Target's_Supply_Chain

Target’s Supply Chain Unit 2 Assignment Michelle Kaczmarek GB570 Managing the Value Chain Dr. Pricilla Aaltonen Kaplan University December 18, 2012 Target’s Supply Chain The Target Corporation was founded in 1962 by John Dayton. Target was originally a discount store by the name of the Dayton Company that was established in the suburbs of Roseville, Minnesota (The History of Corporation, n.d.). Initially, there were four Target stores, all operating out of Minnesota, until 1968 when two more stores were opened in St Louis. Target stores were mainly retail until acquisitions and expansions within the organization were made in 1969. The merging of companies (then named Dayton-Hudson Corporation) created an opportunity for Target to expand into areas such as electronics and appliances (Target Corporation, 2012). However, the expansion and lack of experience by executives and management caused sales to drop’ management issues were adjusted and the company has flourished in the industry. In 2000, the Dayton-Hudson Corporation changed its name to Target Corporation. The retail chain currently has 1,591 retail stores throughout the United States (except for Hawaii, Alaska, and Vermont) and has generated over $69.9 billion in revenue (Google Finance, 2012). Overview of Target’s Supply Chain Target Corporation is one of the Nation’s leading retailers. Target is a corporation that is driven by its consumer’s needs, wants, and desires. Therefore, understanding the logistics of their supply chain is crucial to their success. The Company is driven to please its consumer base by continuously offering quality products at reasonable prices. According to Walters & Rainbird (2007), a supply chain focuses on how efficient an organization’s production and logistics processes function. Moreover, Target’s supply chain will help minimize costs giving Target the ability to control those costs. Target has created a competitive advantage because they are able to control costs which leaves customers satisfied and generates profits for the company (Misra & Choudhary, 2010). Target’s supply chain is geared around fulfilling customer requests involving all aspects of the organization such as transportation, suppliers, manufacturers, warehouse functions, and other retailers (Target Corporation, 2012). Target Corporation seeks to find ways to improve the customer experience by identifying ways to bring value to both the organization and its consumers. Target has leveraged operations costs within the organization by optimizing transportation and shipment costs. This response to Target’s customer demands has helped the organization gain more value in its transportation network. Practices such as this have empowered the company by improving interactions with vendors and manufacturers, faster and up-to-date technology, and improves customer service experiences (Target Corporation, 2012). Target Corporation’s supply chain consists of several categories. These categories include product and service specification, order processing and management, value delivery options, procurement, inventory management, processing, and transportation. It is important for Target to understand these categories because these components are how an effective supply chain functions. Product and Service Specification The first category in the supply chain is product and service specification. Product and service specification is important for the company. It is important because it provides information on products and services that “fit” into the customer’s criteria and specifications. For example, in 2011 Target Corporation began managing two food distribution centers that they previous operated as a partnership with another grocer. This move has allowed Target to reduce costs to the consumer, drive profits, and has allowed Target to have more control over the quality and freshness of their products (Target Annual Report, 2011). Moreover, Target has managed to leverage innovation with technology allowing consumers shopping solutions such as mobile apps, online shopping, and site-to-store shopping that is available anytime, anywhere. Target consumers also expect a certain level of customer care. In 2005, Target launched its “Can I Help You Find Something'” campaign making team members more available to guest when they are in need of help (2011). Target also made changes to its website in 2011 that encourages guests to create new products and interact with other guests; Target also released its new 5% rewards program called REDcard. REDcard allows customers to receive 5% off of all purchases. The REDcard is linked directly to the customer’s bank account like a debit card and 5% is saved at the point-of-sale (Target Annual Report, 2011). Order Processing and Management Order processing and management is the second category in the supply chain. Target values its relationships with both it suppliers and consumers. Therefore, it is essential that the company develop strong partnerships with all organizations involved. It is for this reason that Target Corporation made improvements to their computer software systems and processes; creating faster processes and increased profits (Target Corporation, 2012). Moreover, Target uses a diverse group of suppliers. The company has been able to build long-term relationships with innovative suppliers. This has helped Target harness a competitive advantage over their competitors (2012). Target’s order processing is made up of three important factors: retailers, manufacturers/distributors, and invoicing. The way that Target’s order processing works is the retailer places an order with its manufacture/distributor. Next, the manufacturer/distributor processes the order, checks for payment clearance, and then ships the order to the retailer. Once Target receives the products, they put into inventory. Target is then billed by its distributors so that payment may be made towards their purchases (Target Corporation, 2012). In 2009, Target decided to upgrade its company’s technology. Target made improvements to its systems by incorporating an electronic data interchange (EDI). The EDI system improved the efficiency of generated forms such as bill of ladings, invoices, credits, purchase orders, reports, inventory information, etc. The EDI system allows Target to exchange information between its suppliers, etc. In addition to computer-to-computer information exchange, EDI requires less labor, faster transaction flow, and fewer document errors occur during processing (CovalentWorks Corporation, 2012). Value Delivery Options The third category in Target’s supply chain is value delivery option. Trends and buying patterns are constantly changing and with that come new customer demands. Target’s value based approach is geared by recognizing opportunities, knowing customer expectations, and developing a value chain structure that has created a strong competitive advantage within their market (Walters & Rainbird, 2007). Target is dedicated to delivering outstanding value, exceptional