Supply Chain Management: Seven Eleven Japan Case Study

7-eleven-brand

1.A convenience store chain attempts to be responsive and provide customers with what they need, when they need, 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?

Ada beberapa metode bagi convenience store untuk menunjukkan responsivitas mereka pada pelanggan, seperti yang  telah dilakukan oleh  SevEl di Jepang berikut ini:

 

a.Penambahan jumlah pusat distribusi, vendor, atau toko di lokasi-lokasi yang potensial sehingga pelanggan yang banyak dapat dipenuhi kebutuhannya dengan segera tanpa perlu menunggu lebih lama. Selain itu jumlah fasilitas yang banyak dapat mengurangi jarak tempuh pelanggan ke toko-toko mereka sehingga frekuensi kunjungan pelanggan bisa meningkat. Namun resikonya adalah butuh biaya investasi dan biaya perawatan yang besar untuk mendirikan dan merawat semua toko.

 

b.Menambah  kapasitas pengiriman barang (rapid replenishment) untuk memenuhi kebutuhan/permintaan pelanggan yang lebih banyak. Walau butuh biaya lebih banyak untuk transportasi dengan kapasitas lebih besar, ada juga biaya pengisian barang toko, dan biaya pemindahan barang. Selain itu ada kemungkinan ketidakpastian yang lebih besar apabila yang dikirim dalam jumlah besar tersebut adalah makanan/minuman yang cepat basi.

 

c.Menambah jumlah inventori pada Stock Keeping Unit tertentu sehingga status barang selalu tersedia. Namun metode ini butuh biaya inventori dan ruang penyimpanan ekstra dan juga dapat berakibat buruk jika barang yang disimpan tersebut adalah barang yang hanya laku pada waktu singkat atau hanya pada musim tertentu.

 

d.Membuat sistem informasi terpadu antara pemangku kepentingan yang terlibat (vendor,  pusat distribusi, manajer toko, pelanggan) sehingga proses aliran informasi bisa lebih cepat dan efisien. Ketidakpastian juga dapat muncul jika ada kesalahan teknis pada jaringan maupun pengguna yang menyebabkan ada ketidakcocokan permintaan dan suplai.

 

  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 risk associated with this choice?

 

Strategi micro-match supply and demand dengan menggunakan rapid replenishment yang dilakukan SevEl di Jepang dilakukan secara periodik dengan jumlah pengiriman yang telah diatur secara default sesuai dengan forecast yang telah dilakukan sebelumnya. Resiko muncul jika terjadi kesalahan forecasting ketika terjadi kesalahan dalam komunikasi yang membuat jumlah permintaan dan suplai tidak ekivalen. Akibatnya bisa terjadi kelebihan stok atau malah kekurangan stok. Misalnya jika terjadi permintaan yang tinggi secara tiba-tiba dari sekelompok turis pada musim liburan yang menyebabkan stok di toko berkurang drastis sementara jadwal replenishment masih jauh dari saat tersebut, sehingga mengganggu jumlah ketersediaan stok bagi pelanggan lain.

Masalah lain muncul jika waktu pengiriman barang ikut tertunda yang menyebabkan banyak komplain dari pelanggan akibat layanan yang kurang memuaskan dan juga terganggunya jadwal pengiriman berikutnya.

 

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 : kebijakan ekspansi dengan strategi dominansi pasar, dimana toko SevEl dibangun di sekitar cluster yang terdiri dari 50-60 toko berbeda yang didukung oleh sebuah Distribution Center dan menerima banyak permintaan dari pelanggan di sekelilingnya. Lokasi toko yang berdekatan dapat memudahkan truk pengangkut untuk mengantar muatan yang dipesan oleh masing-masing toko.

