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Affluent Christian Investor | October 21, 2017

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The Collapse of Target Canada, Another SAP Failure

Target in Toronto, Ontario, Canada  (Photo by Nicholas Moreau) (CC BY-SA) (Resized/Cropped)

Target in Toronto, Ontario, Canada
(Photo by Nicholas Moreau) (CC BY-SA) (Resized/Cropped)

There is an article in Canadian Business on the collapse of the bumbling retailer, Target, that boggles the mind, and reinforces all of the reasons why Lean thinking is common sense thinking. It is a sad story of how the company started on their venture to establish a presence in Canada, then filed for bankruptcy less than five years later, having poured billions into the effort and achieving little more than becoming the butt of Canadian jokes.

One would think that Target would recognize that supply chain excellence is the key to big box retailing excellence. After all, procuring, shipping in and moving out staggering quantities of product is basically what they do. Effective supply chain management – getting goods from manufacturers into the hands of consumers – is pretty much the only claim to value adding that retailers can make. In fact, they do it about as well as anyone with their US operation, but in Canada the supply chain was relegated to a secondary consideration while financial and merchandising people called all the shots.

Rather than massage and implement their proven US systems they opted to save the money such massaging needed to consider Canadian currency and French language requirements, and instead looked to quickly slam SAP into their business. Yeah, the same absurdly over-complicated SAP that wreaked havoc at Hershey, HP, Cadbury, Levis, Waste Management, and others… just Google SAP failures and prepare to be entertained.

What followed was nothing short of a train wreck –

By fall of 2013, Target’s three distribution centres—approximately four million square feet in all—were overflowing with goods. Tractor-trailers sat idling in the yards, waiting to be unloaded. The situation got so bad that Target scrambled to rent a handful of storage facilities to accommodate all of the inventory flooding in. The process of determining which goods to send to these rented facilities was haphazard, making it difficult to track things down later.”

The point of sale system – the system that scans the bar codes and figures out what folks are buying – wasn’t any better. Stuff wouldn’t scan, prices would be wrong or not there at all. With empty shelves and overflowing warehouses Target soldiered on, opening more stores and alienating more customers.

Lean thinking is centered on two things: Simplicity and focus. Software from Germany, point of sale systems from Israel, teams of people in India to clean up the data, and decision making in the United States all just to figure out how to get product from a warehouse in one part of Canada to a store down the road is the polar opposite. And having this Gong Show managed by a merchandising guy reporting to another merchandising guy at the top was laughable. It should not be that hard for a person in charge of a couple of aisles in a store to figure out what he needs and then have another person in charge of a couple of aisles of racks in a warehouse send it to him. It is only hard when you assume that neither of those people are smart enough to figure it out so you need mega computers to sort it all out and put that information in front of some hot shot far from the stores to decide.

Mistake number one is assuming incredible (and incredibly expensive) complexity is necessary’ and mistake number two is putting an incredibly over-complicated supply chain system in the hands of people who know little about supply chain.

A Lean thinker cannot read this article without wondering why they didn’t just map the process from the distribution centers to the store shelves and eliminate all of the clutter and nonsense; but process thinking seems to have been the furthest thing from their minds at Target.

Obviously, few companies are as out of touch with common sense as the folks running Target in Canada seemed to be, and few deal with this much unnecessary complexity and mismanagement all at once. But there are lessons to be learned from studying the extreme cases like this one. One lesson is that supply chain management is important – not something to be relegated to little more than an after-thought by experts in non-value adding areas. Another lesson is that the complexity of having the whole thing managed by computers is not only not ‘necessary’ – it is very likely to eventually become your downfall.

 

Originally posted on Manufacturing Leadership Services.

Bill Waddell has earned a reputation for defining the leading edge of Lean Manufacturing. With over thirty years of manufacturing experience, Bill is a global supply chain expert and one of the original Lean Accounting “Thought Leaders”. As a speaker, Bill has addressed various Professional, Academic, and Military groups on five continents and has taught in virtually every leading manufacturing forum in the United States. Bill is the author of such books as Rebirth of American Industry, Simple Excellence, and his newest publication: The Heart and Soul of Lean Manufacturing.

 

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