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Introduction Many companies around the world are seeking new sources of competitive advantages. One of the new drives is the effective supply chain management which brings customer satisfaction and profitability. Many retailers especially supermarkets and grocery stores use different strategies in order to achieve an effective supply chain management. Faced with predictable variability, a company goal Is to respond In a manner that balances supply with demand to maximize profitability (Copra & Melded, 2013: 247).
Inventory management is the activity of planning and controlling accumulation of inventory which occurs because of local mismatches between supplier and demand (Slack, et al. 2012). Inventory management Is one of the building blocks of total supply management and a good Indicator of the effectiveness of supply chain management (Bass&Wrlght, 2008) Stock rotation is an innovative inventory management practice, commonly used in retail, especially in food stores such supermarkets and groceries, of moving products with an earlier sell-by date to the front of a shelf and of moving products with a later ell-by date to the back. Gustafson et al. 2006). In this assignment, it is going to be analyses how 7-Eleven achieves the performance objectives; cost, dependability, flexibility, speed and quality via innovative inventory management and stock rotation and further compare this using the importance- performance matrix. The author studied Industry Journals, Including a case study of 7-Eleven’s, and emphasized the Impact of stock rotation and Inventory management on supply chain management. II. Background to 7-Eleven 7-Eleven Is the world’s largest operator, franchiser and licensor of convenience tortes. -Eleven serves Its customers principally selling grocery products, alcohol and tobacco as well as gasoline in US stores. Its product range shows that its customers prefer different types of food at different times of the day. Ill. Inventory Management In 7-Eleven company applied innovative approaches like stock rotation as its key winning strategy to increase profits as well as customer satisfaction. 7-Eleven’s product range reflects that customers want different types of food at different times of the day. They offer distinct breakfast and launch options.
By 9. 00 m, breakfast options are replaced by lunch options which are freshly prepared and delivered daily. Even though they provide variety of products for breakfast and lunch, they do not have strict policies and they leave it to the discretion of the store managers who is guided by corporate recommendations. 7-Eleven has developed a Retail Information System (IRIS) that delivers daily point of sales (POS) and combines this information with daily, weekly and seasonal reports. They order automatically on daily basis.
Therefore their product reflects most recent likes and dislikes of the customers. Slow moving products are replaced by more popular products according to daily reports. With such a system product ordering decision rely on accurate demand instead of estimation. 7-Eleven’s supply chain mechanism is a good epitome of efficiency and effectiveness. The system is tightly linked the entire supply chain for all product categories. Their main objective is to track sales of items intensively and offer short replenishment cycle times. The store staff places daily orders via IRIS by 10. 0 am. These orders are taken by the bakery and commissaries by 1 1. 00 am. The finished orders are sent to Combined Distribution Centre (CDC) located close to the stores between 15. 00 and 18. 00 pm. The products are delivered to the stores same day or early the next morning between 21. 00 and 5:00. Delivering the products at off-peak hours gives trucks’ drivers opportunity to avoid traffic Jam and store staff to put products on the shelves in the plenty of time. Also, times of trips are reduced by combining many of items into one dual temperature trucks.
Size of the vehicles is arranged as to avoid vast of time in front of the shop and average time for unloading is set as 12 minutes. Figure: 1. -Eleven’s US Distribution Network ‘V. 7-Eleven’s Operational Performance Performance measurement is a prerequisite for the assessment of operation performance, without one it would be impossible to control over an operation ongoing basis. An obvious starting point of deciding which performance measure to adopt is to use five generic performance objectives: dependability, flexibility, quality, speed and cost (Slack, et al. 012). Dependability: 7-Eleven established an innovative inventory management system fed by IRIS and an effective application of stock rotation and structured a distribution outwork (CDC) and set time limitations for each step of supply chain to deliver to provided the 7-Eleven speeding up its entire supply chain process. 7-Eleven is single out as an original retailing pioneer in “10 Retailers That Shook the World Part 2” by Retail Information Systems News (IRIS) (www. Arsines. Eagled. Com).
Flexibility: 7-Eleven leaves discretion to its store managers to make changes on the products according to local preferences and behaviors of customers. Quality: 7-Eleven’s concern is always to offer the customer the convenient and tasty. Freshness of food is also one of 7-Eleven’s quality focuses, the company works with selected commissaries and bakeries to ensure the freshness and tastiness of food through close collaboration with suppliers. 7-Eleven has been honored by numerous companies and organizations. Some of them are; (wry. 7-eleven. Mom) No. 1 on CNN TRAVEL International staffers list of favorite chains in the world for travelers. – No. 12 among Top 75 Retailers & Wholesalers by Supermarket News for 2012. Speed: 7-Eleven aims to minimizes the time between a customer asking for goods and revise and the customer receiving them in full (Slack, et al. 2012). 7-Eleven is single out as ranked 3 on Fast Company’s “World’s Top 10 Most Innovative Companies in Retail” for 2013. Cost: 7-Eleven requires all suppliers to deliver to the CDC where products are sorted by temperature.
This reduces transportation cost because of aggregation of deliveries across multiple suppliers. It also lowers the receiving cost. (by Sunnis Copra, Kellogg School of Management). V. 7-Eleven’s Importance & Performance Matrix Ratings of relative “importance” and “current performance” and the importance- reference matrix of 7-Eleven is illustrated below. Performance Objectives Competitive importance Performance (1 = high, 9= low) (1 = high, 9= low) Dependability 1 1 Flexibility 4 4 Quality 2 3 speed 2 2 cost 4 5 Figure: 2.
Ratings of relative “importance” and “current performance” of 7-Eleven Figure: 3. The importance-performance matrix of 7-Eleven The gap between how an operation or process is currently performing and how it wishes to perform is the key driver of any improvement initiative (Slack, et al. 2012). It can be argued online delivery linked with the existing network may be improvement initiative for cost. Also the high visit frequency ensures that packages are not occupying valuable store shelf space for a long time.
However, it is obvious that transportation costs would be much higher. It is fact that stock rotation strategy and innovative inventory management improve efficiency and customer satisfaction. 7-Eleven’s approach of stock rotation and inventory management is a success; however, it does not mean it works in every case. In order to guarantee success, it should be ensured that stores are in the right dimension and operating in right market. It is also very crucial to have the resources and demand.