 

Inventory Management : SevEl memiliki replenishment cycle yang cepat karena dikendalikan oleh permintaan atau pesanan  pelanggan. Hanya beberapa jenis barang yang disimpan dalam gudang inventori. Selebihnya adalah makanan atau minuman yang perlu diantarkan segera agar produk tersebut tetap fresh sampai ke hadapan si pelanggan. Ada juga barang-barang yang sedang trend di musimnya yang juga langsung dikirimkan oleh supplier ke toko-toko SevEl melalui distributor karena apabila disimpan dalam waktu lama, maka barang tersebut akan melewati musim trend nya,dan menjadi tidak laku lagi.

 

Transportation : Supplier menyediakan barang pesanan setelah menerima order dari Sistem Informasi Toko Terpadu. Setelah melalui proses manufaktur, maka barang tersebut dikirimkan ke Distribution Center sesuai jadwal harian, mingguan, atau bulanan yang telah diatur oleh manajer SevEl sehingga diperoleh responsiveness yang efektif dengan biaya tetap minimal.

 

Information Structure : SevEl menggunakan Total Information System yang menghubungkan kepala perusahaan, toko-toko, vendor-vendor, pusat distribusi, dan pelanggan sehingga rantai suplai lebih responsif dan efektif. Sistem informasi ini mencocokkan data permintaan dan suplai sehingga tercapailah tingkat responsif yang tinggi dan biaya produksi dan replenishment lebih rendah.

 

4.Seven-Eleven does not allow direct store delivery in Japan but has all products flow through its distribution centre. What benefit does Seven-Eleven derive from this policy? When is direct store delivery more appropriate?

 

Pusat distribusi memiliki beberapa peran penting bagi SevEl seperti mengurangi beban manajer toko dalam memeriksa, menghitung, dan mengurus pemindahan barang dari pabrik ke toko, terutama saat manufaktur mengirim sejumlah kecil paket order barang dalam siklus yang cukup cepat yang dapat merepotkan manajer jika dikirim berulang-ulang. Disinilah distribution center berperan mengumpul paket barang dan mengirimnya ke toko retail SevEl sehingga manajer sendiri dapat tetap fokus menjaga dan meningkatkan layanan terhadap pelanggan. Selain itu manajer dapat menyerahkan sistem SevEl pada distribution center untuk mereka jalankan sehingga  sistemnya tetap berjalan sesuai standar keinginan SevEl.

Direct Shipping Deliveri lebih cocok digunakan ketika pengiriman yang dilakukan benar-benar menggunakan kapasitas maksimum truk pengantar dari manufaktur ke toko retail, sehingga dapat meminimalkan biaya transportasi. Bisa juga dilakukan apabila barang-barang yang dikirimkan sudah terjamin sesuai dengan jumlah, standar, dan keamanan sistem yang dimiliki oleh SevEl sendiri.

 

5.What do you think about the 7dream concept for Seven-Eleven in Japan?From a supply chain perspective, is it likely to be more successful in Japan or the United States? Why?

 

7dream menerapkan konsep yang menggunakan Seven-Eleven sebagai tempat inventori barang sekaligus tempat pengambilan barang oleh pelanggan di daerah terdekat pada sistem online delivery. Konsep inilah yang menyebabkan kesuksesan besar 7dream, karena dari hasil survey yang dilakukan pada pelanggan, mereka lebih memilih untuk mengambil barang yang mereka beli di drop off area terdekat daripada diantar langsung ke tujuan atau alamat rumah. Hal ini menjadi pertimbangan penting pelanggan karena mengingat tidak terjamin dan amannya barang jika di antar sampai ke tujuan. Tetapi hal ini juga menjadi salah satu isu dimana kemungkinan pelanggan tidak mengambil barang secepatnya sehingga memakan tempat yang barang yang tidak diimbangi dengan kapasitas toko Seven Eleven.

 

Dari segi perspektif supply chain, memang di Jepang lebih sukses daripada di Amerika.

