Can Target Overcome Chronic Supply Chain Woes?

Published : June 12, 2015

frustrated-businessman

Target Corporation has a lot going for it: an iconic and easily recognized logo and store name, millions of customers, attractively low pricing, partnerships with major product and fashion designers and worldwide expansion plans. Despite all the pluses in Target’s favor, risk mitigation has been a major stumbling block for the company.

The credit card data breach in 2013 left it with lots of PR clean-up to do—and lots of expense. The company has offered customers free credit monitoring, ensured customers of freedom from liability arising from fraudulent transactions and suffered top management shake-ups. It has hired top digital security and tech talent to assess and combat its future digital vulnerabilities to data breaches. Digital security improvements are not cheap. Despite all the negative press, however, the data breach did not taint their public image overall, according to a Time report.

Then there was the failed Canadian venture — which hurt both reputation and bottom line, bringing profits down 40+ percent in 2013 due to the initial Canadian operating loss.

Target’s Canadian Downfall

So if we cannot blame bad PR from the data breach, what caused Target in Canada to tank in its first year so badly that it nearly halved overall company profits? Why did they fail so completely in Canada?

Cross-border customer complaints have centered mainly around empty shelves resulting in low customer satisfaction. Poor supply chain management and high Canadian opening costs combined to create a big problem for Target internationally.

Target must learn to balance supply and demand amidst huge SKU proliferation among brands and ever tighter industry profit margins on products sold. Competing with Wal-Mart's pricing and Amazon's dominance in logistics and operations won't be easy, as the failed Canadian experiment shows.

Things Were Looking Up According to Analysts

Mobile Commerce Daily named Target Mobile Retailer and Commerce Website of the Year in 2013. Unfortunately, Target’s e-commerce segment has not yet brought much profit in the years since, but huge digital growth and demand seem destined for any and every retailer in this ever-more-mobile age. Target is experimenting with better shipping discounts, fresh food and smaller stores, such as CityTarget and TargetExpress, which have worked well for Wal-Mart. Will these efforts be enough? If the company can properly gather and handle their data stream, it all just might work.

Can Big Data Help Cure Target's Empty Shelf Problem?

Target's Canadian venture ended poorly, but the company may still have a chance to become an international powerhouse in the future.

Target's investments in technology will hopefully extend beyond security. Sharpening up its technology should help to not only Target collect and protect, but intelligently leverage big data to better analyze customer behavior. Data will be their biggest tool in predicting and meeting customer demand through all channels. Managing and analyzing data is key to improving supply chain logistics to meet high shopper expectations, which include for adequate stock of myriad products ordered from more and more locations via more channels.

Will Target Hit Ever Hit Its Profitability Target?

None of Target’s potential, new profit center hopes (mobile, fresh food and smaller stores) helped it manage inventory successfully in Canada. In fact, these attempts to lure customers placed more strain on the retailer’s already taxed Canadian supply chain. But if the company learns from past mistakes, all is not lost.

Astute supply chain management can make (and its lack can break) Target. Target is betting big on mobile and making good headway. How will the massive US retailer with big expansion plans handle a supply chain that has never been more complex? Like many other businesses large and small, Target's future depends upon it.

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Topics: Supply Chain Logistics

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