Holiday surprise: Target has supply chain problems, again

In the "everything old is new again category," Target has an out-of-stock problem. Again. Just in time for the holidays.

The Minneapolis-based retailer has been suffering from a decided lack of merchandise, particularly in its grocery department, according to reports in the local press there. Customers say the stores are out of staples, including milk and bread.

For people like me, who have been around for a while, out of stocks are a re-occurring problem for the chain. Most recently during its ill-fated Canadian expansion, shoppers complained of empty shelves (along with price and product disparities).

Well before then, in the early 2000s, Target had some serious out-of-stock problems effecting home, consumables, and health and beauty. It was a concern for Wall Street as well, and then CEO Bob Ulrich managed to nip that in the bud.

The fact that the problem is disproportionately effecting grocery is a pretty good indication of growing pains. Target has been expanding this department and trying to make it a point of differentiation for the retailer. Whereas Target once grudgingly carried grocery staples and a small selection of fresh foods in its PFresh departments, CEO Brian Cornell has declared grocery a major initiative. The plan is to bring in more healthy choices and items unique to the retailer.

Empty shelves will certainly foil that plan.

And Target can not flub this fourth quarter. The security breach of two years ago decimated the chain, shone a light on lots of inner-failings, and resulted in the company purging top leadership and making a quick exit from Canada—just a year after its entry.

Cornell and his team have made great strides in turning this retailer around since then. Most of its problems were self-made and the company's core competencies, mission and positioning were still intact. Target may have strayed, but it never went too far from its central tenet of providing stylish goods for everyday at a value price point.

Out-of-stock and supply chain issues are just the next thing on the list, but one that needs to be sorted out quickly.

Cornell has already taken steps to fix this, appointing John Mulligan as the company's first COO last month and tasking him with supply chain and store oversight.

If this was exclusive to grocery, one could chalk it up to the learning curve of working with new suppliers in a different type of business, but according to Mulligan, the problem goes deeper and stems from the retailer's omnichannel efforts.

Buy online, pick up in-store (BOPIS) is stressing Target's supply chain network. It's a problem that certainly isn't exclusive to Target—or won't be for long as other retailers expand this service—but could seriously hurt Target heading into the all-important holiday selling season.

The retailer is already at work on a technology fix, but Mulligan is not a supply chain or logistics expert; he was the company's CFO and served as interim president and CEO from May to August last year. It's good to have someone focused on a fix, but finding a specialist and creating a position is imperative, and not just for Target.

BOPIS and other fulfillment issues will only become more widely used and complex. And Holiday is right around the corner. -Laura

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