6. Seven-Eleven is attempting to duplicate the supply chain structure that has succeeded in Japan in the United States with the introduction of CDCs (combined distribution center). What are the pros and cons of this approach? Keep in mind that stores are also replenished by wholesalers and DSD (direct store delivery) by manufacturers.
The “pros” of this approach are illustrated by the success of this concept in Japan: highly responsive system that has increased its efficiency through the use of information. They are able to effectively match supply and demand.
The cons of this approach in the U.S. stem from the geographic dispersion of Seven-eleven stores. The fact that stores are not as clustered as in Japan will impede the responsiveness that is a cornerstone of Seven-Eleven Japan. Because DSD is also used, there is more coordination required in the U.S. and more relationships to manage. The CDCs may also be forced into holding some level of inventory because of the lack of clustering in the U.S., resulting in lower performance than that in Japan. If the CDCs become more of a distribution center than a cross docking operation, their strategic advantage is lost, and the investment may not have been worth it. An additional downside is the outbound costs, which could be quite high depending on the number of stores served.