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Cloud computing is the next stage in evolution of the Internet. The cloud in cloud computing everything from computing power to computing infrastructure, applications, business processes to personal collaboration. Cloud computing can be delivered to you as a service wherever and whenever you need over the Internet. With cloud computing, the consumer needs nothing but a web browser and Internet access. The web browser can be a traditional desktop or laptop PC, a Net book, or a mobile device such as a PDA, smart phone like Blackberry or iPhone.

The cloud itself is a set of hardware, networks, storage, services, and interfaces that enable the delivery of computing as a service. Cloud services include the delivery of software, infrastructure, and storage over the Internet (either as separate components or a complete platform) based on user demand.

The concept of cloud computing is one of a user sitting at a terminal taking advantage of services, storage space, and resources provided somewhere else, on another computer, through an Internet connection.

Example, if I’m the user, my word processor documents may be stored on one computer; along with the program I use to edit the documents. My pictures and videos are stored on another computer. My email is saved on a third machine that I can access from any workstation. I also have a personal calendar, photo album, links to favorite sites, and more saved in cyberspace.

SO Where is my documents, email, favorites and pictures? If you ask me, I will just say Google Docs, Hotmail, Scrapblog and Flickr. I will just give you the URLs. But if you ask me to draw a map for the specific location, I will be very confuse!!!. In fact, I don’t know. My emails might be in LA and my documents were in DC. Then they’ve been moved to other servers. But the URLs haven’t changed.                             I just know is that they’re “out there” – in the cloud…

Grid computing

It is a form of distributed computing, the combination of computer resources from multiple domains applied to a common task, usually to a business problem that requires to process large amounts of data. It has been used long time before the cloud computing get in the picture but from the graph above (Google trends) it’s show that the trend of the grid computing is starting to get downward.

Utility computing

Utility concept is quite similar to cloud computing in the term of rented service such as software. It’s also some kind of computing resources such as storage, metered service. This system has low or no initial cost for hardware. Therefore utility computing always remain low in the trend.

In1960, the concept of cloud computing had begun, when John McCarthy opined,

“If computers of the kind I have advocated become the computers of the future, then computing may someday be organized as a public utility just as the telephone system is a public utility… The computer utility could become the basis of a new and important industry. “                                     John McCarthy, MIT Centennial in 1961

In 1997, the first academic definition of cloud computing was provided by Ramnath K. Chellappa who called it a computing paradigm where the boundaries of computing will be determined by economic rationale rather than technical limits.

In 1999 by Marc Andreessen, was one of the first to attempt to commercialize cloud computing with an Infrastructure as a Service model.

By the turn of the 21st century, the term “Cloud Computing” began to appear more widely, although most of the focus at that time was limited to SaaS (software as a service), called “ASP’s” or Application Service Providers.

Amazon having found that the new cloud architecture resulted in significant internal efficiency improvements. It played a key role in the development of cloud computing by modernizing their data centers after the dot-com bubble, which like most other computer networks were using as little as 10% of their capacity at any one time just to leave extra space for occasional of peak data.

In 2007, Google, IBM, and a number of universities embarked on a large-scale cloud computing research project.

By mid-2008, Gartner (an information technology research and advisory firm) saw an opportunity for cloud computing;

“To shape the relationship among consumers of IT services, those who use IT services and those who sell them”, and observed that;

“Organizations are switching from company-owned hardware and software assets to per-use service-based models” so;

“The projected shift to cloud computing will result in dramatic growth in IT service.”

4. 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 manufacturer?

There has been useful advantage of Seven-Eleven upon CDC and DSD as the centers allow smoothing of distribution operation to the stores and the provision of better quality and better information on supply and deliveries is available and there was control of the supply chain as achieved. The presence of technology like the adaptation of the POS system can possibly move ahead and do aid the store employment and management situation by freeing up staff time.

Seven-Eleven U.S. has begun introduce the Combined Distribution Center daily delivery of fresh-prepared foods around 2000. By partnering with multiple food companies, the convenience retailer will be able to offer fresh-made-daily and delivered-fresh-daily pastries, gourmet sandwiches, wraps, entrees, as well as other perishable and ready-to-eat foods once a day. This was a challenge because the CDCs are operated by several different third-party partners, and Seven-Eleven felt it did not have effective metrics for comparing performance to a reliable benchmark. This was due to many factors, including different facility sizes, building layouts and the variety of products handled by each CDC.