Karena di Jepang mereka menerapkan sistem atau konsep yang memakai delivery network dan frekuensi pengunjung Seven Eleven. Penggunaan jaringan yang telah ada ini selain mengurangi cost juga merupakan point kesuksesan 7dream di Jepang. Dan kunjungan pelanggan yang sering ke Seven Eleven membuat barang yang berada pada inventori Seven Eleven cepat diambil dan tidak memakan tempat yang lain. Hal inilah yang menjadi penghambat di Amerika dikarenakan perbedaan budaya dan kebiasaan masyarakatnya.

 

6.Seven-Eleven is attempting to duplicate supply chain structure that has succeed in Japan and 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.

Pengimplementasian struktur supply chain SevEl Jepang ke SevEl Amerika bisa dilakukan tetapi tidak akan persis sama struktur supply chainnya. Akan banyak kendala yang dihadapi jika mengimplementasikan supply chain SevEl Jepang di Amerika. Salah satunya dikarenakan perbedaan budaya organisasi di kedua daerah serta kemungkinan besar suppy chain tidak akan berjalan normal. Disamping hal tersebut ada juga perbedaan antara budaya lokal Jepang dan Amerika seperti  kebiasaan masyarakat serta SevEl bukan hanya perusahaan yang mendominasi daerah Amerika layaknya Jepang melainkan masih ada company seperti SevEl yang juga mendominasi di daerah Amerika. Hal tersebutlah yang sangat mempengaruhi tingkat kesuksesan supply chain yang sangat bergantung atas banyak faktor.

 

Tetapi, pengimplementasian sistem SevEl Jepang di Amerika juga memungkinan karena sudah terbukti secara nyata sukses di Jepang. Dan untuk penyesuaian sistem bisa dilakukan secara hybrid, yaitu dilakukan di daerah-daerah di Amerika yang memiliki peluang sukses lebih besar.

 

7.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-Elecen managing its own distribution function?

 

Pros: Keuntungan dari memiliki distributor outsource ialah pada biayanya. Pengurangan biaya yang diperlukan untuk transportasi material atau produk serta pembiayaan karyawan untuk sistem distribusi. Hal ini juga sangat berpengaruh terhadap desain dari sistem yang dibangun, karena memungkinkan perusahaan mempercepat arus dari produk, operasional, dan dana serta tidak adanya intervensi dari pihak ketiga.

 

Cons: Hal pertama yang paling tidak menguntungkan dari distributor outsource adalah hilangnya kontrol penuh terhadap flow dari produk, operational, dan fund. Dan juga integrasi yang sulit terhadap sistem yang telah dibangun sebelumnya oleh perusahaan.

 

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SUPPLEMENT

 

  1. 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

 

  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?

 

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.

 

  1. What has Seven-Eleven done in its choice of facility location, inventory management, transportation, and information infrastructure to……

 

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1) A convenience store chain can be responsive and provide customers what they need, when they need it, where they need it. What are some different ways that a convenient store supply chain can be responsive? What are some risks in each case?

 

  • Increasing Location

Build several stores within the same geographical area with minimum distance apart from one another to gain the accessibility by customers.

Risk: Having too many stores close to one another can have cannibalizing effect on the stores.

 

  • Rapid Replenishment

Supply the stores with what customers need when they need it. It also enables the stores to have low levels of inventory.

Risk: Having too frequent replenishment of products to different locations will increase the cost of transportation.

 

  • Increasing Inventory

Offer the customers with greater varieties and quantities of products at all the stores to suit their preferences.

Risk: Having greater varieties of products will cause low level of error in forecasting demand and consequently increase wastage, if any; having high level of inventory will increase the holding cost and make the stores less efficient.

 

  • Extensive Use of Information System

Help the store managers to forecast the demand with greater accuracy to better satisfy the needs of customers.

Risk: Having the entire supply chain heavily dependent on the information system will cause the operation going haywire in the case of network failure.

 

  • Increasing Capacity

Expand the space of the stores to better facilitate the store activities and…

 

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  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:

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.

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.

