It has been a mere week since we published our Supply Chain Matters commentary, The Need for Removing Retail Organizational Silos in Omni-Channel Fulfillment. Yesterday featured a retail industry headline that indicating that Target Corporation has hired a 16 year Amazon supply chain executive to be that firm’s Executive Vice President, Chief Supply Chain and Logistics Officer. This announcement strikes more reality into the need for breaking down of supply chain silos and the transformation of the retail supply chain to be able to support the new realities of Omni-channel customer fulfillment.
Target announced yesterday that it has hired industry veteran Arthur Valdez to the new post, directly reporting to John Mulligan, the retailer’s Chief Operating Officer. In the press release, Mulligan indicates that while the retailer has made progress in improving operations, future growth hinges on the ability to enhance the fundamental aspects of its supply chain.
According to a published Seattle Times report, Valdez joined Amazon in 1999 as the GM of a fulfillment center in Kansas. He later went on to manage fulfillment operations in the U.S. Midwest as well as the United Kingdom and in 2012, moved to Amazon corporate headquarters to manage operations for North America. Valdez’s former retail industry experience includes roles at Wal-Mart and Kmart.
In August of last year, we contrasted the different supply chain challenges being faced by both Wal-Mart and Target. In reporting financial results at the time, Target CEO Brain Cornell specifically addressed five strategic priorities, many of which had supply chain connotations. The first was to become a leader in digital online fulfillment, including direct from store shipping capabilities to manage overall inventory more efficiently. At the time, the retailer was shipping direct from 140 stores with plans to enable 450 ship-from locations by the end of 2015 holiday quarter. In our August commentary, we amplified Cornell’s direct comments since they succinctly articulated the challenges for the industry:
“Over time, Target has developed an incredibly complex supply chain, built to serve an outdated linear model in which product flows from vendors through distribution centers to stores. To serve guests today, we are becoming much more flexible in the way we fulfill demand for products and services. And this is stretching our supply chain well beyond its core capabilities.”
Target has additionally come forward with a revised merchandising strategy that moves away from one-size-fits-all store layouts to that of tailored products catering to local demographic shopping needs and consumption patterns. As of the end of 2015, Target’s online revenues amounted to 5 percent of total sales.
Stretching the supply chain, from our lens, applies to people, processes and technology needs and implications. Supply Chain Matters has pointed to announcements from other major retailers, including Wal-Mart, on the implication for bringing together a singular information technology support strategy that can support all channels of customer fulfillment, inventory and services support, and the collapse of silos in the IT leadership area as well.
The success of Target’s new supply chain leadership model will obviously be dependent on all of the above elements. This week’s announcement will usher in a new chapter and case study for future revenue and profitability growth gains either hampered or accelerated by the supply chain.
With the arrival of a seasoned and knowledgeable Amazon supply chain executive, coupled with organizational alignment that places supply chain strategy and deployment at the COO level, Target has the opportunity to make new strides in its supply chain transformation needs. Time will be an important factor as will the broader organization’s appetite for organizational and cultural change.
Readers will recall that Amazon has a unique corporate culture, one that is described by books and newspaper articles as bruising. Some might argue that Amazon’s unique and unforgiving corporate culture has led to its aggressiveness and successes within retail and other industries. Some can argue that superior people have driven such success but the toll it has taken on people and supplier relationships has been troublesome. The open question is how Mr. Valdez blends his experiences as well as organizational traits while at Amazon, with what will be required to transform Target’s supply chain network.
One thing is certain, successful Omni-channel fulfillment has planning, execution, and logistics, advanced technology, supplier collaboration and overall supply chain talent connotations.
What’s your view?