7-11 Japan Case
ISOM 319-E Operations Management Case: Seven-Eleven Japan February 7, 2013 Part A Some different ways that a convenience store chain can be responsive are they can intergraded information systems, additional capacity which are manufacturing, distribution centers and retail store, they also can increase safety inventory, increased number of deliveries, and increased product variety and availability. Part B Some challenges and risks with micro-matching supply and demand using rapid replenishment are the risk for local capacity which is capacity is decentralized, leading to poorer utilization.
The risk for local inventory is obsolete inventory, and it needs the extra space. The risk for rapid replenishment is increasing the cost of replenishment and receiving. The most risk is when supply and demand are not matched, and inventory excesses and shortages occur. Also, it will increase the transportation cost. Part C 1. Facility location: Majority of its new stores in areas with existing cluster of stores. There are many stores in a particular area. Entry into any new market was built around a cluster of 50- 60 stores supported by a distribution center.
Such clustering gave seven eleven Japan a high density market presence and allowed it to operate an efficiency distribution system. 2. Inventory management: Four categories of food are chilled temperature, warm temperature, frozen and room temperature. Seven Eleven’s information system manage inventory through their graphic order terminal and receive inventory using the scanner terminal. POS register of Seven Eleven tracks inventory at a very detailed level, and also manage deliveries to match demand by time of day. 3. Transportation: The transportation system is flexible to maximize responsiveness while also achieving efficiency.
At seven Eleven Japan, all stores are close to each other, and the distribution center is located near them that can make one round delivery to all the stores faster, and more convenient. While at U. S, the stores are not close to each other for a convenient delivery, and they should use outsourcing. 4. Information infrastructure: Seven-Eleven Japan attributed a significant part of its success to the Total Information System installed in every outlet and linked to headquarters, suppliers, and the Seven-Eleven distribution centers. The scanner terminal improves the efficiency of the delivery process.
The store computer linked to the ISDN network to communicate among the various input sources, tracked store inventory and sales, placed orders, provided detailed analysis of POS data, maintained and regulated store equipment. The POS register also keeps up the data information on customer sales, and cashiers records the age and sex of the customer. Part D When Seven Eleven doesn’t allow direct store delivery in Japan, but has the entire product flow from its distribution center, the benefit that they can get from this policy is the coordination, flexibility, responsiveness.
They also can manage less relationship in which the retail stores don’t have to work with each of the vendors, but only the distribution center. Direct store delivery more appropriate for the seven dream delivery concepts. Seven Eleven Japan would not be appropriate except one store has the serving local preferences. Perhaps, it also appropriate for emergency shipment or unique with onetime items that is heavy. Part E In the point of view, the 7dream is a good idea to the customers who prefer to buy online and pick up in local convenience store. However, the issues ight be that 7dream would use up storage space, and require the store to be able to retrieve specific packages for customers. Also, the transportation will cost money, and sometime customers would cancel their order, and the packages already delivered to the local store. 7dream will use up storage space and require the store to be able to retrieve specific packages for customers. We think the 7dream concept is likely to be more successful in Japan than the United States because the size of Japan is much smaller, and compare with the number of stores. There are 10,615 stores over Japan and 5,798 in United States.
The small size of land and the great number of stores in Japan means that the density of the stores is very high. Therefore, customers can access to stores easily. On the other hand, the low density of stores in United State may cause inconvenience to customers. Part F Compared the geographic dispersion of Seven-Eleven stores between Japan and the U. S. the stores tend to be dense in Japan. Using the DCs distribution system can maximize to fill full every delivery truck, and decrease the delivery frequency to each store. Thus, it can reduce the delivery cost. However, in the U. S. he stores are not as clustered as in Japan. It is hard to make sure every outbound transportation truck full with delivery items. Using an outsourcing transportation can ensure the delivery trucks full, cut down the transportation cost, and urge the shipping fast. Part G Based on the different market demands, the fresh food items are classic and simple in the U. S. stores. Moreover, the fresh food sale is lower than Seven-Eleven Japan. The U. S. stores need the fresh food item to deliver daily or every two days. Therefore, using the outsourcing food distributors can reduce the production and transportation cost.
However, the Japanese customers request the stores to provide the variable fresh foods. More than 50 percent of food items change in the course of a year, because of the seasonal demand and new products promotion. In addition, its food delivery schedules should be flexible enough to match supply with demand. The fresh food items are delivered twice or three times per day. Hence, the in house distribution function is more suitable in Japan. It needs dedicated manufacturing plants to produce only fresh food for Japanese stores, and the dedicated DCs to ensure repaid and delivery.