February 1, 2007
Target to Open Food DC
Target plans to open its first company-owned food distribution center in Lake City, Florida in the summer of 2008. The facility will be used to store and transport frozen, refrigerated and fresh produce to company stores in the Southeast. While the facility will be owned by Target, the company has said it will partner with Supervalu to operate the center.
“Our food offerings continue to expand across all Target store formats, and we felt now was the right time to enhance our internal capabilities with respect to the direct sourcing and food distribution center management,” said Mitch Stover, Target’s senior VP, distribution services, in a company press release. “Target will continue to partner with valued wholesale distributors to ensure our guests receive the freshest and highest quality food products possible.”
Janel Haugarth, executive vice president and COO supply chain services for Supervalu, said, “Target is a valued supply chain services customer and we look forward to supporting their future store expansion plans across the country, as well as, the new third-party facility management relationship.”
This is not the first time the companies have worked together to supply frozen, refrigerated and fresh food to Target’s various formats. In 2003, the companies began using a Target dedicated facility owned by Supervalu to supply the retailer’s stores in the Southwest.
Target’s strategy calls for the company to open additional food distribution centers around the country over the next several years. The company currently self-distributes shelf-stable foods.
Discussion Questions: What do you think about Target’s strategy regarding the opening if its own distribution centers for frozen, refrigerated and fresh foods? Do you have any thoughts as to how the Target/Supervalu relationship will evolve?
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This doesn’t sound like news. SuperValu will do as they have done in the past, which is basically all the supply chain functions. If Target was really serious about self distribution they would cut the apron strings from SuperValu and go it alone like Wal-Mart. Realistically though, Target is never going to get too serious about food. The Super Target format is almost an afterthought in their new store development and they devote significantly less square footage to food compared to other supercenters like Wal-Mart and Meijer.
I agree that this sounds like a simple extension of the Target relationship with SuperValu. Why not leverage the expertise of a skilled partner? A wholesaler relationship is very similar to business process outsourcing. If it pays to let a specialist do it, why not?
It’s a brilliant move by Target. Outside of Wal-Mart and Aldi, there is no one better at distribution in the country than SuperValu.
If Target is serious about replenishment, having frozen and refrigerated foods within a reasonable proximity makes sense. Partnering with a company that has some expertise in the area also makes sense. I guess I don’t see an issue here.
Distribution is the next logical step if Target is serious about staying in the food business. Partnering with somebody that knows what they are doing is a remarkably cogent strategy.
Target’s decision to partner with someone that knows the business is the right thing. Traditionally, in retail supply chains when the model changes (i.e. full pallet to piece picking, hard goods to perishables) there is a learning curve to get things right. With that learning curve, customer service suffers along with productivity, increasing cost of sale. Distributing perishable food requires a different expertise than traditional hard goods distribution. SuperValu has executed well in this arena for years. They are efficient and productive, affording Target better customer service and customer satisfaction. Excellent win/win partnership.
Though I can’t comment on the nature of the partnership with SuperValu, I do think that this is a necessary step for Target if it is going to get more serious about perishable foods. I see this as another commitment of Target to food, a commitment that I have always felt needed to be more fully-embraced.
I have been unable to get very excited about Target’s food presentation. While this sounds like they may be planning to get more serious about it, only time will tell. It’s like they are being very timid about committing to the whole food concept. As long as they treat it as a step child, so will their consumers, I believe.
To expand on the points above, this seems like a strategic play in light of Tesco coming into the US with their own distribution strategy. Target is making a smart move to creatively set themselves up for more success…and learn for themselves how to do it well.
Hopefully, Southern California is next.
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This doesn’t sound like news. SuperValu will do as they have done in the past, which is basically all the supply chain functions. If Target was really serious about self distribution they would cut the apron strings from SuperValu and go it alone like Wal-Mart. Realistically though, Target is never going to get too serious about food. The Super Target format is almost an afterthought in their new store development and they devote significantly less square footage to food compared to other supercenters like Wal-Mart and Meijer.
I agree that this sounds like a simple extension of the Target relationship with SuperValu. Why not leverage the expertise of a skilled partner? A wholesaler relationship is very similar to business process outsourcing. If it pays to let a specialist do it, why not?
It’s a brilliant move by Target. Outside of Wal-Mart and Aldi, there is no one better at distribution in the country than SuperValu.
If Target is serious about replenishment, having frozen and refrigerated foods within a reasonable proximity makes sense. Partnering with a company that has some expertise in the area also makes sense. I guess I don’t see an issue here.
Distribution is the next logical step if Target is serious about staying in the food business. Partnering with somebody that knows what they are doing is a remarkably cogent strategy.
Target’s decision to partner with someone that knows the business is the right thing. Traditionally, in retail supply chains when the model changes (i.e. full pallet to piece picking, hard goods to perishables) there is a learning curve to get things right. With that learning curve, customer service suffers along with productivity, increasing cost of sale. Distributing perishable food requires a different expertise than traditional hard goods distribution. SuperValu has executed well in this arena for years. They are efficient and productive, affording Target better customer service and customer satisfaction. Excellent win/win partnership.
Though I can’t comment on the nature of the partnership with SuperValu, I do think that this is a necessary step for Target if it is going to get more serious about perishable foods. I see this as another commitment of Target to food, a commitment that I have always felt needed to be more fully-embraced.
I have been unable to get very excited about Target’s food presentation. While this sounds like they may be planning to get more serious about it, only time will tell. It’s like they are being very timid about committing to the whole food concept. As long as they treat it as a step child, so will their consumers, I believe.
To expand on the points above, this seems like a strategic play in light of Tesco coming into the US with their own distribution strategy. Target is making a smart move to creatively set themselves up for more success…and learn for themselves how to do it well.
Hopefully, Southern California is next.