Some of the ways that a convenience store chain can response are:
The risk of this approach is not giving the appropriate amount of profit to the products and services, because focusing in the amount of costs this kind of business will generate.
The risk of this method is that initiating a distribution center is expensive, if your chain has not made the idealize amount of profits this approach is very risky, because this method requires structure, employees, machines, among other expenses.
The risks with this supply choice are high cost of transportation which includes gas, vehicle, staff, also the cost of receiving continues incomes of products at the store, the risk of having obsolete inventory and lack of extra space.
By creating a distribution center and making all suppliers deliver there instead of the store, in the Seven-Eleven distribution center they classified their products in the four standard categories, by doing that they save costs in delivery recipient and transportation. Also by manufacturing a great amount of products they reduce costs and also the can control their own supply chain and the replenishment of their stores.
By having this policy Seven-Eleven Japan reduced their number of trucks from 70 to 11 to each store daily. This reduces dramatically the delivery costs. But direct delivery can be useful too, you can get deliver in any type of situation, like if you’re running out of stock. Also can be use as a promotional matter, because if the products get first to the store they will get a better place in it, so the customer will see it and you sales will grow. But also by combining these two methods (CDC) you’ll get a better profit by using both methods.
This concept seems to be successful in Japan because Japanese people prefers to go out and go to their convenience store and also receive their shipment deliver there for easy access. I think that the 7dream will be more successful in Japan than in the United States, the most important reason for this is that in the U.S. people are used to receive their shipments in their home or offices.
The pros of this approach are almost none, because the duplication of the Japan mode is almost impossible in the U.S. stores are much larger in number and in distance than in Japan. Making their own distribution centers does not allow U.S. Seven-Eleven to get the same level of transportation aggregation as it gets in Japan.
The pros of having distributor replenish is that you have a variety of products that a single chain can’t produce all alone, but having their own distribution center is also a big pro, because you don’t have to worry about external factor from your suppliers. The cons of having distributor replenish to your stores can have disadvantage too, because you will always be depending of external sources to replenish your store.
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