Pros and Cons of Cdc
Content
Seven-Eleven in the United States Seven Eleven has expanded rapidly around the world (see Exhibit 6). The major growth has been in Asia though the United States continues to be the second largest market for Seven Eleven. Once Seven-Eleven Japan acquired Southland Corporation, it set about improving operations in the United States. In the initial years, several Seven-Eleven stores in the United States were shut down. The number of stores started to grow beginning in 1998. Historically, the distribution structure in the United States was completely different from that of Japan. Stores in the United States were replenished using Direct Store Delivery (DSD) by some manufacturers with the remaining products delivered by wholesalers. DSD accounted for about half the total volume with the rest coming from wholesalers. With the goal of introducing “fresh” products, Seven-Eleven introduced the concept of combined distribution centers (CDC) around 2000. By 2003 Seven-Eleven had 23 CDCs located throughout North America supporting about 80 percent of the store network. CDCs delivered fresh items such as sandwiches, bakery products, bread, produce, and other perishables once a day. A variety of fresh food suppliers sent product to the CDC throughout the day where they were sorted for delivery to stores at night. Fresh food sales in North America exceeded $450 million in 2003. During this period DSD by manufacturers and wholesaler delivery to stores also continued. In 2003 revenue in the United States and Canada totaled $10.9 billion with about 69 percent coming from merchandise and the rest from the sale of gasoline. The North American inventory turnover rate in 2003 was about 17 compared to over 50 in Japan. This performance, however, represented a significant improvement in North American performance.
http://www.scribd.com/doc/35280069/OM-Project
Pure Convenience: Maynard Helps 7-Eleven Improve Efficiency, Reduce Costs
7-Eleven is the largest convenience store operator in the world, with approximately 24,000 stores. The company uses Combined Distribution Centers (CDCs) to deliver the majority of the perishable products sold in its North American stores. The 23 CDCs receive, sort and deliver hundreds of products, including bakery goods, sandwiches, dairy products and produce, on a daily basis to more than 4,500 7-Eleven stores in the U.S. and Canada. 7-Eleven had a desire to improve the efficiency of the CDCs, which are a vital part of its business operations. This was a challenge because the CDCs are operated by several different third-party partners, and 7-Eleven felt it did not have effective metrics for comparing performance to a reliable benchmark. This was due to many factors, including different facility sizes, building layouts and the variety of products handled by each CDC. By improving CDC efficiency, 7-Eleven would reduce operating expenses and better manage the daily delivery of fresh food products to the stores, a key area of growing business for the company. It would also help to ensure accurate, timely and damagefree product delivery. 7-Eleven sought outside assistance to facilitate and execute this improvement initiative. After soliciting proposals from several consulting firms, 7-Eleven chose H. B. Maynard and Company, Inc.
4. Seven-Eleven is attempting to duplicate the supply chain structure that has succeeded in Japan in the United States with the introduction of CDCs. What are the pros and cons of this approach? Keep in mind that stores are also replenished by wholesalers and DSD by manufacturer?
There has been useful advantage of Seven-Eleven upon CDC and DSD as the centers allow smoothing of distribution operation to the stores and the provision of better quality and better information on supply and deliveries is available and there was control of the supply chain as achieved. The presence of technology like the adaptation of the POS system can possibly move ahead and do aid the store employment and management situation by freeing up staff time.
Seven-Eleven U.S. has begun introduce the Combined Distribution Center daily delivery of fresh-prepared foods around 2000. By partnering with multiple food companies, the convenience retailer will be able to offer fresh-made-daily and delivered-fresh-daily pastries, gourmet sandwiches, wraps, entrees, as well as other perishable and ready-to-eat foods once a day. This was a challenge because the CDCs are operated by several different third-party partners, and Seven-Eleven felt it did not have effective metrics for comparing performance to a reliable benchmark. This was due to many factors, including different facility sizes, building layouts and the variety of products handled by each CDC.
pros
Added choices to customers in perishable consuming. Seven-Eleven can add other specialty items to its selection such as fruit salads, seasonal whole and cut fruit, fresh-squeezed juices and produce from a farmer’s market. The consumers can easily get the fresh perishable products near their house. Daily delivery means just that Seven-Eleven stores can place orders to the CDC and get fresh product by sorting for delivery to stores at every night With the company’s proprietary retail information system, each store can customize its order to provide the exact items the customers in their neighborhood want. Receiving fewer deliveries to your store during the day. In this advantages, the stores no need to waste the time to check through each delivery because all needed products will be set up and combined since the Distribution Centers. Expedite business for local food companies, which can now make one delivery to a central location for distribution to local stores. Reduce the holding Inventory Cost. Stores can order just the amount they sell in a day or two, so they don’t have product sitting around on the shelves. That means that they can guarantee the freshness in the perishable products at Seven-Eleven. The staffs are able to consolidate work and spend more time with your customers, growing your business. As they will check the stock and place the order to the CDC and receive the product at night. The suppliers can delivery in large amount with one full truck load as there has a store big enough to keep the products with the method to keep the product longer and still perish. Cons Much lower density (hence longer distance) of U.S. Seven-Eleven stores. Deliver a few product everyday may using too much cost with the longer distance of each branch. Need to increase density, even though setting up own system only reduce problems by eliminating delivers Increase transportation cost at stores because of increased delivers. As Distribution Centers need to deliver the product everyday with a few amounts in order to keep the freshness of the product.