pros

• Added choices to customers in perishable consuming. Seven-Eleven can add other specialty items to its selection such as fruit salads, seasonal whole and cut fruit, fresh-squeezed juices and produce from a farmer’s market. The consumers can easily get the fresh perishable products near their house.
• Daily delivery means just that Seven-Eleven stores can place orders to the CDC and get fresh product by sorting for delivery to stores at every night
• With the company’s proprietary retail information system, each store can customize its order to provide the exact items the customers in their neighborhood want.
• Receiving fewer deliveries to your store during the day. In this advantages, the stores no need to waste the time to check through each delivery because all needed products will be set up and combined since the Distribution Centers.
• Expedite business for local food companies, which can now make one delivery to a central location for distribution to local stores.
• Reduce the holding Inventory Cost. Stores can order just the amount they sell in a day or two, so they don’t have product sitting around on the shelves. That means that they can guarantee the freshness in the perishable products at Seven-Eleven.
• The staffs are able to consolidate work and spend more time with your customers, growing your business. As they will check the stock and place the order to the CDC and receive the product at night.
• The suppliers can delivery in large amount with one full truck load as there has a store big enough to keep the products with the method to keep the product longer and still perish. Cons
• Much lower density (hence longer distance) of U.S. Seven-Eleven stores. Deliver a few product everyday may using too much cost with the longer distance of each branch. Need to increase density, even though setting up own system only reduce problems by eliminating delivers
• Increase transportation cost at stores because of increased delivers. As Distribution Centers need to deliver the product everyday with a few amounts in order to keep the freshness of the product.
• Losing the economics of scale advantages, as Seven-Eleven need to order the product everyday in the fewer amounts.
• High costs of keeping the products as some products need a specific temperature to keep them

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?

“Filling in the entire map of Japan is not our priority. Instead, we look for demand where Seven-Eleven stores already exist, based on our fundamental area dominance strategy of concentrating stores in specific areas.” this above statement shown that to ensure that the support of Seven-Eleven Japan’s facility location to its supply chain strategy, Seven-Eleven Japan has based its fundamental network expansion policy on a market dominance strategy.

Wherever Seven-Eleven Japan entries into any new market, it was built around a cluster of 50 – 60 stores supported by a distribution center. The main reason of applying cluster strategy, it is that clustering gave Seven-Eleven Japan a high-density market presence and allowed it to operate an efficient distribution system. There are several benefits of implementing the market-dominance strategy including such as boosting distribution efficiency, improved brand awareness, increasing the system efficiency, enhancing efficiency of franchise support services, improving advertising effectiveness and preventing competitors’ entrance into the dominant area.

For inventory management, what Seven-Eleven Japan had done to develop capability that support its supply chain strategy is to offer its stores a choice from a set of 5,000 stock keeping units and each store could carry on average about 3,000 stock keeping units depending upon the local customer demand. Seven-Eleven emphasized regional merchandizing to cater precisely to local preferences. Each store carries food items, beverages, magazines, and consumer items such as soaps, detergents, etc.

The highest generated sale of Seven-Eleven is under food category, and under Seven-Eleven Japan concept, the food items were classified in four broad categories including Chilled items such as sandwiches, delicatessen products, and milk; Warm items such as box lunches, rice balls, and fresh bread; Frozen items such as ice-cream, frozen foods, and ice cubes; and Room-temperature items such as canned food, instant noodles, and seasonings. The efficiency in managing the inventory of Seven Eleven Japan could be proved by the resulted of inventory turnover rate is equal to over 50 when comparing to the second largest Seven Eleven in the United States is only about 17 in 2003.

For transportation or distribution system of Seven Eleven Japan, the system was tightly linked the entire supply chain for all product categories as Seven Eleven distribution centers and the information network played a key role in that regard. Its main objective is to carefully track sales of items and offer short replenishment cycle times. In 1987, Seven Eleven Japan had offered three times daily store delivery of all rice dishes and twice a day for fresh food. Its distribution system was flexible enough to alter delivery schedules depending on customer demand. When a store placed an order, it was immediately transmitted to the supplier as well as the distribution center. The supplier received orders from all Seven Eleven stores and started production to fill the orders. The supplier then sent the orders by truck to the distribution center. The key to store delivery was what Seven Eleven called the combined delivery system.

