With just hours to go before reporting its Q2 earnings, Target made a big announcement: The retail corporation has hired a new chief operating officer to spearhead its supply chain efforts. Reports said the move is part of Target’s ongoing efforts to overhaul its relationship with suppliers in the wake of its high-profile exit from Canada. Will an overhaul of its executive team reverse its supply chain stumbles?
On Tuesday (Aug. 18), Target Corp. announced that Finance Chief John Mulligan has been bumped up to chief operating officer, a new position created by Chief Executive Brian Cornell. Reports in The Wall Street Journal said the promotion also led to Cathy Smith being named Target’s new chief financial officer, a position previously held by Mulligan. Both executives will officially take their posts on Sept. 1.
According to WSJ, “Target’s naming of an operating chief is an acknowledgement of the broad challenges retailers face in a rapidly changing environment.” The creation of the COO role, the publication stated, exemplifies how major corporations are now tasked with shifting the way they respond to global market trends and an evolving supply chain that demands an omnichannel response to omnichannel shopping strategies.
While businesses still need to take care of traditional supply chain responsibilities, like managing inventory, they must also get creative in fulfilling orders that are coming in from online, in store, at home and abroad, forcing changes in warehouse management and supplier strategies.
But an executive overhaul has implications specific to the Target chain. The corporation is shifting into more urban markets, which will require a shift from mass volume orders for suburban stores to more numerous, less voluminous orders for urban locations. Reports said the company will be investing $1 billion into supply chain services and technology going forward.
It’s Target's history of supply chain and vendor mismanagement, however, that makes the appointment of a COO particularly poignant.
Strained Supplier Relations
Target has suffered lapses in supply chain management before. Earlier this year, Cornell yanked Target out of Canada, its first non-U.S. market, amid disappointing performance and heightening competition from the likes of Walmart and other rivals.
For the company and its investors, ditching Canada was a wakeup call that Target’s supply chain management was failing. According to reports in Supply Chain 24/7, that failure led to a slew of problems. “Stylishly renovated stores couldn’t mask a dysfunctional supply chain and in-store merchandise management system that left shelves bare and consumers deeply disappointed,” the reports said. “Insufficient stocking was Target Canada’s single biggest headache.”
Analysts seem to agree. In an interview with the publication, Marc Wulfraat, who heads logistics and supply chain consulting group MWPVL International, said Target “just completely lost control of inventory” when it attempted to dive head-first into the Canadian market. “History will show this as being one of the greatest supply chain disasters in Canadian history,” he added.
Not only did the Canadian catastrophe lead to billions in losses for Target, it forced financial losses on Canadian suppliers, too. Thousands of those vendors have taken Target Canada to court on claims the retailer has still failed to pay hundreds of thousands of dollars and may have misled vendors about its impending bankruptcy filing.
Mismanagement of the supply chain, it would seem, generated a chain reaction for Target Canada, whose effects reverberated beyond Target itself and into the suppliers and vendors working for the conglomerate.
As Cornell reshapes the way the company manages that supply chain, Target is likely examining ways it can improve relationships with vendors and avoid the legal and financial earthquake that can quickly arise from supply chain mismanagement. A new chief operating officer may be the key that protects Target from another blunder and safeguards Target suppliers from a missing paycheck.