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 The main risk is obsolete inventory and the need for extra space.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 with what they need when they need it. This allows for centralization of cooking capacity and low levels of inventory, but increases the cost of replenishment and receiving.
The main risk for Seven-Eleven is the potentially high cost of transportation and receiving at stores.
Seven-Eleven does not allow direct store delivery in Japan but has all products flow through its distribution center to reduce the number of vehicles required for daily delivery service to each store, even though the delivery frequency of each item was quite high. At the distribution center, delivery of like products from different suppliers was directed into a single temperature controlled truck. Each truck made deliveries to multiple retail stores. None of the distribution centers carried any inventory; they merely transferred inventory from supplier trucks to Seven-Eleven distribution trucks. This dramatically reduced delivery costs and enabled rapid deliver of a variety of fresh foods.
Direct store delivery is more appropriate when the store only purchases from a few manufacturers/suppliers, and when the items are...