New Target COO's headache: Too few goods to keep shelves filled

Wed Aug 19, 2015 8:39pm EDT
 
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By Nandita Bose

CHICAGO (Reuters) - Two days after being promoted to the new position of Target Corp's (TGT.N: Quote) Chief Operating Officer, John Mulligan's big job is clear: fix a supply chain that the company blamed for shortages of goods that are undermining sales growth.

On Wednesday, the fourth-largest U.S. retailer blamed its "incredibly complex supply chain" for unacceptable stock levels at its stores this year, forecasting weak growth in current quarter sales at established stores.

The focus on the supply chain network is the latest move by CEO Brian Cornell, who took charge a year ago and announced a restructuring plan in March.

Under that program, Cornell eliminated several thousand corporate jobs, revamped grocery operations and announced a $1 billion investment in supply chain technology.

Mulligan, who was promoted from the position of chief financial officer on Monday, said that in-store product stock levels have been getting worse over the last couple of quarters. Kathee Tesija, the company's former chief merchandising and supply chain officer, was moved to an advisory role in June.

"Given the breadth and complexity of the business, it will always be a challenge to be in stock on every item in every store... but our guests need us to be consistent in delivering everyday essentials," Mulligan said.

Target's supply-chain problems have grown more acute as it has expanded its offering of consumable goods such as meat, fresh produce and dairy products, which in turn have brought customers back to their stores more frequently than in the past.

Target's larger rival, Wal-Mart Stores Inc (WMT.N: Quote), has struggled to tackle the problem of running out of stock at its own stores for several years, despite having one of the largest and most sophisticated supply chain networks in the business.   Continued...

 
Customers shop in the pharmacy department of a Target store in the Brooklyn borough of New York June 15, 2015.  REUTERS/Brendan McDermid