Boethius on 7-Eleven's fresh food supply chain outsourcing advantages

¶ … Eleven Supply Chain

Technology and educational advancement has brought many new ideas and models into the international business realm Logistics is a key piece of these models that aim to increase a competitive advantage within any given industry. The purpose of this essay is to highlight and describe significant supply chain management issues by using the evolution of the company 7-Eleven.

This essay will first explain the changes that this company has experienced in recent years and how their transformation of their supply chain has resulted in significant events that can foretell other events relating to the subject. The essay will also provide a flow diagram that explores a new maneuver within the 7-Eleven supply chain model. Next, this essay will present arguments for using either a push-based or pull-based strategy for ordering fresh foods for this organization.

This essay in its attempts to understand this topic more thoroughly will also explore the advantages and disadvantages of incorporating new technologies within these models using RFID chips to accommodate the transactions. To help give the argument context, this essay will also present empirical examples of organizations that have made similar transitions that 7-Eleven has made in changing their business models using supply chain logistical formats to assist In the procurement of these items. The essay will also address how information can be used to implement this transition to fresh foods. Before concluding, the practice of tanpin kanri will also be explored to demonstrate the incorporation of foreign models that are beneficial to shaping the organization throughout the world.

7-Eleven Transformation To Fresh Foods

Any supply changes an established organization such as 7-Eleven will make is deep and profound at many levels. It is necessary to examine the particular details of the execution of such a transformation. The traditional 7-Eleven model must be change if 7-Eleven is to incorporate a new product line of fresh foods into their inventory. This change of supply requires the supply chain mangers to dissect the operation and discover what changes need to be done and what advantages will be realized if and when this event materializes.

Change 1: Strategic Outlook

The strategic outlook of any firm is of prime importance when implementing any real or significant change. The leadership of 7-Eleven, in making their transition to fresh foods must adopt a new outlook on the market and internalize these changes throughout the company. This impetus is located within the leadership branch of the company and its is ultimately the responsibility of this group, to see through and enforce these changes. Strategic outcomes must be linked to the actions, behaviors and trends of the operations of the company, otherwise the leadership element has failed to accomplish their main duties. Supply chain management is where the rubber meets the road, and this offshoot will directly impact how these stores will intermingle with these new changes.

Change 2: Suppliers

7-Eleven is mostly known as a quick stop store serving mostly junk food, cigarettes, lottery tickets and other items that do not contribute greatly to the health and welfare of its customers in any traditional sense. In order to facilitate the move towards fresh foods, new suppliers must be introduced into the supply chain. Suppliers who can deliver fresh, wholesome and prepackaged foods stand to be the main approach in achieving this message. With the advent of new suppliers, new relationships must be formed and essentially new knowledge and learning must also take place.

Change 3: Distributors

The 7-Eleven stores themselves must be prepared to make adjustments to this new supply chain and product transformation. The typical 7-Eleven store must examine how their stores can physically be transformed in order to take on the new fresh foods that may require certain types of physical adjustments. Distributing stores of these new products must also be prepared to transform their ability to manage and maintain these foods, as there is traditionally more labor involved in these types of maneuvers.

Change 4: Fundamental Adjustments.

"Customers today are seeking suppliers that can rapidly respond to such things as menu cycle changes, changing consumer demands, new product introductions. In addition, customers -- particularly large ones -- who decide to change suppliers want to be able to seamlessly make the switch in less than two weeks, " (Harps, 2003). Understanding that a fresh foods implementation will drastically change the stores themselves. Higher quality foods, means higher quality customers seeking higher quality products. Labor must fundamentally respond to this cultural challenge that puts the organization at risk form alienating old customers and attracting new customers that can provide stronger revenues. These fundamental adjustments must be made over the course of time and evolve into a stronger and more capable organization that can withstand such changes.

Flow Diagram Sandwich

Strategy Recommendations

There are two directional schools of thought that are construed when developing supply chain strategies for very large companies such as 7-Eleven. These strategies are known as pull based, or pushed based. It is necessary to have some form of both in this case as the flexibility of this approach can help mitigate the problems that arise due to the varying environmental, economic, political and social factors of any given market that this company may find itself operating within. " Integrating the connections of the Supply Chain into a complete functioning system conceivably improves the flow of goods and information in the organization. That generates a more effective Supply Chain. Thus, regardless of whether a Supply Chain includes links operated by many service providers or it is under the control of a unique management connection, integration is favorable for the increase of effectiveness," (Janiver-James, 2012).

Push-Based

This company can incorporate a push-based supply chain in some aspects, and will most likely need to, in order to say competitive in some areas of their business. Push based inventory management suggests that projections and forecasts from empirical examples have been inserted in the model to use to predict the future. To ignore forecasting in this company's changing supply chain management endeavor would be a mistake. A push system allows 7-Eleven to plan production or buying to meet their needs and then provides a time honored approach to help meet those needs.

Pull Based

A pull-based strategy is associated with the Just In Time (JIT) model of supply chain management. This approach views inventory levels as much more harmful than a push strategy and aims to minimize the problems associated with a bloated inventory. Products are ordered only when they need to be and then can be swiftly and precisely bought by customers reducing wasted efforts and time.

