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Case
Essay
Renata M. Ribeiro
Convenience stores have challenges related to growing market uncertainties and the
maximization
of
local
capacity.
If
fresh
foods
are
prepared
after
customer
order
(pull-process),
the
store
is
utilizing
its
local
capacity
to
fulfill
demand.
This
approach
can
reduce
excess
inventory
and
costs
associated
with
it.
The
risk
with
this
method
is
that
by
decentralizing
capacity,
available
resources
might
be
poorly
utilized.
Relying
heavily
on
suppliers
is
another
risk.
As
the
textbook
states,
a
facility
with
large
amount
of
excess
capacity
allows
for
more
demand
responsiveness
but
also
costs
more
money
and
can
decrease
efficiency.
In
the
other
hand,
a
high-utilization
facility
cant
respond
as
well
to
demand
fluctuations
but
will
be
more
efficient
per
unit
of
product
it
produces.
Achieving
a
balance
between
both
methods,
tailored
to
each
facility,
would
be
the
best
approach
for
any
convenience
store,
including
Seven-Eleven.
The benefits of Seven-Elevens strategy, aiming to closely match supply and demand are
that
stores
have
more
control
of
consumers
purchasing
patterns,
allowing
for
fast
replenishment
or
replacement
of
products
and
better
inventory
turnover
(INVT).
Also,
it
allows
for
bigger
responsiveness
to
seasonal
demand
through
modern
information
systems
and
the
consolidation
of
warehousing
and
transportation.
The
downturns
of
such
strategy
are
the
implicated
high
costs
with
transportation
and
delivering
methods
associated
with
it,
inconsistence
of
demand
(including
seasonal
demand)
resulting
in
over
or
under
stocking
and
risk
of
information
systems
failure.
Regarding
the
adoption
of
its
own
distribution
centers
(CDCs)
in
the
United
States
(US),
the
company
would
have
difficulties
created
by
the
lower
density
of
its
stores
in
the
country.
In
Japan,
they
can
benefit
from
a
high-density
market
presence
and
a
single
CDC
supports
clusters
of
50
to
60
stores,
whether
in
the
US
this
wouldnt
be
feasible,
considering
the
larger
distances
between
stores.
It
would
be
also
hard
to
achieve
the
same
high
level
of
transportation
aggregation
and
efficiency
in
the
US,
given
the
maintenance
of
the
wholesaler
deliveries
and
direct
store
delivery
(DSD)
systems,
which
are
still
necessary
in
the
broader
market
environment.
By
having
outside
distributors
replenishing
its
stores,
Seven
Eleven
could
benefit
from
overall
cost
reduction.
These
would
include
reducing
transportation
and
delivery
costs
by
the
aggregation
of
deliveries
through
diverse
suppliers
and
also
costs
associated
with
product
handling
and
labor.
It
may
also
make
it
possible
for
distributors
to
perform
its
functions
more
smoothly
and
without
interference,
with
regards
to
aggregation
and
demand.
But
the
risk
of
having
a
single
distribution
system
linked
to
the
entire
supply
chain
is
that
problems
and
breakdowns
could
result
in
service
disruption
and
high
costs.
Furthermore,
by
outsourcing
its
replenishment
cycle,
Seven
Eleven
would
have
less
control
of
its
supply
chain,
making
it
harder
to
integrate
its
information
systems
through
different
partners
and
possibly
increasing
the
number
of
deliveries
to
its
stores.