Target's Supply Chain Analysis

Target has proved to have a solid supply chain in the past; however, as the business increased over the years the supply chain has become extremely complex. With the opening of new stores and increase in the assortments of goods, Target has found it challenging to keep every item in stock. As a result, Target’s ability to grow sales has been adversely affected by product stock outs. During an earnings conference call Target stated, “our supply chain was built to serve an outdated model in which product flowed from vendors through distribution centers to stores” (Businessinsider.com, 2015). As the customers are now moving towards e-commerce, the dynamics of supply chain is changing. The old model of supply chain is inefficient and needs to

Most poignantly, retailers are implementing the technology at the item level to reduce stock outs thus experiencing growth to their top line. RFID technology incorporates tags that emit radio signals and devices, called readers, that capture the signal. The tags can be read from several feet away and do not need to be in direct line of sight of the readers. Each tag is encoded with information such as item specific serial numbers, manufacturing location, and expiration date. The tag’s computer chip makes it possible for virtually any type of information to be encoded on the tag. A reader uses an antenna to capture the information from the tag. This information is then relayed from the reader to an RFID computer

By attaching tags to individual items Target will be able to view when an exact item leaves the manufacturers, arrives and leaves their distribution center, is received by the store, is moved from the back of the store to the shelf, its availability on the shelf, and finally when it is sold and leaves the store. Real time visibility pertaining to location and inventory quantity will allow Target to optimize inventory levels and meet customer demand by assuring product is available at the right location at the right time. For the first time ever, Target would be able to quantify lost sales due to stock outs. Through RFID technology, Target will know what product is sold, how much product is in inventory, and which shelves are not stocked (Kaminsky, Simchi-Levi, & Simchi-Levi, 2014). Because of this, realized demand can be calculated based upon actual sales plus lost sales (Kaminsky, Simchi-Levi, & Simchi-Levi, 2014). Having access to true, realized demand will allow Target to improve inventory accuracy, better manage its inventory, make more accurate reorder decisions, and most importantly, avoid stock out scenarios which lead to increased sales (Sell,