Convenience Store Responsiveness: Strategies for Market Dominance - Essay Sample

Introduction

For a convenience store to be responsive, it has to enhance its ability to do the following: mitigate supply chain uncertainty, meet a high service level, build highly innovative products, and meet short lead times (Roh et al., 2014). Also, it has to respond to a growing quantity demand and handle a variety of products. These factors form the basis of the techniques that convenience shop chains should implement to be responsive. The first way is developing a market-dominance strategy. This approach might involve entering into new markets build around a cluster of several stores with distribution centers. This method will shorten the lead time, thus contributing to the responsiveness of the supply chain. While this strategy can help prevent the entrance of business rivals to dominated areas, it is a risk because it can drive management costs significantly. Besides, it can lead to an increase in the cost of infrastructure.

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The second approach is emphasizing regional merchandising to increase the number of commodities that are only found in the organization’s convenience store. Through this method also, the company will be in a better position to meet the local preferences. Regional merchandising can boost the responsiveness of the logistics network from the angle of products. Since it is challenging to predict preferences precisely, this method has risks that arise from uncertainties. Still, the organization can address this issue by implementing effective information systems. The third strategy is constructing integrated information systems for Seven-Eleven’s outlets. This system would link each outlet to suppliers, distribution centers, and the headquarters. In the long-run, this strategy will help the organization to meet the responsiveness requirement since it will drive sales and, more importantly, increase the rate of inventory turnover. However, sharing information with the stakeholders in the supply chain can expose the Seven-Eleven to a risk of disclosing sensitive information such as trade secrets.

Risks of Micro-Matching Demand and Supply

Advanced information and distribution systems can help Seven-Eleven to implement rapid replenishment strategies. More importantly, it is a way through which the organization can respond to orders quickly and place replenishment orders as soon as the demand arises. However, this logistics choice gives rise to several risks that can expose the firm to supply chain problems. First, there is a risk of stock-outs. Road congestion and natural disasters, for instance, can adversely impact the replenishment process. So, the organization is at risk of losing customers and damaging its corporate image in case there will be a shortage of merchandise.

Secondly, there is a risk of having an obsolete inventory. This problem arises because agile supply chains require chain employees who should be on standby every time to deliver products to their destinations accurately and quickly (Christopher, 2003). Without this capability, Seven-Eleven can end up with obsolete inventory. The approach, as well, can drive labor, management, and transportation costs (Federgruen & Yang, 2011; Silver et al., 2016). Thirdly, the company is at risk of leaking trade secrets since information sharing is integral to the success of rapid replenishment. Precisely, integrated supply chains that the organization needs to achieve its rapid replenishment goals can lead to the leakage of vital information. Other risks associated with using agile supply chains include lack of extra space and high transportation costs.

Choice of Inventory Management and Facility Location

All Seven-Eleven’s choices regarding information and transportation infrastructure besides the choice of store location and inventory management techniques are aimed at minimizing transportation and receiving costs. An aspect of dominance strategy, for instance, is structured to lower replenishment and marketing costs by opening a cluster of between 50 and 60 stores (Chopra, 2005). Besides, Seven-Eleven has centralized its manufacturing facilities as a way to lower inbound transportation costs. This strategy enabled the Japanese convenience store to get the maximum benefit from the aggregation of the storage infrastructure. These strategies help improve customer satisfaction. Madhani (2018) said that supply chains should be customer-focused to help an organization to build its competitive advantages.

One of the primary goals of Seven-Eleven is to achieve convenience. The organization realized this objective by locating is facilities in market segments closer to the customers. The need for a centralized facility also shaped the considerations for the stores' location. Eventually, these strategies enabled the organization to establish high-density target markets. In the long-run, Seven-Eleven will be in a better position to manage its stores because of the presence of stability and continuity market development strategies.

Additionally, Seven-Eleven has built robust distribution channels aimed at improving the efficiency and responsiveness of the logistics network. The organization ensured that suppliers delivered goods to distribution centers with the help of temperature-controlled trucks. In this case, the company had various categories of vehicles that transported goods from the distribution center to different retail stores. The aggregation of deliveries from multiple suppliers, in this regard, allowed the Japanese convenience store to reduce inbound transportation costs. The information infrastructure was also set in such a way that the store executives could easily use consumption data to place orders. This information infrastructure is useful to Seven-Eleven as it provides a mechanism for receiving orders at a point of collection and sorting them at the distribution centers. Here, the key point is that Seven-Eleven’s decisions and choices are structured to make both order transportation and receiving processes cost-effectively.

