Target might be taking a big step to fix the most problematic part of its business

Target is getting ready to phase out its grocery supply chain.

The company is seriously considering partnerships with outside companies to make the fresh food supply chain more reliable, COO John Mulligan told Reuters.

Target’s grocery offerings recently evolved to include more fresh food. However, as products shifted to meet customer demand for healthy and organic food, Mulligan says the supply chain became a patchwork system that is not fully reliable in many parts of the country.

In August, Target blamed its “incredibly complex supply chain” for understocked stores this year, reporting that in-store product levels had been getting worse over the last couple of quarters. Understocking issues have further aggravated Target’s weak grocery sales over the last few years.

Groceries, fresh produce, meat, dairy, and other similar offerings need to be replenished 100 time or more every year. Any miscalculation or shortage from an outside distributor immediately impacts Target sales, as shelves remain unstocked.

As Target works to improve its grocery business, e-commerce has been a major concern, as Walmart and Amazon continue to surge ahead of the company.

In September, the company partnered with Instacart to offer same-day delivery of groceries and other household items in select areas. Target told investors in March that the company planned to spend $US1 billion to improve its supply network and online sales tech.

Target has not yet provided any names of potential partners, or revealed a timeline of when it would announce its decision. However, Reuters reports that analysts and consultants suggest that likely candidates might include Minneapolis-based retail chain SuperValu, North Carolina-based wholesale distributor MDI, and regional wholesale co-operatives including Affiliated Foods Midwest and Washington state-based URM Stores Inc.

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