The case discusses about the operation of the world’s largest convenience store chain Seven-Eleven in Japan, and the way it became Japan’s top leading super market chain. Seven–Eleven started its operation in Japan in November 1973 under an area licensing agreement between Ito-Yokado Co., Ltd., and The Southland Corporation. With more than 15,500 stores worldwide, Seven-Eleven Japan Co., Ltd (SEJ) franchises 6,900 stores in Japan and most of the remaining stores located in North America. SEJ has maintained the top position in convenience stores in Japan for twenty years since it opened its first store in downtown Tokyo in May 1974 under the strong leadership of Mr. Suzuki (Chairman and CEO of SEJ). The retail chains total sales including franchise stores in 1997 were $16 billion with record net profit of $550 million, making it the largest retail chain store in Japan. It also had the highest average sales per store per day among the three leading convenience store chains SEJ, Daiei Convenience Systems and Family-Mart. SEJ's commanding market position and outstanding performance has been largely due to its pioneering innovation in rationalizing Japan's convenience retail industry. The convenience store concept is brought to Japan by Southland Corporation, which provides SEJ with the necessary know-how to get started. However, SEJ's innovation in supply chain management soon placed it far ahead of Southland in both profitability and business process technology.
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?
A convenience store can be more responsive by doing exactly what Seven-Eleven Japan is doing; many locations, rapid replenishment, appropriate technology deployment, and an equally responsive supplier. As responsiveness increases, the convenience store chain is exposed to greater uncertainty. A convenience store chain can improve responsiveness to this uncertainty using local capacity, local inventory and rapid replenishment. Local capacity is the convenience store chain that can provide local cooking capacity at the stores and assemble foods almost on demand. Inventory would be stored as raw material. Local inventory approach is to have all inventory available at the store at all times. This allows for the centralization of cooking capacity. Rapid replenishment 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. The risks associated with this system are the costs coupled with demand uncertainty. If demand patterns change dramatically, or the customer base changes, then Seven-Eleven is left with an operation that is not needed. In Seven-Eleven Japan’s case, multiple operations might be shuttered if an apartment building or large employer shuts down or relocates. 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?
Micro-matching supply and demand using rapid replenishment assumes that each store will repeat the same demand pattern on a daily basis. The tour bus phenomenon, where a group of unanticipated customers comes to the store and buys all of a type of product will cause difficulty for regular customers. During such an event, the store will likely stock out and customers may visit the next Seven-Eleven site down the block to make their purchases. Some of this demand may permanently shift, causing a local ripple; the replenishment may be excessive at one site and insufficient at an adjacent site for the next cycle. Another possible issue would...
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