7-Eleven's Supply Chain Evolution and Fresh Food Strategy

Introduction

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

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

7-Eleven Transformation to Fresh Foods

In attempting to understand this topic more thoroughly, this essay will also explore the advantages and disadvantages of incorporating new technologies, specifically RFID chips, to accommodate transactions. To help give the argument context, this essay will present empirical examples of organizations that have made similar transitions in changing their business models using supply chain logistics formats. 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 be explored to demonstrate the incorporation of foreign models beneficial to shaping the organization globally.

Any supply chain changes that an established organization such as 7-Eleven makes are deep and profound at many levels. It is necessary to examine the particular details of executing such a transformation. The traditional 7-Eleven model must change if the company is to incorporate a new product line of fresh foods into its inventory. This change of supply requires supply chain managers to analyze the operation and discover what changes are needed and what advantages will be realized when this transition occurs.

The strategic outlook of any firm is of prime importance when implementing any 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 it 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 company's operations; otherwise, leadership has failed to accomplish its main duties. Supply chain management is where the rubber meets the road, and this function will directly impact how stores will adapt to these new changes.

7-Eleven is mostly known as a quick stop store serving quick snacks, cigarettes, lottery tickets, and other items that do not traditionally contribute greatly to customer health and welfare. In order to facilitate the move toward 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 goal. With the advent of new suppliers, new relationships must be formed, and new knowledge and learning must also take place.

Strategy Recommendations: Push, Pull, and Combination Approaches

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

"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 is critical. Higher quality foods mean higher quality customers seeking higher quality products. Labor must fundamentally respond to this cultural challenge that puts the organization at risk of alienating old customers while attracting new ones that can provide stronger revenues. These fundamental adjustments must be made over time and evolve into a stronger and more capable organization that can withstand such changes.

There are two directional schools of thought when developing supply chain strategies for very large companies such as 7-Eleven: these are known as push-based and pull-based strategies. It is necessary to have some form of both, as the flexibility of this hybrid approach can help mitigate the problems that arise due to varying environmental, economic, political, and social factors of any given market where this company operates. "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" (Janvier-James, 2012).

The company can incorporate a push-based supply chain in some aspects, and will most likely need to in order to stay competitive in some areas of its business. Push-based inventory management relies on projections and forecasts from empirical examples inserted into the model 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 anticipated needs and then provides a time-honored approach to help meet those needs.

RFID Technology in Fresh Food Supply Chains

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 bloated inventory. Products are ordered only when they need to be, and can then be swiftly and precisely purchased by customers, reducing wasted efforts and time.

Balancing both push and pull strategies in some fashion is the appropriate approach for managing inventory through this change in the company. The human element must come into play, as the forecasting power of computer models is reliable only to a point, after which other means to fix problems based on human experience must be employed. Using technology for its benefits is one thing, but being overwhelmed by new technology and computer reasoning ignores the human aspects of business and planning and can turn the company into an organization unable to make decisions without computer permission. Automation has its place, but so does the ability to turn it off when needed.

Radio Frequency Identification (RFID) technology is seemingly everywhere in the business world today as companies attempt to digitize their inventory in multiple ways. Barcodes located on each product denote this practice and certainly can make managing inventory and supplies easier when approached correctly. For 7-Eleven, using RFID technology has both advantages and disadvantages for its business model.

Perishable food can be wasted if left to spoil. RFID technology can help 7-Eleven minimize 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" (Grunow, 2013).

RFIDs differ from barcodes in that each specific item can be placed 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. 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.

Success Stories and Comparative Models

RFID also has its drawbacks, making this reliance on technology somewhat dangerous and risky for companies willing to put all their resources into computer-based systems. Regardless, computer technology is merely a tool, and if the person operating the technology cannot do so advantageously, this technology then becomes a liability. Another disadvantage of RFID technology stems from scanning issues. RFIDs are not foolproof and require careful manipulation to be successful. Scanning RFIDs can be troublesome and confusing if proper care and attention are not taken. The greatest disadvantage to RFID technology is the privacy issues that almost always accompany this technology. While at face value privacy does not seem to be a concern, the long-term effects of this invasion of privacy are not yet fully known. 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 upgrade.

There are several models that 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 from which the company can learn and implement based on these successes. Walmart 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 allow the company to evolve and grow while maintaining competitive advantage in the marketplace.

Another success story that has incorporated the retail of fresh foods involves common grocers that deal with these problems all the time. Companies such as Whole Foods, Trader Joe's, and Safeway supermarkets can all be examined 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. 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).

Conclusion

The unique aspects of 7-Eleven provide the necessary adjustments to the supply chain management efforts that are being required due to their expansion into fresh foods and transition toward becoming more like a grocer. Importantly, the overall organizational strategy must be aligned with these adjustments if they are to be successful. If they are, then it is up to the management and leadership of this company to bring this project to life by making it work through diligent and responsible interactions with the logistical arena of their industry. When the right balance is struck between pushing and pulling, technology may step in and become a multiplier of success, much like the case in Japan. Keeping in mind the advantages and disadvantages of this approach is essential in all logistical and supply chain issues dealing with fresh food retailing and the ability to stay profitable.