At the distribution center, delivery of like products from different suppliers was directed into a single temperature controlled truck. There were four categories of temperature-controlled trucks such as frozen foods, chilled food, room temperature processed foods, and warm foods. The number of stores per truck depended on the sales volume. The system worked on trust and did not require the delivery person to be present when the store personnel scanned in the delivery; this helps to reduce the delivery time spent at each store. Based on the information, it shown that Seven Eleven has continuously improve its transportation and distribution system, since 1974, there were 70 vehicles visited each store every day but later on in 1994, there were only 11 vehicles necessary. This dramatically reduced delivery costs and enabled rapid delivery of a variety of fresh foods. In 2004, Seven Eleven Japan had a total of 290 dedicated manufacturing plants throughout the country that only produced fast food for Seven Eleven stores. The items were distributed through 293 dedicated distribution centers that ensure rapid and reliable delivery. None of there distribution centers carried any inventory, they merely transferred inventory from supplier trucks to Seven Eleven distribution trucks. Transfleet Ltd., a company set up by Mitsui and Co. for exclusive use of Seven Eleven Japan, provided this transportation.

For information infrastructure, Seven Eleven Japan attributed a significant part of its success to the Total Information System installed in every outlet network linking the head office, stores, and the Seven Eleven distribution centers. Until July 1991, only a traditional analog network linked these chains. Later on, an integrated services digital network or ISDN was installed, linking more than 5,000 stores; it became one of the world’s largest ISDN system. This system enables Seven Eleven to collect, process, and feed back point of sales data quickly. Sales data generated in each stores by 11.00p.m., was processed and ready for analysis the next morning.

In 1997, Seven Eleven Japan was introduced its fifth generation of the Total Information System, which was still in use in 2004, the hardware system included as the following; Graphic Order Terminal, this was a handled device with a wide-screen graphic display, use by the store owner or manager to place the order. Once all the orders were placed, the terminal was returned to its slot, at which point the orders were relayed by the store computer to both the appropriate vendor and the Seven Eleven distribution center. Scanned Terminal, these scanners read bar codes and recorded inventory. They were used to receive product coming in from a distribution center. This was then automatically checked against a previously placed order and the two were reconciled. This scanner terminal was also used when examining inventory at stores.

Store Computer, this linked to the ISDN network, the POS register, the graphic order terminal, and the scanner terminal. It communicated between the various input sources, tracked store inventory and sales, places orders, provided detailed analysis of POS data, and maintained and regulated store equipment. POS register; this POS data was automatically transmitted online to a host computer. All sales data collected by 11.00p.m. was organized and ready for analysis by the next morning. The data was evaluated on a company wide, district, and store basis.

Due to Seven Eleven done in its choice of information infrastructure to develop capability that support its supply chain strategy, the information system allowed Seven Eleven store to better match supply with demand. Store staff could adjust the merchandising mix on the shelves according to consumption patterns throughout the day. The identification of slow and non-moving items also allowed a store to convert shelf space to introduce new items.

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?

By using rapid replenishment system, Seven-Eleven Japan store can manage lower inventory in the store and higher shelf space available. This fit for Seven-Eleven in Japan because of smaller size of the store. But it still have some risk in case of a very fluctuated demand, when the demand raise to a very high level the inventory that the store stock might not be enough to serve customers demand. This situation will lead to loss of a sale and lower customer’s satisfaction.

The rapid replenishment is a core concept to lean thinking. It’s how you can manage the flow of inventory and how you can shorten the cycle time between each delivery. Which mean seven eleven will deliver more often and the quantity of the product between each deliver will depend on the demand of the customer that forecast from the Point Of Sale and previous Data. It allowed seven eleven to be able to control their inventory level because when they deliver more often they can deliver just few amounts at a time. Therefore there are also some risks associated with this system.

First, even though the rapid replenishment is a good system but the cost of replenishing and receiving is high. It’s because the system that require to put the rapid replenishment become efficient, for example they have to install the point of sale system to generate the sale information to the dc and supplier so they can deliver the good that fit for the curtain demand. For the receiving they also have to have the product scanner to scan the product when it arrives to the store. All of that equipment that’s required will raise the cost of the replenishing and receiving. Furthermore, the receiving cost also high because of the number of the delivery that higher too.

Second, even though rapid replenishment helps seven eleven to maintain their inventory level that drive by the demand of the customer, to save their inventory cost. Sometime it might be risk in the shorten of inventory(backlogs) because when seven eleven tried to micro match the demand and supply, seven eleven have to rely on the past purchasing data and the point of sale data. To be able to generate the demand forecast to deliver the product to each of seven eleven chain store. What if the demand has become so fluctuate to the point that it over their inventory level, that time seven eleven will be suffer from the empty shelf. As you know that the favorite items from seven eleven are such as lunchbox, rice ball and sandwich, so most likely if the consumer come during the high demand won’t have the food to consume. So most likely the consumer will go to other convenience store to buy the food to serve their need in that curtain time. If this scenario happen more that few time, the consumer most likely to switch the convenient store.

