ERP Implementation decision caused Billions of Dollars loss to Target Corporation in Canada. It was a sad day in the history of Canadian Marketplace. You must be wondering how the biggest retail business from USA failed in Canada.
I have always talked about ERP Implementation strategy, best practices and critical success factors. Over 2 decades of ERP implementation taught me many lessons. These lessons are helping me not to do the mistakes which Target Corporation did.
Please read below article where I have explained “Why Target failed in Canada”
History of Target Corporation
Target is the eighth-largest retailer in the United States since 1962. It began expanding its store in USA till 1980s and then introduced its own brand in 90s.
It gained its popularity and became successfully, the name of company was changed to Target Corporation in year 2000 with many departmental store. Target had total 1,844 stores throughout United States and is ranked at number 37 in Fortune 500 in year 2020.
Expansion of Target in Canada
The Canada expansion was announced in January 2013. Target opened its first stores just a couple of months later despite the enormous remodeling work required. When I read the customers remarks on their Facebook I was surprised to see below common remarks;
- “totally heartbroken”
- “please don’t go,”
- “good riddance,”
- “you obviously don’t understand Canadians”
What caused the Target Failure in Canada?
For any organization, Technology is backbone for organizations today. Wrong decisions on chosen the technology made Target beginning in Canada to end.
First and most important decisions that Target Canada had to make was concerning technology. It was necessary to find an ERP system that would allow the company to order product from vendors, process goods through multiple warehouses, and get product delivered to store shelves efficiently. Target’s US counterpart was already benefiting from such a system, however, that technology was not designed to manage specific Canadian requirements, such as the ability to deal with foreign currency and French-language characters, unit of measurements.
The management of Target was aggressive to start operations in Canada immeidately. They gave a target to software company to implement ERP within 2 years. Where the project estimated time was 5 years.
With such a tight timeframe, it would have been impossible for Target to customize its existing system to manage these new requirements and so the company opted to find a new, out-of-the-box solution. This was the first in a series of misguided decisions, and thus began the many software issues that contributed to the company’s decision to abandon the Canadian market.
Bad Data and inexperienced staff
United States uses Centimeters for the dimension, and Canada Uses Inches. Changing the software data entry format and making modification to Unit of Measurement was one aspect but Data Entry was another. The Data entry operators in Canada were fresh graduates who didn’t know much about this issue. So they kept feeding the data.
Another important measure was Dimension of boxes e.g. L x W x H which was recorded differntly in USA and the same format was not followed by data entry operators in Canada. In short, young graduates didn’t have experience how to enter the data. These were few data entry issues from many other.
Poor Inventory Management
It is important for any retail business to have grip on its inventory and doing inventory analysis is crucial. The sales forecast was done based on US stores, considering culture, taste etc. of the customers based in USA. However, the demand was not the same in Canada. This lead to excessive inventory for those products which were not in demand and short inventory of high demand items. When customer entered the store for a specific product, he faced below issues;
- Products were having the wrong price tags.
- Products were out of stock
- When products were order it took long time in shipment.
Checks and Balances were not done properly.
ERP has various features that helps to automate various processes and triggers the alerts when baseline criteria is met. One of the feature was Order replenishment feature. This feature shouldn’t be turned off, but it was turned off by the Storage Manager, as they did it to ensure that they are not seen as incompetent.
So this caused non availability of the stock when customers wanted to buy.
Impact of Failure of Target in Canada
Target Canada failure is one of the most confounding sagas in Canadian corporate history. The cost of this failure was billions of dollars to the company. Roughly 17,600 people had to lose their jobs. Target was a careful, analytical and efficient organization with a highly admired corporate culture. The corporation’s entry into Canada was uncharacteristically bold—not just for Target, but for any retailer.
Target said Goodbye to Canada
Most of the top management staff were aware of the bankruptcy of Target in Canada, however most of the staff were not aware of the problem. But they got the shock on 15th January, 2015.
There were 133 total stores of Target in Canada which were closed by April, 2015. This also brought relief to many staff, as the decision was important to save company from disaster.
On the other hand, customers were also disappointed but target announced that in October, 2015 they would begin to ship goods ordered online to Canadian consumers.