Recently, Target Canada has been the center of attention. After all, are claiming bankruptcy and liquidating their 133 retail stores. The retailer entered the Canadian market only two years ago in March of 2013. Hugely anticipated by Canadians, many even paid regular visits to the company’s US stores for low prices and unique product lines. However, Target’s launch in Canada was disappointing. Not only were many shelves empty, there was higher-than-expected pricing and a lack of selection. In this post, we’ll talk about the main cause of Target Canada’s downfall: their inventory.
One of their biggest issues had to do with how they were managing their inventory. Products arrived at the wrong warehouses, which resulted in products going to the wrong stores. Retail stores would receive large shipments of some goods, while other products would never arrive. This left many shelves empty and without essential everyday items such as milk and eggs. As a result, building customer loyalty was hard for Target. They did not live up to their promise of “expect more, pay less,” which drove many buyers away. Competition in the market was stiff and Target was not up to par.
When expanding into Canada, Target decided to outsource their logistics to a Canadian firm. This firm used an ERP system that needed to integrate with Target’s existing software in the US. However, the retail giant did not spend enough time testing the systems or training their employees on how to use them. As a result, this meant a vast amount of bad data in their software. The bad data meant that the reorder points for their items were also off.
Target’s system would automatically renew purchase orders at an item’s min stock level. This is a common practice in many systems today. But, as the saying goes, garbage in garbage out. Using bad data, they started to experience over-stocks and stock shortages on many of their retail items. The numbers in their system did not match up to their actual stock.
How to avoid this issue?
Large ERP systems, like the one Target Canada used, take a longer time frame to be implemented properly. When working with ERP systems, extensive training needs given to employees so that things run smoothly and efficiently. This was Target’s first mistake. They needed to spend more time working with and testing the new system, especially with the volume of retail stores relying on it.
There are many sources where the bad data may have come from. To name a few, incorrect data entered by untrained employees, problems with the new ERP, and/or issues with data moving to the new system. Either way, these errors put Target Canada in the dark. They did not know when or where products were being shipped. It is true that ERP systems have a wide breadth of capabilities. But, as the saying goes: jack of all trades, master of none. These systems can leave out often crucial information when it comes to inventory management.
Instead, mapping out their supply chain would allow Target to identity their inventory needs. A better option for Target would be using a customizable inventory system to integrate with the ERP. As a result, they would have greater control over their stock. Deploying much faster, a flexible system could focus on inventory control. These systems minimize the room for error. As a result, Target’s customer service would improve with having products shipped to the right location at the right time.
This article is the first in a series on inventory management disasters. Check out the second article to find out what happened with Atari.