guest experience, and constant innovation (Target Corporation, 2012). Target is able to stand behind this promise by delivering a fun, enjoyable, and exciting experience whether it is online or in the store. Target has a dedicated staff throughout the organization that strives every day to satisfy the consumer. Procurement The fourth category is procurement. The Target Corporation has in place The Target Non-Retail Procurement Group. This group buys non-retail services, energy, materials, equipment, and supplies to use in their headquarters, stores, and distribution centers (Target Corporation, 2012). In addition, Target sells items such as overstocks, guest returns, and damaged items as procurements; helping to offset any lost revenues the company may have incurred. Procurement at Target also means that the organization is on the hunt for the best possible prices from the best possible suppliers with the best possible terms (2012). Consequently, Target’s EDI system makes their procurement process easier, faster, and more accurate than past systems which create customer value and faster implementation throughout the organization. Inventory Management Inventory management is the fifth category in the supply chain. Target uses a radio frequency inventory (RFID) program (Target Corporation, 2012). The RFID program is cost effective, profitable, and benefits the customer. The RFID program works by new bar code tags being applied to new merchandise that is delivered to the stores. Inventory counts are then updated in the system automatically. Once the products are sold via the registers, the inventory counts are then adjusted to reflect the sale. In addition, any time that the on-hand counts fall below a certain number more inventory is ordered and is shipped directly to the store from the distribution center (2012). Processing Processing is the sixth category in the supply chain. Processing allows Target to receive and distribute its goods and services. According to Target Corporation (2012), the organization has 37 distribution centers that provide service to over 1,100 state-of-the-art stores in practically every state. Target recognized that they can be a more effective and efficient company with more distribution centers. This practice has provided Target with the ability to control the flow of products and how they are received and distributed in both the grocery and retail sectors. Transportation The seventh category in the supply chain is transportation. The Target Corporation realized in 2001 that they were losing money on shipments and eating up employee time by entering everything manually (NTE, 2011). Target also knew that demand was increasing and company growth was beginning, so they decide to find a new system to improve its transportation value to its consumers. Target turned to NTE, an e-transportation leader to develop a technology-based solution to help leverage Target’s existing operations and strengthen its infrastructure (2011). The new technology has allowed Target to link to its partners through a private trading community. Moreover, target has seen amazing results with this technology. They now have the ability to see their shipments in real-time, consolidate shipments, eliminate mass faxes, larger loads, control over their supply chain, validate purchases before shipping, reduce unnecessary transportation moves, impose logistics planners, avoid scheduling issues, and measure and monitor vendor compliances in a matter of seconds (2011). Assessment of Supply Chain Efficiency Target Corporation’s supply chain is a very efficient and effective approach. It provides a diverse system that creates the highest level of customer value possible in today’s fast-paced world. Target’s suppliers help create a competitive advantage by providing goods and services that the consumer wants, needs, and demands. Furthermore, Target listens to its customers and creates the ultimate customer experience by providing a variety of goods at reasonable prices. Target gives consumers the products that they desire as quickly as possible for the lowest price available. Relationship of Supply Chain to Demand Chain Target’s overall goal is to provide customers with a variety of merchandise at low costs. Consumers need to feel comfortable with their purchase, plus find value in that purchase. It seems that Target’s supply and demand chains are interwoven. The RFID system allows for automatic re-ordering which would track demand by how many of that one product is sold. Products and services must be evaluated in order to determine if there is value added to the company and the consumer, suppliers must be able to fill demand at any given time, and internal processes must be functioning properly in order to make an effective strategy operationally efficient (Walters & Rainbird, 2007). Conclusion Target Corporation has over 1,100 stores and 37 distribution centers nation wide. They offer a variety of products to its consumers using many different suppliers. However, Target can effectively manage its supply chain and increase revenues in a faster manner. Target prides its self on its ability to put the consumer first. They do this by listening to what the consumer wants and then will find ways to appease their customers. Furthermore, Target manages its processes with current technology which provides faster and more accurate service to the consumer. Electronic order processing has increased Target’s bottom line by eliminating wasteful steps within a process; in addition to, incorporating new shipping software into the organization. These changes have allowed Target to provide low costs and quality products to their customers, bringing value not only to the organization, but the consumer, too. References CovalentWorks Corporation. (2012). EDI learning center: what is EDI' Retrieved December 18, 2012, from http://www.covalentworks.com/what-is-edi.asp. Google Finance. (2012). Target corporation. Retrieved December 18, 2012, from http://www.google.com/finance'q=NYSE:TGT&fstype=ii 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. NTE. (2011). Target corporation. Retrieved December 18, 2012, from http://www.nte.com/wp-content/uploads/2012/10/Target-Case-Study.pdf Target Corporation. (2012). Here for good: Products & services. Retrieved December 18, 2012, from http://hereforgood.target.com/well-being/products-and-services/ Target Corporation. (2012). Our history. Retrieved December 18, 2012, from https://corporate.target.com/discover/history. Target Corporation. (2012). Target 2011 annual report: financial highlights. Retrieved December 18, 2012, from https://corporate.target.com/annual-reports/2011/index.aspx'contentId=WCMP04-061597. The History of Corporation. (n.d.). The history of the large company model: Target corporation. Retrieved December 18, 2012, from http://www.thehistoryofcorporate.com/companies-by-industry/traderetail/target-corporation/ Walters, D., & Rainbird, M. (2007). Strategic operations management: A value chain approach. New York: Palgrave Macmillan.