Direct Store Delivery Policy

The policy in place prohibits direct store deliveries. Instead, it requires all the supplies to flow through the main Seven-Eleven’s distribution center. This policy is beneficial for several reasons. First, the company can reduce replenishment cycles significantly by using a distribution center (Otto et al., 2010). Also, this policy ensures that a firm can maintain proper sales records and monitor it appropriately. Secondly, the process minimizes delivery time, which, in turn, enables the organization to maintain confidence among partners in its supply chain (Otto et al., 2010). Reduction of delivery time is beneficial in that it facilitates prompt delivery of fresh food supplies. With this policy in place, Seven-Eleven can replenish its stock continuously. Also, the company does not need an additional person when checking and receiving orders.

Thirdly, the policy helps Seven-Eleven lower transportation costs since its implementation requires a less number of trucks. The store would save costs in the long-run, considering that it will not be responsible for the maintenance of the distribution system. Since suppliers will be delivering their commodities on a central location, the firm will lower the utilization of the outbound delivery vehicles from the distribution center. In this view, an increase in deliveries will drive receiving costs at the stores.

Direct delivery of goods to the distribution centers rather than to the store is appropriate under two circumstances. First, when a company has large stores that can accommodate deliveries from multiple suppliers and secondly when a company has a reliable integrated store information system. If a system goes down, an organization may face several challenges and inconveniences during delivery at its distribution center. In such instances, the company may not have accurate forecasts, and timely deliveries may not be possible.

Seven-Dream Concept

Seven-dream is a good idea for the organization, and it makes sense because a vast majority of Japanese customers like picking their deliveries and shipments from convenience stores within the country. In this regard, a survey in Japan showed that about 92% of Yahoo’s and Seven-Eleven customers prefer to pick or collect their online deliveries at a convenience store around them (Chopra, 2005). Japanese prefer this method of delivery since, unlike Americans, they visit their local convenience stores frequently.

From the perspective of the supply chain, seven-dream is more likely to succeed in Japan than in the US. The reason is that the density of convenience stores is higher in Japan than in the United States. In other words, Japanese convenience stores can easily reach their customers because the country has a small market. With this phenomenon, Seven-Eleven, among other convenience stores, are easily accessible to Japanese people. Together, these points support the expansion of Seven-Eleven's distribution channels to meet the increasing demand and the needs of customers collecting their online deliveries at convenience stores across Japan.

Duplicating Japanese Supply Chain Model

The company will face multiple challenges implementing a supply chain structure that is used in Japan. This difficulty will arise from the idea that the density of US convenience shops is relatively lower than that of Japan. The problem is further compounded by the fact that the Japanese convenience shops are getting both wholesaler and direct store deliveries. Even if Seven-Eleven is to establish a distribution center in the United States, it will not have a transportation aggregation effective as the one it had developed in Japan.

However, using one’s distribution system is beneficial to the company if all direct store and wholesaler deliveries are to be flown through the central distribution center. Even then, establishing a distribution center will have a small impact in the United States, given larger distances between convenience shops. Also, the value will be much less than in Japan, considering that stores in the US have low density than in Japan. If Seven-Eleven is to implement the same supply chain in America, it is more likely that it will reduce the efficiency that it had attained in Japan. Still, the proposal has an array of benefits to the company.

The introduction of Combined Distribution Centers (CDCs) has four benefits that can improve Seven-Eleven’s chances of success in the United States. First, it can create economies of scale for distribution. The reason is that the company will be in a better position to track items in different stores across the country and direct them in one distribution center. The power of the buyer will also increase as the organization will be purchasing products in bulk. Secondly, there will be better control of supply chains and control for products.

Through CDCs, Seven-Eleven will monitor the quality of goods that flows along its supply chains and control them from a central location. In the long-run, the company will have lower supervision costs. Thirdly, the approach helps reduce workload at the stores as the employees would have adequate time to do inventory management. Lastly, it improves distribution efficiency besides lowering inventory management costs. The reason is that the CDC allows a company to minimize costs and deliver goods or commodities at the right time.

The major con of this approach is difficulty controlling supply chain functions, considering that there is only one distribution center. Under this approach, also the distribution system is inflexible. Yoshiteru...