Improvements to Target\'s Logistics Processes as One

Improvements to Target's Logistics Processes

As one of the leading retailers in North America, Target Corporation (NYSE:TGT) has one of the most advanced logistics, supply chain management and planning systems and series of processes in the retail industry. Target has specifically designed their entire value chain to deliver higher-end electronic products that can compete with WalMart, specifically in the areas of flat screen televisions, laptop computers and increasingly, Apple-branded iPads and iPod products. Target is also using their advanced supply chain processes including Collaborative Planning, Forecasting and Replenishment (CPFR) to compete in the high-end women's clothing lines that WalMart is not choosing to compete in (Target Investor Relations, 2012). At the close of their latest fiscal year, Target was operating approximately 1,760 stores in 49 states. Target finances its operations through its retail and credit card business units, using the profits from those two operations to finance the operations of 37 regional distribution centers (Target Investor Relations, 2012). Target is just beginning to explore food and perishables retailing, as is evidenced by their decision to open just four distribution centers dedicated to this product line areas. Target is adept at logistics processes that include pick/pack/ship operations and the basics of distributed order management. Target however does not manage the collaborative, planning, forecasting and replenishment (CPFR) process as well as WalMart however. Target lacks the ability to deliver the level of pricing insight as part of their logistics workflow processes as WalMart (Henderson, 2001). Target also continues to use their logistics processes and systems to support and strengthen their higher-end market message over competing just on low prices as WalMart has (Krishnamurthi, 2001).

Advanced Logistics Processes Target Needs To Improve

Target grew rapidly as the company excelled at the basic logistics processes that were essential to support their over 1,000 stores via their 37 distribution centers. Supporting demand management on non-perishable products also became a strength for Target over the last five years as a distributed order management system was installed using enterprise software Yantra (Target Investor Relations, 2012). Target was able to transform their basic operations using a 360-degree of their entire supply chain and logistics processes via distribution order management logistics.

This new platform also set the basic foundation for being able to collaborate with suppliers at a higher level of performance than had been possible in the past. The most complex processes from a logistics standpoint that Target is most challenged with are Sales & Operations Planning (S&OP) and enterprise-wide Collaborative, Planning Forecasting and Replenishment (CPFR) (Henderson, 2001) (Hofman, 2004). Target realizes these two logistics areas can deliver much greater value than they are today. The approach the company is solving these two problem areas from a logistics standpoint are to concentrate on creating a higher level of data and process transparency across their entire company and with suppliers (Target Investor Relations, 2012). Target is looking to get ahead of the challenges of S&OP and CPFR by bringing a greater level of analytics measurement into their logistics systems at a global scale. The pursuit of greater demand visibility and performance of the entire supply chain from a logistics standpoint is also anchored in key supply chain analytics and metrics. Target has been known to create their own metrics internally and also is relying on the Hierarchy of Supply Chain Metrics shown in Figure 1 (Target Investor Relations, 2012). This hierarchy of supply chain metrics is often used throughout Target to define logistics strategies and measure them. Creating greater visibility into the logistics processes and pursuing the perfect order (Columbus, 2008) is an area where Target can improve.

Figure 1: Hierarchy of Supply Chain Metrics

Sources: (Hofman, 2004): Link to the AMR Research The Hierarchy of Supply Chain Metrics

The metrics included in the Hierarchy of Supply Chain metrics also gives Target the potential to redesign their troubled S&OP and CPFR processes, deliberately designed to lessen risk on the highest-priced electronics and clothing items the company sells. At present Target struggles with advanced demand management strategies for these items with the investment in S&OP and CPFR seen as potential solutions to these challenges (Target Investor Relations, 2012). Target also concentrates on taking the ground-level metrics and translating them into the mid-level of metrics shown in Figure 1, Hierarchy of Supply Chain Metrics.