Target’s Supply Chain Unit 2 Assignment GB570 Managing the Value Chain Jerry Haenisch Kaplan University August 12, 2012 Target’s Supply Chain The Dayton Company president, Douglas J. Dayton, sought to “draw upon the company’s vast wealth of department store experience” in an effort to “combine the best of the fashion world with the best of the discount world” to create a store where a consumer could find quality merchandise at discounted prices (. After following a desire to shift from a family operated business, in 1962 The Dayton Company formed Target Corporation in 1962. The following paper will outline Target Corporation’s supply chain.
The intricate relationship between the demand chain and supply chain will be analyzed. All information will be reviewed to determine if the supply chain is capable of meeting and maintaining supply chain expectations. Overview of Target’s Supply Chain “Our mission is to make Target your preferred shopping destination in all channels by delivering outstanding value, continuous innovation and exceptional guest experiences by consistently fulfilling our ‘Expect More. Pay Less. ’ brand promise” (Target, 2013). Their supply chain stands out among the rest as being one of the best designed supply chains in the retail industry.
Target focuses on increasing global networking, offering a trendy product and clothing line, and including value added services, such as Starbucks, to create brand distinction. Target actively engages in supplier diversity and consistently seeks out “certified diverse suppliers who can provide innovative, competitively priced goods and services, foster community and economic development, and enhance our ability to deliver shareholder value” (Target, 2013). The idea is that this will reduce inventory lead times, lower product wholesale costs, and deliver inventory consistently to the stores, thus improving heir product and service specification (Walters & Rainbird, 2007, p. 155). This improvement has yielded Target an improved internal financial performance rating and service superiority that backs up their mission statement. Being a retail industry leader, Target has responded to their consumer’s demand through continually and accurately adjusting their supply chain by investing in certified designers, following consumer trends, offering shipments to accommodate demand, and seeking ways to increase customer service.
This drive to continue to grow and strengthen their supply chain has led Target to improve cost of shipping and transportation, investing in technology and strengthening vendor relationships. Important components of Target’s supply chain include order processing and management, product and service evaluation, inventory procurement and management, and delivery (Walters & Rainbird, 2007, p. 155) Product and Service Specification
Demonstrating visionary leadership sets Target apart from their direct competitors, allowing them to select and provide products based on consumer’s needs and wants. Since the main focus of Target, circa 1962, was based on providing excellent services and an upscale shopping experience, they have been able to maintain a trendier image when compared to other discount retailers in their market. Target stores are always clean, bright, and offer a trend-forward merchandise option that continues to feed their customer’s appetites. (Target, 2013).
Many products are imported and must be compliant with existing federal regulations, follow corporate guidelines for quality and brand integrity, and offer features unique enough to stay competitive. After the discount movement made them the first coast-to-coast national retailer in 1989, Target began recognizing that shoppers did not always have time to shop at several stores in one shopping trip. Their first superstores emerged in 1995, which included their traditional retail, plus pharmacies, photo centers, restaurant spaces and “fresh produce, meat and dairy products” (Target, 2013).
Other ways to create and strengthen their supply chain was to create the online store for customer shopping convenience. Firms such as Amazon. com and eBay were some of the first on the market to move toward online stores, and then followed by Wal-Mart and Target to maintain a competitive market presence. This addition of stores and online shopping options created an attraction for consumers and helped make them more attractive to current and potential customers. Order Processing and Management
Order processing involves the following steps: customer orders item(s), order received by the manufacturer, order processed by the manufacturer, credit verified by the credit department, order packed and loaded on to truck for shipment, order shipped to customer, and finally, order receive by customer and added to inventory (Nobilis, 2011). Having a competitive supply chain is not successful unless Target has the technologies to deliver the good or service to consumers in an efficient, effective manner.
When a consumer purchases an item, via the internet or in store, they are not only placing an order for the item, but providing feedback into consumer trends, thus feeding the demand chain. The retailer then places an order with the distributor, who receives and processes the order. Most systems have their retailers set up with automatic credit verification and payment is processed. Once the payment has been processed the order is then packaged and shipped out to the retailer.
It is shipped via truck or train to the retailers, where they take the items and add them to their store’s inventory for consumer purchase. Orders are also periodically shipped to retailers to create a sense of uniformity among the Target Stores and aids in management of the supply chain (Target, 2013). Value Delivery Options Target partners with multiple vendors to achieve a high level of quality. “Our mission is to ensure that vendors operate efficient, safe and ethical factory environments where they can produce safe, reliable, high-quality products” (Target, 2013).