Rapid replenishment: Another approach is to set up rapid replenishment and supply the stores what they need and when they need it. This allows for centralization of cooking capacity, low levels of inventory, but increases the cost of replenishment and receiving.

  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?

The main risk for Seven-Eleven is the potentially high cost of transportation and receiving at stores.

  1.        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?

All choices made by Seven-Eleven are structured to lower its transportation and receiving costs. For example, its area dominance strategy of opening at least 50-60 stores in an area helps with marketing but also lowers the cost of replenishment. All manufacturing facilities are centralized to get the maximum benefit of capacity aggregation and also lower the inbound transportation cost from the manufacturer to the distribution center (DC). Seven-Eleven also requires all suppliers to deliver to the DC where products are sorted by temperature. This reduces the outbound transportation cost because of aggregation of deliveries across multiple suppliers. It also lowers the receiving cost. The information infrastructure is set up to allow store managers to place orders based on analysis of consumption data. The information infrastructure also facilitates the sorting of an order at the DC and receiving of the order at the store. The key point to emphasize here is that most decisions by Seven-Eleven are structured to aggregate transportation and receiving to make both cheaper.

  1.        SEVEN-ELEVEN DOES NOT ALLOW DIRECT STORE DELIVERY IN JAPAN, WITH ALL PRODUCTS FLOWING THROUGH ITS DISTRIBUTION CENTER. WHAT BENEFIT DOES SEVEN-ELEVEN DERIVE FROM THIS POLICY? WHEN IS DIRECT STORE DELIVERY MORE APPROPRIATE?

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 truck load 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.

  1.        WHAT DO YOU THINK ABOUT THE 7DREAM CONCEPT FOR SEVEN-ELEVEN JAPAN? FROM A SUPPLY CHAIN PERSPECTIVE IS IT LIKELY TO BE MORE SUCCESSFUL IN JAPAN OR THE UNITED STATES? WHY?

7dream makes sense given that Japanese customers are happy to receive their shipments at the local convenience store. From a logistics perspective, online deliveries can piggy back on Seven-Eleven’s existing distribution network in Japan. Deliveries from the online supplier can be brought to the DC where they are sorted along with other deliveries destined for a store. This should increase the utilization of outbound transportation allowingSeven-Eleven to offer a lower cost alternative to having a package carrier deliver the product at home. The primary negatives are that 7dream will use up storage space and require the store to be able to retrieve specific packages for customers.

One can argue that the concept may be more successful in Japan given the existing distribution network of Seven-Eleven and the frequency of visits by customers. Online delivery is able to link with the existing network. The high visit frequency ensures that packages are not occupying valuable store shelf space for a long time. Also, the frequent visits ensure that the marginal cost to the customer of picking up at a Japanese Seven-Eleven is small. This is less likely to be the case in the United States.

  1.        SEVEN-ELEVEN IS ATTEMPTING TO DUPLICATE THEIR SUCCESSFUL JAPANESE SUPPLY CHAIN STRUCTURE 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 MANUFACTURERS.

The difficulty of duplicating the Japan supply chain structure in the United States follows primarily from the much lower density of U.S. Seven-Eleven stores. This is compounded by the fact that Seven-Eleven stores are getting both direct store deliveries as well as wholesaler deliveries to its stores. Setting up its own DCs does not allow Seven-Eleven to get the same level of transportation aggregation as it gets in Japan. Its own distribution system would help more if all wholesaler deliveries and direct store deliveries were stopped and routed through the DC. Even then, having its own distribution system would add much less value than in Japan given the lower density of stores and larger distance between stores.

  1.        THE UNITED STATES HAS FOOD SERVICE DISTRIBUTORS LIKE MCLANE 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?

One can contend that a distributor brings much more value to the table in the United States relative to Japan. Given the lower density of stores, a distributor is able to aggregate deliveries across many competing stores. 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. In fact, it may be argued that going through the distributor has Seven-Eleven subsidize deliveries to competing smaller chains that may also be using the same distributor.

 

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