Case Question Answer

One of the leading challenges facing organizations today is the need to respond to

ever increasing levels of unpredictable demand from consumers. This is because

the product and technology life cycles has began to shorten, competitive pressures

force from more frequent product changes and a ever rising demand of variety in

products and services from households. To tackle this problem, organizations must

not only respond to these changes but also act fast in doing so. As it relates to a

convenience store chain supply, there are various ways in which it can be

responsive to consumers’ demands.

Firstly, the breakthroughs of the last decade in the use of information technology to

capture data on demand direct from the point-of-sale or point-of-use are now

transforming the organization’s ability to hear the voice of the market and to

respond directly to it. This has enabled many convenience supply chains to

Synchronize activities through shared information and Partner with suppliers to

reduce in-bound lead times. Synchronization implies that all parties in the supply

chain are moving to the same pace or ‘marching to the same drumbeat’. In other

words, through shared information and process alignment there is in effect one set

of numbers and a single schedule for the entire supply chain. Base on Christopher

(2005), this practice is increasingly becoming reality as web-based technology

enables different entities in a network to share information on real demand,

inventory and capacity in a collaborative context. One powerful way in which

collaboration can improve responsiveness is through the adoption of Vendor

Managed Inventory (VMI) practices. As stated by Christopher (2005), Vendor

Managed Inventory (VMI) switches the responsibility for the management and quick

replenishment of inventory from the customer to the supplier. The customer no

longer places orders on the supplier but rather shares with them information on

sales, rates of usage or consumption. Using this information the supplier is better

able to plan and schedule the acquisition, production and delivery of the product.

Both parties benefit, the customer through higher levels of availability and reliability

and the supplier through a reduction in their need to carry safety stock and, often, a

better use of capacity.

Secondly, most convenience supply chains are now facilitating customers by

location and boost capacity. For example, Seven-Eleven Japan have increased their

subsidiaries from 500 in 1991 to 12071 in 2008 and operating hours throughout

Japan due to an increase market demand for convenience store services.

Last but not least, proper time management has become a major strategy for begin

responsive to consumers demands. Many processes in the supply chain are lengthy

because the constituent activities are performed in ‘series’, i.e. in a linear, ‘one

after the other’ way. It is often possible to re-engineer the process so that those

same activities can be performed ‘in parallel’, i.e. simultaneously. Time

compression in a supply chain can be achieved not necessarily by speeding up

activities, but rather by doing fewer things i.e. eliminating where possible non-

value adding activities.

We must note that these solutions are not without their risks. If the convenience

store maintains high level of inventory, it increases the holding cost that make

convenience store less efficient. Moreover, the inventory can be wasted, because
unpredictability of demand. In high level of inventory there is very low margin of

error in forecasting, so it can increase wasted and also increase the supply chain

cost. Likewise, Christopher (2005) argues that when the products are quick

replenish in different location, it increase the transportation cost, capacity also

increase the holding cost and high fixed cost of information system.

Reference

Christopher.M (2005), LOGISTICS AND SUPPLY CHAIN MANAGEMENT: Creating

Value-Adding Networks. 3rd edition, Prentice Hall, London. p 132-37