7-Eleven Supply Chain Transformation to Fresh Foods

Introduction

Technological advancement and evolving educational frameworks have introduced many new ideas and models into the international business realm. Supply chain management is a key element of these models, aiming 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 as a company.

This essay first explains the changes that 7-Eleven has experienced in recent years and how the transformation of its supply chain has resulted in significant developments that offer broader lessons on the subject. It also presents a flow diagram exploring a new maneuver within the 7-Eleven supply chain model and argues for the use of either a push-based or pull-based strategy for ordering fresh foods.

In its attempt to understand this topic more thoroughly, the essay explores the advantages and disadvantages of incorporating RFID technology into these models. It also presents empirical examples of organizations that have made transitions similar to 7-Eleven's in changing their business models through supply chain logistics. Additionally, the essay addresses how information can be used to implement the transition to fresh foods. Before concluding, the practice of tanpin kanri is explored to demonstrate how foreign management models can beneficially shape the organization's global operations.

7-Eleven's Transformation to Fresh Foods

Any supply chain changes that an established organization such as 7-Eleven undertakes are deep and profound at many levels. It is necessary to examine the particular details of 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 shift requires supply chain managers to dissect the operation, identify what changes must be made, and determine what advantages will be realized when this transition is complete.

Change 1: Strategic Outlook

The strategic outlook of any firm is of prime importance when implementing significant change. The leadership of 7-Eleven, in making its transition to fresh foods, must adopt a new perspective on the market and internalize these changes throughout the company. This responsibility rests ultimately with the leadership branch, which must enforce and see through these changes. Strategic outcomes must be linked to the actions, behaviors, and trends observable in company operations; otherwise, the leadership element has failed in its primary duties. Supply chain management is where strategy meets execution, and this function will directly determine how stores interact with these new product lines.

Change 2: Suppliers

7-Eleven is primarily known as a convenience store selling junk food, cigarettes, lottery tickets, and other items that do not contribute greatly to customers' health and wellness in any traditional sense. In order to facilitate the move toward fresh foods, new suppliers must be introduced into the supply chain. Suppliers capable of delivering fresh, wholesome, and pre-packaged foods represent the primary pathway to achieving this goal. With new suppliers come new relationships, and essentially new knowledge and learning must take place as well.

Change 3: Distributors

The 7-Eleven stores themselves must be prepared to make adjustments to support this new supply chain and product transformation. Each store must examine how it can be physically reconfigured to accommodate fresh foods, which may require specific changes to storage and display infrastructure. Distribution partners must also be prepared to transform their ability to manage and maintain these foods, as there is traditionally more labor involved in handling perishable products.

Change 4: Fundamental Adjustments

"Customers today are seeking suppliers that can rapidly respond to such things as menu cycle changes, changing consumer demands, and 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). A fresh foods implementation will drastically transform the stores themselves. Higher-quality foods attract higher-quality customers seeking premium products. Labor must fundamentally respond to this cultural challenge, which puts the organization at risk of alienating existing customers while attracting new ones who can provide stronger revenues. These fundamental adjustments must unfold gradually over time, evolving into a stronger and more capable organization that can withstand such changes.

Flow Diagram: Fresh Food Supply Chain

The following sequence illustrates a simplified supply chain flow for a fresh food item such as a sandwich at 7-Eleven:

Farm or Fresh Food Source → Deliver to Supply Point → Redistribute → To Outlets / To Track → Centralized Distribution Center → Transport to Individual Stores → Product is Received and Placed for Distribution → Customer Buys Sandwich → Return Logistics → Reorder and Adjust Next Order

Push, Pull, and Combination Supply Chain Strategies

There are two primary schools of thought when developing supply chain strategies for large companies such as 7-Eleven: push-based and pull-based approaches. In practice, some balance of both is necessary, as the flexibility of a hybrid model can help mitigate problems arising from varying environmental, economic, political, and social factors in any given market. As Janvier-James (2012) noted, "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 is under the control of a unique management connection, integration is favorable for the increase of effectiveness."

Push-Based Strategy

7-Eleven can incorporate a push-based supply chain in certain aspects of its business and will most likely need to in order to stay competitive. Push-based inventory management relies on projections and forecasts drawn from empirical examples to predict future demand. Ignoring forecasting during a changing supply chain management endeavor would be a mistake. A push system allows 7-Eleven to plan production or purchasing to meet anticipated needs and provides a time-honored approach to fulfilling those needs.

Pull-Based Strategy

A pull-based strategy is associated with the Just-In-Time (JIT) model of supply chain management. This approach treats excess inventory levels as more problematic than a push strategy does, and it aims to minimize the inefficiencies associated with bloated stock. Products are ordered only when needed and can then be swiftly purchased by customers, reducing wasted effort and time.

Combination Approach

Balancing both push and pull strategies is the appropriate approach for managing inventory during this transition. The human element must come into play, as the forecasting power of computer models is reliable only to a point, after which human experience and judgment must guide decision-making. Using technology for its benefits is one thing, but becoming entirely dependent on computer reasoning risks ignoring the human dimensions of business planning and turning the company into an operation incapable of making decisions without algorithmic permission. Automation has its place, but so does the ability to override it when circumstances demand.

Conclusion

The unique characteristics of 7-Eleven's business require significant adjustments to its supply chain management efforts as it expands into fresh foods and takes on a role more akin to a grocer. Importantly, the overall organizational strategy must be aligned with these adjustments if they are to succeed. When alignment is achieved, it falls to the management and leadership of the company to bring this project to life through diligent and responsible engagement with the logistical dimensions of their industry. When the right balance between pushing and pulling is found, technology can serve as a multiplier of success — much as it has in Japan. Keeping in mind the advantages and disadvantages of RFID and related tools is essential in addressing all logistical and supply chain challenges related to fresh food retailing and the goal of remaining profitable.

References

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Grunow, M., & Piramuthu, S. (2013). RFID in highly perishable food supply chains — Remaining shelf life to supplant expiry date? International Journal of Production Economics, 146(2), 717–727.

Harps, L. (2003). Fast food: SCM feeds the need. Inbound Logistics, August 2003.

Janvier-James, A. M. (2012). A new introduction to supply chains and supply chain management: Definitions and theories perspective. International Business Research, 5(1), 194.

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