inventory management
system, employing a JIT approach. Inventory levels are closely monitored and replenished based
on real-time data and demand patterns

Advanced Inventory Systems: - Seven-Eleven uses advanced inventory management systems to

track product sales and stock levels in real time. This data is used to optimize inventory levels,
reduce stockouts, and minimize overstock situations

3 Transportation

Efficient Supply Chain Logistics: - Seven-Eleven has invested in a sophisticated logistics system
to ensure timely and cost-effective transportation of products from (Distribution center) DCs to
stores The Company uses advanced technology to schedule deliveries, often several times a day,
to maintain optimal inventory levels at each store

Efficient Route Planning: - The Company employs advanced routing and scheduling software to
optimize delivery routes, reducing transportation costs and fuel consumption

4 Information Infrastructures

Advanced Technology: - Seven-Eleven utilizes advanced point-of-sale (POS) systems and

information technology to collect real-time sales data, allowing for data-driven decision-making
in inventory management and product assortment

Technology Investments: - Seven-Eleven has consistently invested in technology to support its

supply chain operations, ensuring that its information infrastructure remains robust and up-to-
date
Question 4: SEVEN-Eleven does not allow direct store delivery in Japan but has all
products flowing through its distribution center. What benefit does Seven-Eleven derive
from this policy? When is direct store delivery more appropriate?

Answer: Seven-Eleven Japan's policy of not allowing direct store delivery (DSD) and instead
routing all products through its distribution center is a key part of its highly successful business
model. The benefits of this approach include

Efficient Inventory Management: Centralized distribution allows Seven-Eleven to maintain tight

control over inventory levels at each store. This helps minimize overstocking and understocking
issues, 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 truckload 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.
Questions No 5: What do you think about the 7dreams concept for Seven-Eleven Japan?
From a supply chain perspective is it likely to be more successful in Japan or the United
States? Why?

Answer: In my view, the 7dream concept's success in using Japanese stores as drop-off and
collection points makes perfect sense. I can understand why 92% of customers in Japan prefer
picking up their online orders from local convenience stores rather than having them delivered to
their homes, considering how frequently Japanese customers visit these stores. It's clear that
7dream intends to leverage this preference and the existing distribution system to build an
effective and efficient supply chain. This strategy is essential for meeting the demands of online
customers and ensuring timely delivery. From a supply chain perspective, I believe this concept
is more likely to thrive in Japan compared to the United States.

One reason for my belief is that the Japanese market is relatively smaller compared to the United
States. In 2008, Japan had 12,071 stores, whereas the U.S. had only 6,262, almost half the
number. Moreover, Japan's smaller geographical size means that the density of stores is higher,
making 7-Eleven stores easily accessible throughout the country. This greater store density in
Japan provides 7dream with a wider customer reach. I know that the 7dream concept could
potentially find success in the U.S. as well. In the U.S., it might be more practical to have orders
delivered directly to the customer's doorstep, tapping into a larger market. It's worth noting that
in the U.S., some manufacturers already use direct store delivery (DSD), with the rest of the
products being delivered by wholesalers. This indicates that direct delivery is a more popular
concept in the U.S.

The 7dream concept seems more likely to succeed in Japan due to its smaller size and higher
store density but if it adjusts its strategy for the U.S. market by offering home delivery, it could
tap into a bigger market, there's a significant opportunity to succeed in the United States as well.
Question No 6: Seven-Eleven is attempting to duplicate the supply chain structure that has
succeeded in Japan and 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.

Answer: Seven-Eleven Japan Co. established by Ito Yokado in 1973 in Japan. Both Ito-Yokado
and Seven-Eleven Japan were founded by Masatoshi Ito. He started his retail empire after World
War 2. After a trip to the United States in 1961, Ito became convinced that superstores were the
wave of the future. The Seven-Eleven distribution system tightly linked the entire supply chain
for all product categories. The distribution centers and the information network played a vital
role in that regard. Attempting to duplicate the supply chain structure they were succeeded in
Japan and United States both countries with the introduction of CDCs. CDCs means combined
distribution centers. This concept was also introduced by Seven-Eleven. CDCs delivered fresh
items. DSD means direct store delivery. Stores of United States were replenished using this
formula. So difficulty of duplicating the Japan supply chain structure was followed in United
States primarily from much lower density of United States Seven-Eleven stores. It is
compounded and the fact is Seven-Eleven stores are getting both direct store deliveries as like
the wholesaler deliveries to its stores. Setting own distribution center it will not allow Seven-
Eleven to pick the same level transportation quantity as it can get in Japan. Its own distribution
system will help at a good level that time when the wholesaler deliveries and direct store
deliveries will stop and routed by distribution center. When it has its own distribution system in
United States it will add some less value than in Japan likes the lower density of stores and larger
distance between stores. So in that time, DSD by manufacturers and wholesaler delivery to stores
also continued. This was a period when Seven-Eleven worked very hard.
Question 07: The United States has food service distributors that also replenish
convenience stores. What are the pros and cons to having a distributor replenish
convenience stores versus a company like Seven-Eleven managing its own distribution
function?

Answer: A distributor brings much more value to the table in the United States relative to Japan.
Given the lower density, 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 a large number of
stores.

The pros and cons of having a distributor replenish convenience stores versus a company like
Seven-Eleven managing its own distribution function.

Pros are represented as follows:

1. Less costly.
2. Foodservice distribution can give a variety of food choices.
3. Having its own distribution center means controlling its own demand and better supply
chain management.
4. They do not have to invest anything in the distribution center, fleet, or personnel.

Cons are represented as follows:

1. No own distribution center means less control over the replenishment cycle or quality of
items.
2. Less responsive compared to own distribution functions, because there is no direct link
between the company and the convenience stores and customers.

Finally, it can be stated that distributors offer more value in the US than single chains like Seven-
Eleven due to lower density. They can reach aggregation levels, but Seven-Eleven cannot exploit
its large number of stores. Distributors are less costly, offer a variety of food choices, have their
distribution center, and don't need to invest in equipment. However, they lack control over
replenishment cycles and are less responsive.