That’s why this is also the risk that seven eleven has to face and try to overcome in order to maintain their competitive advantage.

Third, the risk that they have to face is that they will not have the economics of scale in production because when they apply the rapid replenishment, the suppliers will only produce the product to match the need of the store when they need it. They won’t produce the same item for the large amount, which is if they produce in that way they won’t have to suffer from the set up cost in each batch that they have to produce.

Fourth, even though the rapid replenishment will lower the transportation but seven eleven still have to concern about the gas price because if the gas price raise it will again increase their operation cost. Then again seven eleven won’t be able to raise their product price to serve that cost too due to the incentive competition in the convenience market.

Fifth, Due to the system that when the trucks deliver the product to the store, there will be only the store people who scan and check the product in to the system. There will be no way of detecting the feud. The replenishment system worked on trust and did not require the delivery person to be present when the store personnel scanned in the delivery. This is a very risky system because store personnel may stoles the products. It can cause company loss in a million.

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?

As responsiveness increases, the convenience store chain is exposed to greater uncertainty. A convenience store chain can improve responsiveness to this uncertainty using one of the following strategies, especially for fresh and fast foods:

1. Local Capacity. The convenience store chain can provide local cooking capacity at the stores and assemble foods almost on demand. Inventory would be stored as raw material. This is seen at the U.S. fast-food restaurant franchise Subway where dinner and lunch sandwiches are assembled on demand. The main risk with this approach is that capacity is decentralized, leading to poorer utilization.

2. Local Inventory Another approach is to have all inventory available at the store at all times. This allows for the centralization of cooking capacity. The main risk is obsolete inventory and the need for extra space.

3. Rapid Replenishment Another approach is to set up rapid replenishment and supply the stores with what they need when they need it. This allows for centralization of cooking capacity and low levels of inventory, but increases the cost of replenishment and receiving.

From the case study, Seven-eleven Japan Co. had provided their customers a variety of service that is difference responsive way from usual convenience store concept.

1. 7dream.com

Seven-Eleven Japan established an e-commerce company which their customer can choose the product at home and pick the product at the store. Because from the survey, 92% of its customers preferred to pick up their online purchase at the local convenience store rather than have them delivered at home. Since Seven-Eleven Japan have the distribution system that conforms with these drop and pick up system. So Seven-Eleven serve as drop-off and collection points for Japanese people. Instead of providing customers at that time the need is happen, the customers can choose the product at home and then pick up the product later at the store.  The risk of this case is normally Seven-Eleven Japan established this system as a way to derive benefit from the existing distribution system. If in the future this system is popular among the Japanese, the capacity of the existing distribution system may not be enough to serve the customers such as a space to storage the goods waiting for customers to pick up (the store in Japan is smaller than other country)

2. In-Store Payment

Instead of selling household goods, food and groceries, a convenience store can be responsive as a payment spot. Seven-Eleven Japan add a variety of services that customers can obtain at its stores for example an in-store payment of Tokyo Electric Power bills, gas, insurance premiums, and telephone. In order to attracted millions of additional customers every year and take advantage of opening hour and number of stores to service customer.

The risk of this case is when the company adopt this service every Seven-Eleven store Japan have to link with the data of the payment such as electric bill. If the employees not fully understand how the system works, he or she will misunderstand and take too long to serve customer. Result in lower customer satisfaction and can link to overall brand dissatisfaction. Some customer will stop buying at Seven-Eleven because the long waiting time.

What is an author doing?

An author is doing a research paper title “Deriving and exploring behavior segments within a retail loyalty card program” to identify the customer cluster that deriving by the royalty card program, so the management can use the information to implement the right strategy to the right customer.

Why is the author doing what he/she does?

• The author notice that even though the rapidly increasing number of retail loyalty programs. Most of the company still not notice or pay attention to the difference in the behavior patterns of the customers within the loyalty programs.
• The author wants to know that is there ability to create customer segments within a retail loyalty program. If it can, what are the drivers of difference among them that make each of them unique and whether it need difference managerial implications (strategy) to manage in order to yield higher customer satisfaction and company profitability.

How does the author do the project?

The author use data of the one-year test of retail loyalty card program provided by one major US retailer. The author formed the segment by numerical taxonomy process. First, the author using cluster analysis to generate a range of potential market structures (grouping 57,650 loyalty card program members in to 2 through 11 group) for classifying each of the loyalty card patrons on a set of managerially relevant variables. Each group was ranking their segment by least patrons to highest patrons.

