Target Supply Chain Analysis

In this walk through a supply chain, we will start with a package of M&M’s purchased at the retail store Target. Supply chains encompass all the processes, services, back office processes, and subordinate finished goods used to manufacture the M&Ms. What one will quickly realize is that there are multiple supply chains working together to move raw materials from a farm, transporting the goods to downstream supply chain members, and providing supporting services and ancillary products required within parts of the chain like manufacturing or distribution. Interestingly, supply chains can be horizontal (distributed), or they can be aligned vertically, where one entity of the supply chain controls the entire chain. One may suggest that an effective
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Target is a multi-location retailer entity with many store fronts located in select markets across the United States. I would suggest that Target supply chains are a mix of vertical chains, where Target has control over the end to end supply chain, and horizontal supply chains, where Target must work and communicate with other suppliers to assure products that customers want will be stocked on Target’s shelves. One might ask, why would target have to work with suppliers in a horizontal supply chain, and the obvious answer could be that there are many outlets some manufacturers can sell their good through, Target is one of many options, and being too assertive, Target may lose opportunities to grow client base and loyalty if certain items cannot be found on their shelves. Items that are sold in stores are most likely delivered Target’s own distribution centers. These center’s provide Target the opportunity to purchase more products from other suppliers and those distribution centers can ship precisely what a store may need, as opposed to having to purchase certain quantities that could result in over stock and reserve for scrap charges for unsold product. Hence, the next upstream supplier from a retail location is almost always going to be a Target distribution center. An exception may be realized through suppliers like
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M&M’s are supplied to Target from MARS Wrigley Confectionery. This company is a merger of two companies most Americans should be very familiar with: MARS (think Three Musketeer bars, Snickers, and M&Ms) and Wrigley (think gum); it is one brand of parent company MARS, which is an international conglomerate whose brands also include Uncle Ben’s rice and PEDIGREE dog food. Target stores use a point of sale (POS) computer system which controls inventory, sales transactions, and other necessary back office functions a store is required to perform to maximize sales and manage inventory profitably. For a product like M&M’s, the stores’ POS system will keep track of inventory in the store and when inventory hits a re-order point, an order will be generated for management to review. If approved, the order will be transmitted electronically to the corporate office and the regional distribution center. At the distribution center, many stores’ orders are received, and all these requisitions are used to request orders from its supplier, MARs. Because demand can be difficult to predict, and because Target utilizes its own distribution centers that support multiple stores, they can place larger orders, and they can be almost assured that the goods purchased will be used at a store somewhere. Another advantage Target might recognize through its distribution centers is if one store has too much product, a request can be generated to return