Seven-Eleven's Supply Chain Strategy in Japan

1. 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?

A micro-match supply and demand using rapid replenishment makes Seven-Eleven possible to deliver consumers its goods in fresh with low inventory level, but there are some disadvantages as the costs of choosing this method. These disadvantages are mainly coming from low inventory level. Here are two different factors, irregular supplying condition and irregular demand on products.

At first, if problems occur in the supply chain processes such as distribution or manufacturing level, Seven-Eleven can't meet products orders from retail stores. For example, damages from natural disasters or union strike in the process of manufacturing or distributing goods hinder the retailer stores from receiving goods on due day. Then, the stores can't help avoid facing sales problem. There must be some period of blank.

Secondly, unusual and unexpected high demand on certain goods can't be immediately met. With higher inventory level, company can deal with unusual demand on certain goods even though rate of increase on demand is rapid, to some extent. However, keeping low inventory level with high frequency of delivery, time is needed for manufacturers to produce goods and for suppliers to distribute them to stores. Therefore, they can suffer hardship from deficiency.

2. 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?

Seven-Eleven based its fundamental network expansion policy on a market dominance strategy. It set up retailing cluster by centralizing 50-60 franchise stores in certain area. The dominance strategy improved distribution efficiency, brand awareness, system efficiency, franchise support services efficiency, ad effectiveness, and made entrance barrier to competitors. It decided to increase delivery frequency and maintain rapid replenishment to ensure the quality and freshness of goods, while lower the storage cost by reducing inventory level. In addition, in order to have linked information network among the operating departments, it introduced Integrated Store Information System which is installed in every outlet and linked at headquarters, suppliers, and distribution centers. As a result, POS system introduced in 1982' and Integrated Services Digital Network(ISDN) introduced in 1991 the participants at every supply chain level receive and analyze the cumulated consumers' data. The shared analysis on consumers' annual, monthly, weekly and daily purchase pattern helped Seven-Eleven to keep replenishment time short, orders flexible and the number of transportation trucks minimized. The series of systems and processes