Exclusive: Target Canada's supply chain gridlock: how Barbie SUVs snarled traffic

Wed May 21, 2014 3:02am EDT
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By Allison Martell, Solarina Ho and Susan Taylor

TORONTO (Reuters) - A pink Barbie-branded SUV that seats two toddlers offers a surprising glimpse into the myriad problems that jammed up Target Corp's supply chain when it set up shop in Canada, and the challenge facing Target's new Canadian head.

The toy was one of many products that piled up in bewildering volume at Target's new distribution centers as it opened 124 stores across Canada last year, said two former employees of the company's Canadian logistics contractor.

Only a year ago, Target was touting its first store openings in Canada. Then Chief Executive Gregg Steinhafel told investors he was pleased with how his workers and systems were handling the launch. But things were already going awry, said the sources, who worked at two of Target's three distribution hubs and spoke on condition of anonymity.

Goods were coming into the warehouses faster than they were going out, in part because the barcodes on many items did not match what was in the computer system. As shipments stacked up, Target flew in dozens of red-shirted staff from the United States to shore up the operation, the sources said.

This insiders' view, which has not been reported before, may partially explain why shoppers have been disappointed by empty shelves at some of Target's Canadian stores. It is a cautionary tale for other U.S. retailers who may be considering a big push into Canada.

Target, which is due to report its quarterly financial results on Wednesday, has said little about what went wrong with its Canadian supply chain. But on Tuesday it fired Tony Fisher, the president of its operation there, and replaced him with Mark Schindele, a veteran U.S. executive with deep experience in managing supply chains.

Target's launch into Canada, its first international venture, was code-named Project Bacon, an apparently playful reference to Canadian bacon sold in U.S. supermarkets. Instead of a slow province-by-province rollout, the retailer clinched a big real estate deal, locking itself into a rapid, coast-to-coast launch that later magnified supply chain problems.

The company said in February it had "dramatically reduced" congestion in the supply chain but did not give details. Asked to comment on the sources' depiction of overflowing warehouses, Target said it did not discuss vendor relationships.   Continued...

Target Canada President Tony Fisher speaks to the media as the company shows off one of its new Canadian stores in Guelph, Ontario in this March 4, 2013 file photo. REUTERS/Geoff Robins/Files