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Associated Risks
Increased upfront investment in integrated
infrastructure
comprising
warehouse,
IT,
transportation, vendors and stores is required.
Seven- Eleven Japan micro matches the supply and demand through
following methods.
1. Collecting and analyzing store level POS data and forecasting.
2. Changing the shelf content based on the time of day.
3. Frequent change of product mix around 50% of the items sold
in the SEJ stores are changed each year.
4. Manufacturing start of after receipt of order
5. Rapid order fulfillment through multiple trips to store in a
single day.
6. ISDN network attaching stores, vendors and warehouses
The risks associated with the choice are
1. Shorter forecasting horizon (changing display throughout the day
and changing 50% of the products each year) would result in lower
margins of error and increases risk of stock outs and obsolescence if
the actual demand differs.
2. Break down of transportation network or a glitch in the IT network
would result in complete disruption in material availability affecting
the service level.
3. Frequent ordering would increase the associated labor and IT
infrastructure costs which lead to higher fixed costs, making the
system inherently risky in case of falling demand.
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?
SEJ have a responsive and flexible strategy in place to closely match
the customer demand. This enables them to alter the delivery
schedules based on the customer demand. The supply chain has
several items borrowed from the agile just in time system.
The facility location, transport network, IT infrastructure and inventory
management have been built around this core strategy.
1. Location- SEJ uses a market dominance strategy, where in they
have a scluster of 50-60 stores in a geographic location supported
by a distribution center. This location enables SEJ to aggregate the
demand and ensures viability of multiple trips to the same store.
2. Inventory Management- SEJ has a high inventory turnover of 50,
which shows that the average level of inventory is quite low in the
stores. This is achieved by frequent order fulfilment through