Differences between Wal-Mart and 7-Eleven Logistic Strategy

Differences between Wal-Mart and 7-Eleven Logistic Strategy | Wal-Mart is an American public corporation that runs a chain of large, discount department store. As the world’s largest retailer with net sales of almost $419 billion for year 2011, Wal-Mart is considered a “best-in-class” company for its supply chain management practices. Wal-Mart’s highly-automated distribution centers, which operate 24 hours a day and are served by Wal-Mart’s truck fleet, are the foundation of its growth strategy and supply network. When entering a new geographic area, the company first determines if the area will be able to contain enough stores to support a distribution center. A distribution center was strategically placed so that it could eventually serve 150-200 Wal-Mart stores within a day. Stores were built as far away as possible but still within a day’s drive from distribution center. The result is a “trickle-down” effect; trucks don’t have to travel as far to retail to make deliveries, shorter distance reduce transportation costs and lead time, and shorter lead time mean holding less safety inventory. If shortages occur, replenishment can be made more quickly. The company’s hub-and-spoke distribution network utilizes a system of manufacturer storage with customer pickup.  No inventory is stored at Wal-Mart’s distribution centers.  Wal-Mart’s fleet of 6,500 dedicated trucks and over 50,000 trailers (SC Digest’s editorial staff, 2011) are used to pick up goods directly from manufacturers’ warehouses, thus eliminating intermediaries and increasing responsiveness.  The use of trucks raises transportation costs but is justified in terms of reduced inventory.

7-eleven is a store originated in the United States 70 years ago which now is the world’s largest convenience store chain, with more than 10.000 stores in 20 countries. The success of convenience store depends largely on the success of the distribution system. 7-eleven supply chain strategy aims to combine overall chain character. Two ways of doing it are the operation excellence and costumer closeness. The improvement of chain performance focuses on the operation convenience and the total cost reduction such as cross docking, the reduction in inventory, and optimum order fulfillment. The customer closeness emphasizes on the demand side of the chain, the cooperation between chain members is a primary concern. Each of 7-eleven outlets has its own unique characteristic. The store in some area may different with other area in the way of selling product, different product, different services, etc. These unique characteristics make the distribution network more complicated and difficult. The company deals the issues by employing regional distribution center so as to properly manage the demand and operation at the store outlets. On the other hand, the limited space at each store makes it necessary to manage inventory effectively. This means quick response to demand and precise replenishment at each store location. The more responsive chain, the more cost in operation. However, from the convenience store view point, the end customers prepare themselves for the ‘plus price’ in exchange with convenience.

Wal-Mart and 7-eleven have the same way to optimize the distribution process which is done by cross docking to greatly reduce inventory cost. But the way they build the logistic network is different. While Wal-Mart established the distribution center first and the store built in certain area from distribution center, 7-eleven built the store first and if the few stores in certain area were built then they create the regional distribution center to satisfy supply to the store. The result is the selling price in Wal-Mart is lower than 7-eleven.



Walmart distribution model