5) What do you think about the 7 dream concept for Seven – Eleven Japan?

From supply
chain perspective, is it likely to be more successful in Japan or United States? Why?

Answer:

The goal of Implementing 7 dream concept in the Seven Leven, Japan, an e-commerce
company, was to exploit the existing distribution system and the fact that stores were easily
accessible to most Japanese. Stores served as drop off and collection points for Japanese
customers. A survey by eSBook, a joint venture between Softbank, Seven-Eleven Japan,
Yahoo! Japan, and Tohan, a publisher, discovered that 92 percent of its customers preferred
to pick up their online purchases at the local convenience store, rather than have them
delivered to their homes. This was understandable given the frequency with which Japanese
customers visited their local convenience store. 7dream hoped to build on this preference
along with the synergies from the existing distribution system.

Deliveries from the online supplier can be brought to the DC where they are sorted along
with other deliveries destined for store. This increases the utilization of outbound
transportation allowing Seven-Eleven to offer a lower cost alternative to having a package
carrier deliver the product at home. The negatives are that 7dream will use up storage space
and require the store to be able to retrieve specific packages for customers.
The existing distribution network of Seven-Eleven and the frequency of visits by customers
in Japan is more successful. Online delivery is able to link with the existing network. The
high visit frequency ensures that packages are not occupying valuable store shelf space for a
long time. Also, the frequent visits ensure that the marginal cost to the customer of picking up
at Japanese Seven-Eleven is small. This is less likely to be the case in the United States. So in
summary I believe that 7-dream will be more popular in Japan because:

1) Store density is higher than that in US. So accessibility is better.

2) Americans do not mind having the product delivered directly to their home. They would
not go all the way to a store to pick up some item when for a few dollars; somebody would
just deliver it to you i.e. Americans prefer home delivery compared to the convenience store
pickups.
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 this
approach? Keep in mind that stores are also replenished by wholesalers and DSD by
manufacturers.

Answers:
The difficulty of duplicating the Japan supply chain structure in the United States follows
primarily from the much lower density of U.S. Seven-Eleven stores.

The Seven-Eleven stores are getting both direct store deliveries as well as wholesaler
deliveries to its stores. Setting up its own CDC’s does not allow Seven-Eleven to get the
same level of transportation aggregation as it gets in Japan. Its own distribution system would
help more if all wholesaler deliveries and direct store deliveries were stopped and routed
through the CDC.
Having its own distribution system would add much less value than in Japan given the lower
density of stores and larger distance between stores. Stores are also supplied by wholesalers
and DSD by makers.

The advantages and disadvantages are:

Advantages

1. Can ensure fresh supply of items.

2. Operational efficiency.
3. Consolidation of deliveries.
4. Cost effectiveness.
5. Close accessibility to a variety of goods by the customers as they can access easily a
variety of commodities in combined distribution centres.
6. Increased frequency of products delivery to various distribution centres enhancing the
matching of customer demands by the Company with high responsiveness.

Disadvantages:

1. Wholesalers may have issues because of these distribution centres.

2. Manufacturers may prefer Direct Store Delivery as they have more control here.
3. Increasing the wages of staff by sorting for delivery to stores at every night.
7) The United States has food service distributers like McLane that also replenish
convenience stores. What are the pros and cons having a distributer replenish convenience
stores versus a company like Seven- Eleven managing its own distribution function.

Answer:
A distributor brings much more value to the table in the United States relative to Japan.
Given the lower density of stores, a distributor is able to aggregate deliveries across many
competing stores. This allows a distributor to reach levels of aggregation that cannot be
achieved by a single chain such as Seven-Eleven. The big disadvantage to having all
deliveries done through a distributor is that Seven-Eleven is unable to exploit having a large
number of stores.

Advantages and Disadvantages of having a distributor replenish convenience stores vs. 7-11
managing its own distribution function are:

Advantages:

1. Managing the distribution system is entirely the distributor’s thing of concern.

2. Cost effective.
3. Having a distributor replenish convenience stores means that they do not have to invest
anything in distribution centres, fleet, personnel.
4. Proximity of distributors to distribution convenience stores added value as they very well
understand customer demands.
5. Outsourcing encourages specialization hence quality. The company will be able to focus
on her core business.

Disadvantages:

1. An additional cost for the company for outsourcing the service.

2. Less control over replenishment cycles and or quality of items
3. May not be as responsive as having own distribution function, because there is no direct
link between the company and the convenience stores and customers.
4. The level of service consistency cannot be fully monitored by the company.