Case Study: Target's Supply Chain
Target’s Supply Chain
Unit 2 Assignment
Michael Mc Evoy
GB570 Managing the Value Chain
Professor Craddock
Kaplan University
26 September 2014
Target’s Supply Chain The founder of target George Draper Dayton, had a thought, and that thought eventually became a reality. In 1902 he opened the Dayton Dry Goods company, and from there it just moved forward. In 1911 Dayton’s Department store opened their doors and this was a precursor to the evolution into Target. From the time they opened the doors as Dayton’s in 1911 to what is now Target 1962 they celebrated 50 Years in 2012 and are now enjoying 52 years of service the American Public.
Overview of Target’s Supply Chain A company’s value chain …show more content…
consists of a multitude of chains that intertwine to form the value chain. One of these is the supply chain. Supply chains focus on the effectiveness and efficiency of the location as well as production and logistics and cost management. One of the main focuses of the supply chain is managing the margins. With this the competitive advantage that the company gains from the supply chain has the ability to control the costs of the business. With this focus on the supply chain it will be better defined as what is necessary to fulfill a request from the consumer. This could include everything involved including the following;
Manufactures
Suppliers
Warehouses
Transportation
Retailers
All of these are part of the supply chain to ensure that the end result is that the consumer is satisfied and content with their purchase. Because after everything is said and done the end result should be the consumer is satisfied and the company has made a profit, and achieve company growth over time. Like most retailers Target has found a way to achieve growth over the years. They have accomplished this by utilizing several different vendors for their products. They have over thirty distribution centers throughout the country to effectively resupply all of the location around the country within a minimal amount of time. This can appear to be a logistical nightmare, but with a working supply chain it is a win/win for all.
Product and Service Specification In breaking down the supply chain we will look at each of the segments. The first one would be product and service specification. In order for the company to receive products they must first create a need and then create product specifications. This will normally be accomplished during the initial store set up prior to opening the doors for the first time and before the initial stock order will be received. Even though the main focus of the company is the consumer, Target has a customer relations department to solve and issues or concerns that the consumer may have. The main focus for the company is the products that they are selling to entice the consumer to enter the locations. All product that enter the location will have a specification label to describe what the product is and how it functions, just like another document that is used for all chemicals the MSDS (Material Data Safety Sheet). The documentation that is received with the products will give Target an idea of what they are looking to sell in each store based on their own demographics.
Order Processing and Management The next step in the supply chain management would be order processing. There are three areas in this part of the supply chain, they are;
Manufactures
Distributors
Retail Outlets
When it is time for the location to resupply, the inventory system part of the POS (Point of Sale) software will know that a product has fallen below its prescribed min/max (minimum/maximum) value. The system will scan the complete inventory and then create a replenishment order based on the sales and the min/max. That order will be transmitted to the local distribution location to be processed and then pulled for shipping. The distribution center will notify the location of anything that they do not have in stock and will then refer to the manufacture for procurement. That will generate a backorder list for the location. Once the order has been filled it will be processed and a shipping list will be created. Once the order has been placed on pallets and then wrapped it is ready to be shipped to the local location. Upon receiving the stock order the location will scan in the order to ensure that the distribution center has properly pulled the order correctly otherwise the stores internal inventory will be off, and that can create havoc later during physical inventories. Once the order has been scanned into inventory then the next step is to post and receive the inventory and then have the store personnel stow the truck.
Value Delivery Options The next step in the process would be delivering value to the customer.
After all the only thing that will separate Target form other chains like Wal-Mart and other discount chains is the ability to deliver the perception of value to the consumer. Value is the only bargaining chip that they have. Most of them will sell the same products but it is the perception of value that makes the difference in whether or not the consumer will purchase the products. Most of the time consumers will make their purchases from a need that has to be filled but quite a few time they will do what is called impulse buying. They will see an item and they just have to have it at that time. Retailers will act upon this and then place items that are attracted to impulse in areas of the store so that consumers will act upon …show more content…
them.
