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.