Goal Cracks Down on Providers
Discount giant Target Corp (TGT.N) is cracking down on their suppliers as part of a multi-billion dollar overhaul to speed up its supply chain and better compete with rivals like Wal-Mart Stores Inc. and Amazon.com Inc.
The sixth-largest U.S. retailer by sales is tightening deadlines for deliveries to its warehouses, hiking fines for late deliveries, and may institute penalties of up to $10,000 for inaccuracies in product information. A tighter grip on its deliveries is seen as crucial to keeping shelves stocked, maximizing sales and controlling costs.
Target’s supply chain became more complex several years ago when it expanded its offering of perishable goods such as meat, fresh produce and dairy products. Further complications came when the retailer started catering to online shoppers by shipping orders directly from warehouses and also allowing them to pick up online orders in stores.
The new rules and penalties, detailed in a letter sent to suppliers, started to go into effect at the beginning of May 2016 and will be rolled out over the course of the summer. In summary:
- Domestic suppliers must give a single-day arrival date for shipments to Target’s warehouses.
- There is no longer a “grace period” to ship a few days after the promised date without penalties.
- Target will hike fines on late shipments up to 5 percent of the order cost.
- Escalating fees of $5,000-$10,000″ could be charged for suppliers who fail to provide complete and accurate product information.
- Target has stated that they will be flexible with suppliers during an adjustment period.
The retailer, which operates 1,800 stores and 40 U.S. warehouses, will roll out the proposed changes over the summer with household, paper, pet products and center-store grocery suppliers having to comply in June; health and beauty vendors in July and divisions including apparel, home and electronics in August.
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