Target gets tough with vendors to speed up supply chain

CHICAGO: Discount retailer Target Corp is cracking down on suppliers as part of a multi-billion dollar overhaul to speed up its supply chain and better compete with rivals including Wal-Mart Stores Inc and Amazon.com Inc.

The sixth-largest U.S. retailer by sales plans to tighten deadlines for deliveries to its warehouses, hike fines for late deliveries, and could institute penalties of up to $10,000 for inaccuracies in product information, according to a letter sent to suppliers and obtained by Reuters and an interview with Target's chief operating officer John Mulligan.

The moves, effective May 30, are the first major steps Target has taken since Mulligan was appointed as COO late in 2015 to fix supply problems that emerged after it expanded product offerings, including fresh food, several years ago.

A tighter grip on its deliveries is seen as crucial to keeping shelves stocked, maximizing sales and controlling costs. Target has already announced an investment of over $5 billion in supply chain and technology infrastructure between 2015-2017.

Mulligan told Reuters in an interview on Monday that the company aims to include suppliers in the effort.

"These steps are a key part of becoming more reliable," Mulligan said.

The new rules and penalties are detailed in a letter sent to suppliers. They will start to take effect at the end of the month and will be rolled out over the next 60-90 days.

In the letter, Target said the goal was to keep products stocked to "lower missed sales for all of us."

Mulligan and Chief Executive Brian Cornell met over 200 suppliers recently to talk through the changes. He described the discussion as productive.

"We had a very long question-and-answer session," Mulligan said. "Obviously there were concerns, so we listened to those and we feel very good with where we are going with our vendor partners."

Next on his list for improvements is Target's international supply chain, and he has already started holding talks with vendors who import products to the Unites States, Mulligan said.