With a net worth of around $104 billion, there’s no denying that Target is a retail giant. However, when the corporation tried to replicate its U.S. success in Canada, even its reputation as an industry mainstay couldn’t save its efforts from collapsing.
Within two years of opening, the chain shuttered all of its Canadian stores, citing a dysfunctional supply chain that led to a host of errors, including insufficient stocking, mispricing, and more.
What exactly led to the Target Canada supply chain failure? How can you prevent such mistakes from happening during your own organizational change? Let’s find out.
Behind the Target Canada Supply Chain Failure
In March 2013, Target Canada officially opened its first store. From the beginning, this seemed to be a project destined for success.
Looking to emulate Walmart’s seamless foray across the Canadian border, Target followed the same business model. The basis included buying the leases of a now-defunct big-box store called Zellers. Target bought the leasehold interests of 220 Zellers locations for $1.8 billion in 2011, with plans to convert 150 of the locations to Target stores by 2014. Ultimately, that number would only reach 133.
By early 2015, the brand announced it was closing all of its Target Canada stores, claiming that by their estimates, it would take six years to turn a profit. To date, it had lost around $7 billion on the effort.
These store closures were an abrupt move that left 17,600 employees out of work and people around the country scratching their heads.
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6 Lessons Learned from this Supply Chain Failure
1. Set Realistic Expectations
From the very beginning, Target was working with a lofty order. The original initiative was to open 124 Target Canada stores, as well as three giant distribution centers, all within the same general timeframe. This was a classic case of biting off more than one can chew, and it left Target executives too overwhelmed to focus on the minute details that ultimately undermined the expansion.
A comprehensive project plan is critical to establishing parameters and ensuring that teams work within them. An ambitious undertaking is one thing but planning to achieve it all by an unrealistic deadline puts undue pressure on everyone. It also means other issues slip through the cracks.
2. Ensure Adequate, Appropriate Leadership
When designating project leadership and building project governance, it’s important to ensure that the people you select for these roles are well-suited for the job.
In this case, there should have been experienced leaders at the helm of the expansion who took into account the various nuances of an international transition. Without such a team in place, there were misunderstandings and crossed wires almost from the start.
Pricing errors were among the first issues noted. Customers began to notice that the Canadian prices of certain products were much higher than their U.S. counterparts. Their prices weren’t in line with local expectations, which opened the door for competitors, including Walmart and Loblaw, to price their items more aggressively and improve their in-store experience.
3. Ensure You Have Experienced Project Resources (and Enough of Them)
Opening more than 100 stores at the same time and doing so at lightning speed put undue strain on Target Canada. Operations were so slammed that the company didn’t have the resources required to fully optimize its SAP supply chain management system.
Originally, the goal was to launch the software in Canada and then expand it into U.S. operations. The only issue? No one on the project team had the functional SAP knowledge required to guide the company through an SCM implementation, not to mention an implementation coupled with a hurried territorial move.
As a result, the system launched in an already-faulty state – it was improperly configured for the Canadian market. Store shelves sat empty, while warehouses were bursting with inventory. In a review, analysts explained that the system was working off inaccurate, unreliable intelligence from the start, as the initial data setup was rushed.
A software consultant could have helped Target build a project team that had the time and expertise required for a demanding implementation.
4. Consider a Phased Rollout
Not only was the SAP rollout performed too quickly, but the plan was again, too ambitious. The system encompassed a massive number of items and locations, leaving much room for error.
For example, there was a multitude of mistakes related to product information regarding item weight, dimensions, and other key metrics.
A phased launch would have been preferable to a big bang implementation approach. Opening a few test stores would have given Target Canada the opportunity to test the system at each phase. This way, team leaders could have identified critical distribution issues before they became more widespread.
Instead, Target went full steam ahead, and as a result, team leaders became hyper-focused on correcting and cleansing data, rather than fixing issues with the supply chain.
5. Ensure Excellent Vendor Communication
In your supply chain, even the most minor miscommunication can have grave effects. This issue came to light when it was discovered that Target and its vendors weren’t on the same page regarding shipping dates.
The main problem was a lack of clarity around the phrase “in-DC.” To Target team leaders, this meant the date that the product would arrive in its respective distribution center. Some major vendors, however, believed the phrase to mean the date they were supposed to ship the products to Target.
Defining terminology is an important part of data management. Learn more by reading our blog post, ERP Data Migration and Cleansing Tips.
6. Focus on End-User Training
At Target Canada, there was one glaring gap as the new stores began to roll out: Employees weren’t properly trained on how to run operations at their stores.
Younger staff members received only a few weeks of training, while senior leaders lacked the time or institutional knowledge required to get them up to speed. This created dysfunction at the core, which only added to the internal issues chipping away at the project’s infrastructure.
A Successful Supply Chain Optimization
With a powerhouse brand and a household name, Target should have been able to integrate seamlessly into Canada, but the opposite held true.
The Target Canada supply chain failure can be traced back to a variety of different issues, chief among them a rushed SCM system implementation, ill-fitted leadership, a lack of testing, and a disregard for cultural differences.
Is your company planning an expansion? There’s never been a better time to transform, automate and streamline your supply chain. Contact our team of ERP consultants below to get started.