Target has teams whose focus is on social compliance, supply-chain sustainability, product safety and quality assurance, recall programs, and operations that all work together to deliver the value and service the value to their customers (Walters & Rainbird, 2007, p. 54). According to Peter Tirschwell, while many large retailers have opened inland ports to receive goods, Target Stores “has gone its own way” and held firmly to the strategy of routing imported merchandise to select distribution locations on the East and West coasts.
Target continues to rely on truck or rail transportation of goods to “feed its 1,600 retail locations” (Tirschwell, 2008). Procurement The Target Sourcing Service team globally searches for merchandise and diligently works to locate products and services that exceed consumer expectations. The team is designed to anticipate issues and potential risks in order to make decisions in the best interest of the business (Target, 2013). Target Sourcing Team also methodically evaluates countries for factors including production control, social responsibility, capacity, and time to get product to market and pricing.
Products are also clearly labeled with country of manufacture to be in compliance with U. S. governmental regulations. Inventory Management Inventory demand fluctuates based on season, demographics, and economical stability. Target plans inventory supply to address seasonal items and prepare for “high season” by managing supplier relationships (Target, 2013). Items that consistently managed include household items, electronics, clothing, home furnishings, personal care items, music and movies, pet supplies, and food.
Proper inventory management allows Target Corporation to maintain the stability of the supply chain to prepare for future demands and respond to consumer trends. Processing Processing is a firm’s ability to receive and send products. Centrally located “hubs” are responsible for organizing and distributing inventory to the different distribution centers via an East and West coast location. Once items are shipped to the distribution centers they are then processed and distributed to the Target Stores and a select few third party centers whose focus is on food items (Target, 2013).
Unlike other large retailers, Target does not have inland distribution centers and is further described below. Transportation The organization’s regional distribution centers are located in the East and West coast of the United States. It has held firmly to a strategy of routing most of its imported merchandise through a handful of import distribution centers located on the East and West coasts, and relaying goods by truck or rail to the regional distribution centers that supplies products to its retail locations (Tirschwell, 2008).
Target is able to respond quickly to consumer demand because the company to take control of goods immediately upon import and focus specific items to areas of higher demand (Target, 2013). Assessment of Supply Chain Efficiency Target has achieved success by “combining innovation and discipline, financial strength and strategic planning, and balancing its investment in long-term growth with its ability to deliver near-term earnings” (Target, 2013). It can be determined that Target’s supply chain is highly functional and efficient.
The organization has programs in place and teams set up to create value by seeking out what consumers want and procure those items to produce value. The level of communication seen in the referenced materials suggests that Target is maintaining a high level of communication between the distributors, retailers and consumers. Value is delivered in a timely manner and when necessary via the inventory management, processing, and transportation program design. Since Target has a product inspection and recall program they also establish a service value with their consumers. Relationship of Supply Chain to Demand Chain
Walters states that it is important to use a demand chain along with a supply chain to better establish the value chain as a whole (2007). Based on that statement, it can be concluded that Target’s supply chain successfully supports the demand chain. By identifying the consumer’s wants and needs, following market trends and demands, and carefully watching the market competitors, Target is better able to monitor the value chain for strengths and weaknesses. They can maintain focus on quality, price and service while continuing to add value to customers and stakeholders.
Conclusion It is clear that Target has effectively met the needs of their supply chain. Through careful product and service selection, closely managed and distributed inventory, and a clear focus on consumer trends, Target has created a distinct image in the market giving them a competitive advantage. Combining these aspects of the supply chain has positively affected the demand chain, thus increasing customer satisfaction through higher product and service quality and a quick response to consumer demands.
Target is steadily growing and gaining ground with competitors and will continue to see an increase in results through ongoing contribution to the value chain via the supply chain. References Misra, H. , & Choudhary, K. (2010). Opportunities and challenges for ICT mediated innovations in a development oriented value chain: The case of Jaipur Rugs Company. Vilakshan: The XIMB Journal of Management, 7(2), 21-48. Nobilis, L. (2011). Supply chain management: Order processing. Retrieved August 13, 2013 from http://www. biz-development. com/SupplyChain/6. 20. 6. supply-chain-management-order-processing. htm. NTE. (n. . ) NTE customer success stories: Target Corporation. Retrieved August 13, 2013 from http://www. nte. com/wp-content/uploads/2012/10/Target-Case-Study. pdf Target. (2013). Target through the years. Retrieved on August 12, 2013 from https://corporate. target. com/about/history/Target-through-the-years. Tirschwell, P. (2008). Target reconsiders supply-chain strategy. Retrieved August 12, 2013 from http://www. ittc. com/uploadedfiles/News/07_14_08_target_reconsiders_supply_strategy. pdf. Walters, D. , & Rainbird, M. (2007). Strategic operations management: A value chain approach. New York: Palgrave Macmillan.