Procurement
The next link in the chain would be procurement. This for a business is crucial. It is the businesses ability to obtain the material and goods that they are going to bring to the market for the consumer. Procurement is;
Purchasing
Transportation
Terms from the manufacture
Once this link in the chain has been satisfied then it is up to inventory management to ensure that an unending supply keeps coming into the location for sale.
Inventory Management As we gather ore links in the chain we have come to what happens after the sale has been completed. The item has to be replaced and this is how we replenish our inventory. Prior to the store opening for business all of the products in the store for sale were assigned inventory values depending on how fast the product is estimated to sell. Products will then be assigned a min/max. Every time the product is sold the system will scan the inventory and if the on hand amount is below the min/max the system will generate an order. Depending on the ordering parameters that have been set will determine the amount of orders the system will generate. Once the order is generated it will then be transmitted to the distribution center for processing.
Processing
This would be the next link in the chain. Once the order has been received it has to be processed in the distribution center. Depending on the amount of automation that the center has will determine just how fast the order can be filled and shipped out. Some DC’s (Distribution Centers) are fully automated which means that there is a skeleton crew on hand just to ensure that the automation is functioning properly. Others will use pickers who have a certain section of the warehouse and they will physically pull the item from the DC’s inventory and then place it on a conveyor belt with the bar code facing out. The bar code will be read many times during the parts travel from the shelf of the DC to the shelf of the store. In order for Target to make this efficient and effective they have strategically place DC’s around the nation, with any store no more than one day’s drive from the DC. This ensures that all of the locations will be able to benefit from rapid replenishment. No store manager likes to see holes on the shelves where product for sale should be. But with one day shipping in most cases the holes should be kept to a minimum. This also allows for special orders should the product not be in the store or the consumer wishes to purchase something that the store has no stocking room for, but is offered thru the DC Once the order has been processed and prepared it will be wrapped on a pallet for shipping to the store. This will lead us to the final link in the chain.
Transportation
The final link in the value chain is the logistical effort to move the product from the warehouse to the store.
This is probably one of the most important links in the chain. Like most manufactures and competitors, the bulk of transportation is over the road trucking. The big rigs will load at the DC and then start out on their prescribed routes. Most of the time the deliveries will be done at night while the location is closed. The driver will have access to the loading area and a virtual cage area where the drive can on load and off load product only. As long as he stays within the marked off area the alarm will not sound but cross the line and then “POP GOES THE WEASEL”. This way the store associates will be able to check in the order during store hours and not having to wait for the truck to arrive.
Assessment of Supply Chain Efficiency Based on the findings here it would appear that Target’s supply chain is very efficient. With having over 34 DC’s with in the country no location is less than a day away from resupply. With transportation costs being kept at a minimum Target is able to pass the savings to the consumer in the means of lower prices for the product. Target is also able to add value to the shopping experience by using a multitude of vendors providing a wide array of product that consumers both use and require on a daily basis.
Relationship of Supply Chain to Demand
Chain The relationship that Target has with its suppliers appears to be interwoven. One of Target’s plans is to provide consumers with a wide variety of products for its consumers to feel comfortable and satisfied with their purchases. In order for Target to maintain its growth rate they must be able to manage both their supply chain and value chain effectively
Conclusion
By effectively managing their supply chain, Target has seen a year over year increase in both sales and revenues. Product specification documents have given them the knowledge to understand what they are selling and just where the products are coming from. With the addition of inventory software they have the ability to replenish their stocking levels to ensure that they will always have the product on hand for sale. This gives them the competitive advantage to outperform the competition in the retail market and provide a great value to the consumer.
References
Bendorf, R Tanel, T & Emmett S (n.d) what is Procurement? Not such a simple answer. Retrieved from http://www.purchasing-procurement-center.com/what-is-procurement
Budding, J. (2009) Inventory Management. Retrieved from http://archive.sba.gov/groups/public/documents/sba_homepage/pub_mp22.pdf
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.