Losing the economics of scale advantages, as Seven-Eleven need to order the product everyday in the fewer amounts. High costs of keeping the products as some products need a specific temperature to keep them
http://www.scribd.com/doc/35280069/OM-Project
Pure Convenience: Maynard Helps 7-Eleven Improve Efficiency, Reduce Costs
7-Eleven is the largest convenience store operator in the world, with approximately 24,000 stores. The company uses Combined Distribution Centers (CDCs) to deliver the majority of the perishable products sold in its North American stores. The 23 CDCs receive, sort and deliver hundreds of products, including bakery goods, sandwiches, dairy products and produce, on a daily basis to more than 4,500 7-Eleven stores in the U.S. and Canada. 7-Eleven had a desire to improve the efficiency of the CDCs, which are a vital part of its business operations. This was a challenge because the CDCs are operated by several different third-party partners, and 7-Eleven felt it did not have effective metrics for comparing performance to a reliable benchmark. This was due to many factors, including different facility sizes, building layouts and the variety of products handled by each CDC. By improving CDC efficiency, 7-Eleven would reduce operating expenses and better manage the daily delivery of fresh food products to the stores, a key area of growing business for the company. It would also help to ensure accurate, timely and damagefree product delivery. 7-Eleven sought outside assistance to facilitate and execute this improvement initiative. After soliciting proposals from several consulting firms, 7-Eleven chose H. B. Maynard and Company, Inc.
4. Seven-Eleven is attempting to duplicate the supply chain structure that has succeeded in Japan in the United States with the introduction of CDCs. What are the pros and cons of this approach? Keep in mind that stores are also replenished by wholesalers and DSD by manufacturer?
There has been useful advantage of Seven-Eleven upon CDC and DSD as the centers allow smoothing of distribution operation to the stores and the provision of better quality and better information on supply and deliveries is available and there was control of the supply chain as achieved. The presence of technology like the adaptation of the POS system can possibly move ahead and do aid the store employment and management situation by freeing up staff time.
Seven-Eleven U.S. has begun introduce the Combined Distribution Center daily delivery of fresh-prepared foods around 2000. By partnering with multiple food companies, the convenience retailer will be able to offer fresh-made-daily and delivered-fresh-daily pastries, gourmet sandwiches, wraps, entrees, as well as other perishable and ready-to-eat foods once a day. This was a challenge because the CDCs are operated by several different third-party partners, and Seven-Eleven felt it did not have effective metrics for comparing performance to a reliable benchmark. This was due to many factors, including different facility sizes, building layouts and the variety of products handled by each CDC.
pros
Added choices to customers in perishable consuming. Seven-Eleven can add other specialty items to its selection such as fruit salads, seasonal whole and cut fruit, fresh-squeezed juices and produce from a farmer’s market. The consumers can easily get the fresh perishable products near their house. Daily delivery means just that Seven-Eleven stores can place orders to the CDC and get fresh product by sorting for delivery to stores at every night With the company’s proprietary retail information system, each store can customize its order to provide the exact items the customers in their neighborhood want. Receiving fewer deliveries to your store during the day. In this advantages, the stores no need to waste the time to check through each delivery because all needed products will be set up and combined since the Distribution Centers. Expedite business for local food companies, which can now make one delivery to a central location for distribution to local stores. Reduce the holding Inventory Cost. Stores can order just the amount they sell in a day or two, so they don’t have product sitting around on the shelves. That means that they can guarantee the freshness in the perishable products at Seven-Eleven. The staffs are able to consolidate work and spend more time with your customers, growing your business. As they will check the stock and place the order to the CDC and receive the product at night. The suppliers can delivery in large amount with one full truck load as there has a store big enough to keep the products with the method to keep the product longer and still perish. Cons Much lower density (hence longer distance) of U.S. Seven-Eleven stores. Deliver a few product everyday may using too much cost with the longer distance of each branch. Need to increase density, even though setting up own system only reduce problems by eliminating delivers Increase transportation cost at stores because of increased delivers. As Distribution Centers need to deliver the product everyday with a few amounts in order to keep the freshness of the product.
Losing the economics of scale advantages, as Seven-Eleven need to order the product everyday in the fewer amounts. High costs of keeping the products as some products need a specific temperature to keep them