Second, select the most appropriate market structure by using scree testing (test important) and discriminant analysis. The result was either five or six segments might yield the best market structure, stable and reliably predict group membership. However the author choose six segments because it create the unique characteristics of the best group and allow more definition within the three most interesting groups.

Third, the author names six segments (clusters) by its characteristic;

Cluster 6: ideal, highly loyal shoppers – most loyal group of card holder spent over twice as much per person as members of the cluster 5. The smallest group only 1% of total cardholder population.

Cluster 5: half loyal shopper – Around 9% of total cardholder population. Spent three times higher than cluster 3.

Cluster 4: late but enthusiastic followers – This group is the most impacted by the loyalty card program. Since they increased participation of the program (their purchasing 600 percent during the second half of the year).

Cluster 3: shopper who lost their enthusiasm – This group unsatisfied with the program because their rate of use continue to drop.

Cluster 2: very infrequent card shoppers – Infrequent use of card, this group did not reach the spending threshold required for the rewards by the loyalty program

Cluster 1: shopper who wanted to like it but not – Around 39% of total cardholder population. This group tried the program, stayed with it for some period of time, but did not like it enough to continue and this group did not reach the spending threshold required for the rewards by the loyalty program.

Finally after the author name six clusters and it characteristic, the author regress a set of patronage-related variables onto the clusters using multinomial logistic regression. To find what are the drivers of difference among clusters. The author able to find out that the distance to the store, distance to the nearest competitor and the number of very early adopters in the cardholder’s neighborhood interaction field were the most importance driver accounting for overall difference between the most loyal cluster and other clusters. The author also makes the suggestion on which strategy should use to approach each clusters and the limitation of this research in order to make a better research next time.

In conclusion, it appear that the ability to create segments within loyalty card program and understand the drivers of differences among them can be great benefit to the company by using difference strategy that match the difference customer need in each segment to increase the customer satisfaction, to know which customer the company choose focusing on and to increase the profit to the company.

I agree with the article because…

First of all in our increasingly interconnected and interdependent global economy, the process of delivering supplies and finished goods from one place to another is getting more and more complicated. The best supply chains keys aren’t just speed and cost containment because the raising opportunities and problems created by globalization. For example, when supplier shifted manufacturing facilities from the United States to Asia to take advantage of the lower labor costs, if the company (located in USA.) is unable to adapt and agile, these incident will cost companies a lot because it will have to bear with the increase transportation cost.

Second, The inability of high-speed, low-cost supply chains to respond to unexpected changes in demand or supply; the obsession of companies with speed and costs causes supply chains to break down during the launch of new products (they cut down cost by refuse to create a buffer stock because it wanted to keep the inventory cost low); and efficient supply chains often fail to adapt to changes in the structures of markets (set up a fast and cost-effective supply chain by centralizing component procurement, assembly and testing, and order fulfillment in the same city).

Third, the ideal of efficiency (fast and inexpensive) should be replaced by a focus on agility, adaptability, and alignment. Top-performing supply chains are agile, adaptable, and aligned. These three qualities are quite different from one another, and all three are essential. Excellent supply chains react rapidly to sudden changes in demand or supply. The value of agility has risen in the last few years as the frequency of sudden shocks to supply chains has increased. Top-performing supply chains are adaptive, in the sense that they change over time to match the evolution of market structures and strategies. These supply chains identify structural shifts early on, filter out noise, and track important patterns. This enables the company to relocate facilities, change suppliers, and outsource manufacturing. The best supply chains are tailored to the nature of markets for products. Alignment matters because companies often looked out for their own interests and ignored those of their network partners. Consequently, supply chains performed poorly. A supply chain works well only if the risks, costs, and rewards of doing business are distributed fairly across the network. In fact, misaligned incentives are often the cause of excess inventory, stock-outs, incorrect forecasts, inadequate sales efforts, and even poor customer service. The fates of all supply chain partners are interlinked: If the firms work together to serve consumers, they will all win. However, they can do that only if incentives are aligned.

In conclusion, today managing the modern supply chain is not only a job that involves specialists in manufacturing, purchasing and distribution but also depend to the work of financial, information, operations, customer service and relationship between network partners of the company. The ideas that great supply chains only have to be fast and cheap no longer create the long-term profit and competitive advantage to the company. Conversely the best supply chains also have to be agility, adaptable and aligning interest.