Unit 2 Assignment
Michael Mc Evoy
GB570 Managing the Value Chain
Professor Craddock
Kaplan University
26 September 2014
Target’s Supply Chain The founder of target George Draper Dayton, had a thought, and that thought eventually became a reality. In 1902 he opened the Dayton Dry Goods company, and from there it just moved forward. In 1911 Dayton’s Department store opened their doors and this was a precursor to the evolution into Target. From the time they opened the doors as Dayton’s in 1911 to what is now Target 1962 they celebrated 50 Years in 2012 and are now enjoying 52 years of service the American Public.
Overview of Target’s Supply Chain A company’s value chain …show more content…
consists of a multitude of chains that intertwine to form the value chain. One of these is the supply chain. Supply chains focus on the effectiveness and efficiency of the location as well as production and logistics and cost management. One of the main focuses of the supply chain is managing the margins. With this the competitive advantage that the company gains from the supply chain has the ability to control the costs of the business. With this focus on the supply chain it will be better defined as what is necessary to fulfill a request from the consumer. This could include everything involved including the following;
Manufactures
Suppliers
Warehouses
Transportation
Retailers
All of these are part of the supply chain to ensure that the end result is that the consumer is satisfied and content with their purchase. Because after everything is said and done the end result should be the consumer is satisfied and the company has made a profit, and achieve company growth over time. Like most retailers Target has found a way to achieve growth over the years. They have accomplished this by utilizing several different vendors for their products. They have over thirty distribution centers throughout the country to effectively resupply all of the location around the country within a minimal amount of time. This can appear to be a logistical nightmare, but with a working supply chain it is a win/win for all.
Product and Service Specification In breaking down the supply chain we will look at each of the segments. The first one would be product and service specification. In order for the company to receive products they must first create a need and then create product specifications. This will normally be accomplished during the initial store set up prior to opening the doors for the first time and before the initial stock order will be received. Even though the main focus of the company is the consumer, Target has a customer relations department to solve and issues or concerns that the consumer may have. The main focus for the company is the products that they are selling to entice the consumer to enter the locations. All product that enter the location will have a specification label to describe what the product is and how it functions, just like another document that is used for all chemicals the MSDS (Material Data Safety Sheet). The documentation that is received with the products will give Target an idea of what they are looking to sell in each store based on their own demographics.
Order Processing and Management The next step in the supply chain management would be order processing. There are three areas in this part of the supply chain, they are;
Manufactures
Distributors
Retail Outlets
When it is time for the location to resupply, the inventory system part of the POS (Point of Sale) software will know that a product has fallen below its prescribed min/max (minimum/maximum) value. The system will scan the complete inventory and then create a replenishment order based on the sales and the min/max. That order will be transmitted to the local distribution location to be processed and then pulled for shipping. The distribution center will notify the location of anything that they do not have in stock and will then refer to the manufacture for procurement. That will generate a backorder list for the location. Once the order has been filled it will be processed and a shipping list will be created. Once the order has been placed on pallets and then wrapped it is ready to be shipped to the local location. Upon receiving the stock order the location will scan in the order to ensure that the distribution center has properly pulled the order correctly otherwise the stores internal inventory will be off, and that can create havoc later during physical inventories. Once the order has been scanned into inventory then the next step is to post and receive the inventory and then have the store personnel stow the truck.
Value Delivery Options The next step in the process would be delivering value to the customer.
After all the only thing that will separate Target form other chains like Wal-Mart and other discount chains is the ability to deliver the perception of value to the consumer. Value is the only bargaining chip that they have. Most of them will sell the same products but it is the perception of value that makes the difference in whether or not the consumer will purchase the products. Most of the time consumers will make their purchases from a need that has to be filled but quite a few time they will do what is called impulse buying. They will see an item and they just have to have it at that time. Retailers will act upon this and then place items that are attracted to impulse in areas of the store so that consumers will act upon …show more content…
them.