Combination

Balancing both push and pull strategies in some fashion is the appropriate approach in managing inventory for this change in this company. The human element must come into play, as the forecasting power of computer models are only reliable to a point and then another means to fix the problem based on human experience must come into play. Using technology for its benefits is one thing, but being overran by new technology and computer reasoning will ignore the human aspects of business and planning and turn the company into a legion of robots unable to make a decision without the permission of a computer system. Automation has its place but so does the ability to turn it off when needed.

RFID Issues

Radio Frequency Identification (RFID) technology is seemingly everywhere in the business world today as companies attempt to digitize their inventory in as many ways possible. The bar codes located on each product denotes this practice and certainly can make managing inventory and supplies easier when approached from the right angle. For 7-Eleven using RFID technology has both advantages and disadvantages for their business model.

RFID Advantages

Perishable food can be wasted if left to spoil. RFID technology can help 7-Eleven by minimizing this risk. "As regards the overall sustainability of the food supply chain, several leverages can be proposed to improve it. Aiking and De Boer (2004) identify the proper management of the supply chain, visibility and traceability as key factors. Nowadays such factors can be achieved through the implementation of new technologies, such as RFID technology, whose cost has reduced as a consequence of its increased adoption worldwide," (Gurnow, 2013).

RFID's are different than bar codes and each specific item can be place within a known distance with this radio satellite technology. Traceability is a very useful tool for organizations such as 7-Eleven to employ. Speed and simplicity are also anticipated advantages from using RFID technology in food based inventory as in this case. Computers can read and track numbers much faster than the conscious human mind making these advantages worth considering in weighing this move to better control supply chain management issues that can occur during a company's growth and expansion as seen with 7-Eleven.

RFID Disadvantages

RFID also has its drawbacks, making this reliance on technology somewhat dangerous and risk for those companies willing to put all their eggs in the computer basked. Regardless, computer technology is merely a tool, and if the person operating the technology cannot do so in an advantageous way, this technology then becomes a liability of sorts. Another disadvantage of RFID technology stems from the scanning issue. RFIDs are not foolproof and require manipulation in order to be successful. Scanning RFIDs can be troublesome and confusing if the proper care and attention is not taken. The greatest disadvantage to RFID technology is the privacy issues that almost always accompany this issue. While at face value privacy does not seem to be a concern, the long-term effects of this invasion of privacy is not known quite yet. It serves the organization well to respect the privacy concerns of its customers while considering the pros and cons of RFID technology that can be used in this supply chain management issue and upgrade of services.

Success Stories

There are several models in which 7-Eleven may build around that can be successful Fresh food incorporation into a quick stop store like 7-Eleven has not been done at this magnitude, however there are examples in which the company can learn from and implement their plan based on these successes. Wal Mart is one example that has included fresh foods into their retail market. Target is another company that now sells fresh foods and groceries at a much larger scale than 7-Eleven. These two giant companies provide a macro approach to altering a supply chain model that is outdated and takes advantage of technological advances that allows the company to evolve and grow while maintaining a competitive advantage in the market place.

Another success story that has incorporated the retail of fresh foods are the common grocers that deal with these problem all the time Companies such as Whole Foods, Trader Joes and Safeway supermarkets can all be scoured for their operational successes and failures. These models provide a historic understanding of the market and allow logistics managers to base their ideas on empirical examples that have both succeeded and failed. "A variety of factors influence customers' store patronage intentions, some of which are quite subtle. Environmental cues, such as design and ambience, can have a noticeable effect. Consumers' perceptions of value and their subsequent patronage are heavily influenced by their perceptions of the store's "look and feel." Music, color, scent, and crowding can also significantly impact the overall shopping experience.13 The emotional responses that are induced by the store experience can have a pronounced impact on the amount of time and money spent in the store. Therefore, the extent to which stores offer a more pleasant shopping experience fosters a good mood, resulting in greater spending." (Grewal et al. 2010).

Important Information

There are specific pieces of knowledge that are required in order for this technology to be effective and eventually produce profits for this company. If every piece of inventory that is deemed to be fresh food than certain dating information must be included on this piece of food. The expiration date of the food is one key piece of information that is needed to help make this transformation be successful. If 7-Eleven were to begin selling spoiled food, their competitive advantage would certainly be seriously affected.

Adjusting 7-Eleven's supply chain modalities to a more technological-based system would also require the location of each piece of inventory. This need is obvious in order to track the location of the inventory and where it is going. Other pieces of information that may need to be attached to each fresh food item, is where the product came from. The size, scope and magnitude of 7-Eleven requires this company to have many suppliers. It may turn out that a piece of inventory from one supplier is tainted or spoiled, and may require the immediate tracking and recall from logistics managers, making this piece of data very important in keeping this change aligned with the strategic opportunities of expanding markets and providing profits gained with a competitive advantage. "Risk Management In markets, where efficient utilization of capital intensive capacity is a key driver of overall supply chain performance, spot markets are complemented by contract markets where options on inventory (or capacity) can be purchased in advance for the exchange of a reservation fee. In case demand exceeds available stocking levels, such options are utilized and the exercise price paid." (Kraft & Mantrala, 2006).