Report: Target plays hardball with vendors to speed up supply chain

By Daphne Howland | May 5, 2016

Dive Brief:

• Target is taking steps to speed up its supply chain and ensure accurate product information, tightening deadlines and raising penalties for late deliveries or erroneous product data, according to an internal letter obtained by Reuters.
• Target recently met with more than 200 vendors and had a productive meeting, COO John Mulligan told Reuters, which notes that the hardball tactics begin to take effect May 30 and continuing over the summer.
• The new measures continue Target's efforts to revamp its supply chain. The discount retailer last year tapped Mulligan—who served as interim CEO after the departure of Gregg Steinhafel—to serve as COO, and hired former Amazon VP of operations Arthur Valdez earlier this year as EVP, chief supply chain and logistics officer. (Amazon subsequently filed a lawsuit alleging Valdez violated the terms of the non-competition agreement he signed when he began work at Amazon 16 years ago.)

Dive Insight:

Target has greatly expanded its merchandise assortment in the past couple of years and boosted its grocery offerings even before that, but has been beset by problems of empty shelves in some stores. The situation is widely seen as a keyfactor in its short-lived expansion into Canada. The retailer has previously said that between 2015 and 2017 it would spend more than $5 billion in supply chain and technology,according to Reuters.

As brick-and-mortar retailers move to meet the customer where she is—expecting to be able to shop online, by phone or in store—many are running into similar obstacles presented by legacy systems, including their technologies and supply chains.

It does no good to offer “click-and-collect” services if a product isn’t there, or if online orders deplete shelves, leaving them empty for in-store shoppers. And product information is key because shoppers expect to be able to see whether the item they seek is actually at the store near them.

Of course, retailers are highly dependent on suppliers’ own operations, and their speed, accuracy, and security is really only as fast, accurate, and secure as their slowest, least accurate, and least secure vendor. Wal-Mart, already infamous for running a tight ship with suppliers, recently told vendors it also would speed up delivery requirements and raise standards for tardiness.

Automation is increasingly driving supply chain efficiencies, with 51% of 900 companies surveyed in a recent study conducted by logistics industry group MHI and Deloitte saying that robotics and other automation tech is the key to disrupting or competing in their industry—up from 39% last year.