Seven-Eleven Supply Chain Strategy and Operations: Case Study

Different ways a convenience store supply chain can be responsive

Seven-Eleven has expanded rapidly around the world (see Exhibit 6). The major growth has been in Asia, though the United States continues to be the second-largest market for SevenEleven. Once Seven-Eleven Japan acquired Southland Corporation, it set about improving operations in the United States. In the initial years, several Seven-Eleven stores in the United States were shut down. The number of stores started to grow beginning in 1998. Historically, the distribution structure in the United States was completely different from that of Japan. Stores in the United States were replenished using direct store delivery (DSD) by some manufacturers,
which accounted for about half the total volume. The remaining products were delivered by wholesalers.

With the goal of introducing “fresh” products, Seven-Eleven introduced the concept of combined distribution centers (CDC) around 2000. By 2003, Seven-Eleven had 23 CDCs located throughout North America supporting about 80 percent of the store network. CDCs delivered fresh items such as sandwiches, bakery products, bread, produce, and other perishables once a day. A variety of fresh-food suppliers sent product to the CDC throughout the day where they were sorted for delivery to stores at night. Fresh-food sales in North America exceeded $450 million in 2003. During this period, DSD by manufacturers and wholesaler delivery to stores also
continued.

In 2003, revenue in the United States and Canada totaled $10.9 billion with about 69 percent coming from merchandise and the rest from the sale of gasoline. The North American inventory turnover rate in 2003 was about 17 compared to over 50 in Japan. This performance, however, represented a significant improvement in North American performance.

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?

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?

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?

4. 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?

5. 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?

6. Seven-Eleven is attempting to duplicate the supply chain structure that has succeeded in Japan in the United States with the introduction of CDCs. What are the pros and cons of thisapproach? Keep in mind that stores are also replenished by wholesalers and DSD by manufacturers.

7. 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?