7-Eleven Looks to Consolidate Drink Deliveries
The 7-Eleven chain has achieved success by consolidating deliveries from various bakeries to its convenience stores in markets around the U.S. Now the company is looking to test a similar approach by consolidating beverages delivered to its stores in Los Angeles. The plan, should the test succeed, would be to expand to other markets and then to other product categories, as well.
As a piece on The Dallas Morning News website points out, the typical 2,400 square-foot 7-Eleven gets 62 deliveries per week. Because the stores are not equipped with loading docks, deliveries come through the same entrance as customers. This causes a disruption in stores and ultimately drives up fuel and other costs associated with making deliveries. As Joe DePinto, president and chief executive officer of 7-Eleven, observed, “Distribution systems were built for big-box retailers, and we’re a small box.”
Discussion Question: Where do you see opportunities for improvement in the convenience store supply chain? What will consolidating deliveries do for 7-Eleven and the companies that supply it with products?
This makes a lot of sense for everyone involved even though the manufacturers will probably not like it. DSD companies would utilize delivery savings but lose control of in-store merchandising in the process. It should allow 7-Eleven to have daily deliveries of less than case lot products with a very short lead time on their orders, though. Fewer trucks at the stores, shorter order lead times, and the ability to order in units rather than cases are all very big pluses for the c-store operator. With this system, the end consumer should dictate what sells more than the manufacturer or store operator if the store operator does their job properly. It makes the store manager’s job much easier relative to inventory management.
All drinks, salty snacks, bakery, perishables–in fact all inventory is applicable to this system in any area where you have the store mass to support it.
I think 7-Eleven’s plans are well-intended but ultimately misguided. This has been tried before elsewhere and has failed. Soft drinks turn much more rapidly than beer. And to expect store personnel to merchandise consistently is a pipe dream. Also, there are legal issues for alcohol beverages. But most of all, you have to have considerable store density, which 7-Eleven may happen to have in SoCal, but elsewhere is problematic. DSD allows c-stores to piggyback from a cost-of-delivery standpoint from the other nearby retailers for efficiency.
If you want to control cost you need to look at the entire supply chain and this is what 7-Eleven is doing. Not only will it help control costs but will have the potential to lower shrink, since fewer people will be handling inventory.