Target Supply Chain Essay
| Target Corporation’s Supply Chain| Success for many organizations depends on the firm’s ability to balance product and process changes while exceeding customer expectations for improved cost delivery and quality. In lieu of these issues firms have started to implement principles of supply chain management. Supply chain management mainly involves managing the flow of incoming materials, manufacturing operations, and downstream distribution has to be in alignment that is responsive to change in customer demands eliminating a surplus of inventory.
When dealing with supply chain management companies need a strategy for managing resources that go toward meeting customer demands for their product or service. Developing a set of metrics to monitor the supply chain so that it is cost efficient while delivers high quality and value to customers is very important. A company must select suppliers to deliver the goods and services they need to create their product. For that reason, supply chain managers must develop a set of pricing, delivery and payment processes with suppliers and create metrics for monitoring and improving the relationships.
SCM managers can put together processes for managing their goods and services inventory, including receiving and verifying shipments, transferring them to the manufacturing facilities and authorizing supplier payments. Supply chain managers schedule the activities necessary for production, testing, packaging and preparation for delivery. This is the most metric concentrated portion of the supply chain. A system where companies are able to measure quality levels, production output and worker productivity will yield the best results.
Companies coordinate the receipt of orders from customers, develop a network of warehouses, pick-up to get products to customers and set up an invoicing system to receive payments. Target was established in 1962 and is an American discount retailing company headquartered in Minneapolis, Minnesota. Target Corporation is one of the nation’s largest retailers with three independent, highly visible chains; Target Stores, SuperTarget, and formerly Target Greatland. Target Operations include highly competitive retail space, in addition to their superior understanding of logistics.
Logistics is big business for this retail store as it sells everything from fashion to furniture in over 1,740 retail outlets in 49 states. Its supply chain includes several thousand vendors, distribution centers, and its core carriers and consolidators. [update] Target Corporation operates 26 distribution centers throughout the United States; three new distribution centers in 2006 and one in 2009 to support the growth of its stores. With the exception of a few vendors, distribution centers shipped items directly to Target stores. The retail chain’s first distribution center opened in Fridley, Minnesota, in 1969.
Target offers a wide variety of product assortments and it has a variety of suppliers. Target is in a favorable position with their suppliers due to their size. Furthermore, Target poses the threat of backward integration via expansion of its own private-label offerings. Target is more susceptible to economic fluctuations compared to other discount retailers due to its greater proportion of “upscale” products. When buyers have less discretionary income they will not be as willing to pay a bit more for Target’s stylishness or higher quality.
Target has seized the opportunity to capitalize on its bargaining power while taking measures to lower costs. Costs are reduced by pressuring vendors to absorb merchandising costs and by eliminating distribution and inventory costs through improved supply chain management controls. Vendors see the benefit of their products being offered at Target so they must cooperate. Target has automated and expanded its distribution facilities and requires vendors to prepackage their products or ship them “store-ready. Requiring suppliers to ship orders directly to specific stores is a frequent practice amongst their suppliers. Much of the responsibility for handling and distribution is shifted to the supplier, and Target can levy penalties for any errors within the distribution process. In 2003, Target launched a web-based tracking system that gives it end-to-end visibility of its supply chain. The system enables Target to adapt more quickly to supply chain problems and track the performance of its suppliers.
Previously, target vendors would fax thousands of orders each week; target would then need to sort, optimize and assign carriers. Their staff would manually input shipments into its proprietary vendor management system which would notify its transportation management system for consolidation and optimization. Target was in fact making transportation decisions with very limited visibility to the shipments. This led to an excessive number of costly less than truckload moves. The company was unable to continue operating in this manner as the business continued to experience growth.
Target was exploring ways to improve its load factors, reduce data entry requirements and errors, optimize routing decisions, and disseminate more timely shipment status information to everyone in its supply chain. Target was interested in the finding a technology based solution for their supply chain operation so they turned to the e-transportation leader NTE. Target wanted to capitalize on novel Internet-based technologies that would capitulate a more efficient way to manage the inbound transportation activities.
The partnership with NTE leveraged a technology-based solution that could use the retailer’s accessible operations and infrastructure. This included the TMS system, and using NTE OMS as its core service. Target therefore linked all of its trading partners into a centralized confidential trading community for automated transactions, timely communications and status reports, and efficient transportation management. Many of Target vendors submit ready to ship freight information at the individual order level electronically to Target.
It can then more easily and efficiently merge and optimize shipments into its regional distribution centers. The private community was launched in January 2002. Transactions and status reports are completed online which allows Target buyers to now have real-time visibility to shipments. Phone calls to Target’s routing department have been reduced drastically. Target’s internal staff is able to focus on other processes within the business. Additionally, target has been able to consolidate a significant number of shipments into more cost effective shipments.
In 2004, Target announced to their suppliers that they were going to perform a trial on the effects of radio frequency identification (which is also used at Wal-Mart) on the efficiency of supply chain management. This trial included a distribution center and ten nearby Target stores. The RFID tags were placed on the bar codes of pallets and cartons to track the goods from the suppliers to the distribution center, and from the distribution center to the stores. This system was used for five years within the Dallas stores however; RFID has since been phased out. Initially the way Target was conducting their supply chain management was nefficient, time consuming, and dated by processing orders via fax. However, it appears as though Target has made the necessary changes to be effective and stay abreast to the competition through technological improvements. Throughout my research it was very difficult to find objective facts that ultimately proved that Target Corporation Supply chain operated at its full capacity. Wal-Mart is known for having superior logistical systems in place. For instance, Wal-Mart supply chain has been recognized for being the best in the world; this has been achieved through their emphasis on visibility by sharing vital information with suppliers.
Heavily supported by the IT infrastructure is the first thing that sets the retail-giant apart from the competition. Their process includes; the manufacturing process, the goods going to the distribution center, then distributed to the city hub, then transported to the retailer, and next in the hands of the customers. Wal-Mart has always been driven to pass along savings; this has been accomplished by their commitment to making improvements through their operations.
For instance; improving the customer experience while lowering costs has given Wal-Mart the ability to drive costs down through the supply chain. Wal-Mart business model is surrounded by their understanding of logistics, transportation, distribution, and technology. Target implemented a trial in Dallas to test out the RFID technology however, that process has since been eliminated. Wal-Mart however has found great success with implementing that system and is currently taking it a step further with using it to track men’s pants.
Their current system appears as though it focuses more heavily on the suppliers. Furthermore, Target has automated and expanded its distribution facilities and requires vendors to prepackage their products or ship them “store-ready. ” Requiring suppliers to ship orders directly to specific stores is a frequent practice amongst their suppliers. This ultimately can be a good thing allowing management to focus on other high caliber projects however; it does leave room for error. The process can be further streamlined to provide maximum efficiency.
I am curious to know what happens when a supplier fails to ship their products other than the price penalty that they place on the supplier. References Company supply chain. (n. d. ). Retrieved from http://sites. target. com/site/en/company/page. jsp? contentId=WCMP04-034213 Waligum, T. (2008, novmber 20). Supply chain management. cio Walmart Corp. (2011). About us. Retrieved February 6, 2012 from: http://walmartstores. com/AboutUs/321. aspx Walters, D. ; Rainbird, M. (2007). Strategic operations management: A value chain approach. New York, NY: Palgrave MacMillan. Schlosser, Julie. “How Target Does It. ” Fortune 18 Oct. 2004: 100.