Procurement
The next link in the chain would be procurement. This for a business is crucial. It is the businesses ability to obtain the material and goods that they are going to bring to the market for the consumer. Procurement is;
Purchasing
Transportation
Terms from the manufacture
Once this link in the chain has been satisfied then it is up to inventory management to ensure that an unending supply keeps coming into the location for sale.
Inventory Management As we gather ore links in the chain we have come to what happens after the sale has been completed. The item has to be replaced and this is how we replenish our inventory. Prior to the store opening for business all of the products in the store for sale were assigned inventory values depending on how fast the product is estimated to sell. Products will then be assigned a min/max. Every time the product is sold the system will scan the inventory and if the on hand amount is below the min/max the system will generate an order. Depending on the ordering parameters that have been set will determine the amount of orders the system will generate. Once the order is generated it will then be transmitted to the distribution center for processing.
Processing
This would be the next link in the chain. Once the order has been received it has to be processed in the distribution center. Depending on the amount of automation that the center has will determine just how fast the order can be filled and shipped out. Some DC’s (Distribution Centers) are fully automated which means that there is a skeleton crew on hand just to ensure that the automation is functioning properly. Others will use pickers who have a certain section of the warehouse and they will physically pull the item from the DC’s inventory and then place it on a conveyor belt with the bar code facing out. The bar code will be read many times during the parts travel from the shelf of the DC to the shelf of the store. In order for Target to make this efficient and effective they have strategically place DC’s around the nation, with any store no more than one day’s drive from the DC. This ensures that all of the locations will be able to benefit from rapid replenishment. No store manager likes to see holes on the shelves where product for sale should be. But with one day shipping in most cases the holes should be kept to a minimum. This also allows for special orders should the product not be in the store or the consumer wishes to purchase something that the store has no stocking room for, but is offered thru the DC Once the order has been processed and prepared it will be wrapped on a pallet for shipping to the store. This will lead us to the final link in the chain.
Transportation
The final link in the value chain is the logistical effort to move the product from the warehouse to the store.
This is probably one of the most important links in the chain. Like most manufactures and competitors, the bulk of transportation is over the road trucking. The big rigs will load at the DC and then start out on their prescribed routes. Most of the time the deliveries will be done at night while the location is closed. The driver will have access to the loading area and a virtual cage area where the drive can on load and off load product only. As long as he stays within the marked off area the alarm will not sound but cross the line and then “POP GOES THE WEASEL”. This way the store associates will be able to check in the order during store hours and not having to wait for the truck to arrive.
Assessment of Supply Chain Efficiency Based on the findings here it would appear that Target’s supply chain is very efficient. With having over 34 DC’s with in the country no location is less than a day away from resupply. With transportation costs being kept at a minimum Target is able to pass the savings to the consumer in the means of lower prices for the product. Target is also able to add value to the shopping experience by using a multitude of vendors providing a wide array of product that consumers both use and require on a daily basis.
Relationship of Supply Chain to Demand
Chain The relationship that Target has with its suppliers appears to be interwoven. One of Target’s plans is to provide consumers with a wide variety of products for its consumers to feel comfortable and satisfied with their purchases. In order for Target to maintain its growth rate they must be able to manage both their supply chain and value chain effectively
Conclusion
By effectively managing their supply chain, Target has seen a year over year increase in both sales and revenues. Product specification documents have given them the knowledge to understand what they are selling and just where the products are coming from. With the addition of inventory software they have the ability to replenish their stocking levels to ensure that they will always have the product on hand for sale. This gives them the competitive advantage to outperform the competition in the retail market and provide a great value to the consumer.
References
Bendorf, R Tanel, T & Emmett S (n.d) what is Procurement? Not such a simple answer. Retrieved from http://www.purchasing-procurement-center.com/what-is-procurement
Budding, J. (2009) Inventory Management. Retrieved from http://archive.sba.gov/groups/public/documents/sba_homepage/pub_mp22.pdf
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.