UNIT PROCESS IMPROVEMENT PROJECTTARGET CORPORATION: “GREENING” THE SUPPLY CHAIN

KAPLAN UNIVERSITY GRADUATE SCHOOL OF BUSINESS MANAGEMENT

GB570 MANAGING THE VALUE CHAIN

By Barbara Reed

April 11, 2023

For Prof. Donald Gufsa

Contents

OVERVIEW OF TARGET CORPORATION, INC...........................................................3

PROBLEM STATEMENT..................................................................................................3

DATA AND MEASUREMENTS.......................................................................................6

Figure A: Current Pre-Construction Process..................................................................7

Figure B: Additions to Construction Plan Approval Process..........................................7

CAUSES AND EFFECTS...................................................................................................8

Figure C: Fishbone Diagram.........................................................................................8

COSTS/BENEFITS SUMMARY.......................................................................................8

Costs................................................................................................................................8

Benefits............................................................................................................................9

Figure C: SWOT Analysis............................................................................................11

CONCLUSION..................................................................................................................12

REFERENCES..................................................................................................................13

OVERVIEW OF TARGET CORPORATION, INC

Target Corporation, Inc. has 1740 stores in 49 states plus the District of Columbia. Although

primarily a U.S. based corporation, Target has begun its international foray in Bangalore, India. In

addition to retail, Target Stores also have pharmaceutical services, grocery departments, clinics, cafes,

and photo services. (Target Corporation, 2009, p.15). A primary growth opportunity for Target has been

the expansion of SuperTarget, which has a fresh produce department.

Target is an environmentally friendly company which is committed to the community and to

principles of diversity. Target’s mission is to deliver “outstanding value, continuous innovation and an

exceptional guest experience” so as to make Target the preferred shopping choice of its consumers.

(Target Corporation, n.d). Target’s brand promise is “Expect more, pay less.” (Ibid.)

In keeping with Target’s focus on freshness and on the environment, I recommend that Target

reexamine its supply chain management system with an eye towards going green. In this paper, I will

explore what it entails to develop a green supply chain, ways that Target has already instituted logistics

that are in line with going green, and ways that Target could improve its green scorecard.

PROBLEM STATEMENT

Target Corporation, Inc., should incorporate Green Supply Chain Management (GSCM) practices

into its an Environmental Management System designed to reduce the organization’s impacts on the

natural environment. (Jolly, G., 2009, p. 1). An Environmental Management System, EMS, is a “strategic

management [approach] that define how an organization will address its impacts on the natural

environment.” (Jolly, G., 2009, p. 1). An EMS requires companies to create and document

environmental policies and procedures. A potential weakness of these systems is that they do not

necessarily include a mechanism for improvement or a means of measuring improvement. Nevertheless,

companies that adopt an EMS tend to use green supply chain management (GSCM) practices. (Ibid).

GSCM practices include:

1) assessing their suppliers’ environmental performance;2) requiring suppliers to undertake environmental measure;3) tracking the cost of waste; and 4) informing buyers of ways to reduce environmental impact.

(Jolly, 2009, p. 2)

Implementing GSCM practices is not just good for the environment, it is also good for business.

GSCM practices are evolving from a mere compliance standpoint, which is a position of cost avoidance,

to one of creating value. GSCM initiatives create value when they increase profitability, improve

relations, encourage innovation, and enable growth. (Wilkerson, 2005, p. 11).

Many retail chains are requiring Consumer Product Goods manufacturers (GPC) to implement

GSCM practices. “Consequently, when compared with automotive, aerospace and industrial electronics

firms, close to six times more CPG manufacturers are engaging in energy efficiency, product and

packaging recycling, or the reduction of GHG emissions in distribution activities with their customers.”

(Supply Chain & Logistics Association, n.d., p. 5). Benefits to retailers include reductions in energy and

waste, decreased GHG emissions, and less packaging, which saves space.

Target already has instituted green initiatives, which have been very effective. For example,

Target gives its customers a 5% discount on purchase for using reusable bags. Target also provides an

electronics recycling program to its consumers.

However, there are more opportunities to increase its green scorecard. One technique involves

instituting a program designed to encourage its vendors to utilize electronic invoicing and billing

practices. Although some vendors are using electronic invoicing, many are clinging to paper invoices.

Another method would be to encourage suppliers to reduce packaging and to utilize biodegradable

packages when possible. Reduced packaging helps to conserve valuable shelf space.

Finally, a specific way that Target could improve its green scorecard would be to retrofit invest in

LEED-certified buildings and retrofit existing buildings. “LEED promotes a whole-building approach to

sustainability by recognizing performance in five key areas of human and environmental health:

sustainable site development, water savings, energy efficiency, materials selection and indoor

environmental quality.” (US Green Building Council, n.d.). Investing in LEED certified buildings will

enable Target to access carbon credits. Carbon credits are based on GHG emissions. Unused credits can

be sold for profit, which increases the company’s bottom line. 

In summary, by institution GSCM practice, Target will experience improved compliance,

customer retention, decreased distribution costs, and increased service differentiation. Three specific

GSCM practices that Target could institute are: 1) encouraging vendors to use electronic invoicing; 2)

encouraging vendors to reduce packaging and employ biodegradable materials when possible, and 3)

invest in LEED-certified buildings and retrofit existing buildings. These three techniques will improve

Target’s green scorecard. This PIP will focus on investing in LEED certified buildings.

Investing in LEED-certified buildings is in line with the company’s environmental policies.

Target’s existing environmental policy has four core components. The first is its commitment to

recycling. The company has already deferred 63 million plastic bags from landfills. Its water and land

conservation program has reduced store water use by 20-25%. Target’s commitment towards smart

design of products and materials has earned it the number 1 ranking on Greenpeace’s Seafood Scorecard.

Finally, the company is committed to piloting new technologies and transitioning to renewable energy

resources. The company currently has a goal of earning the Energy Star for at least 75% of its buildings

by 2016.

LEED certification is compatible with Target’s Energy Star goals. While Energy Star is only

concerned with energy usage, LEED is more encompassing. LEED evaluates buildings based on six

green design categories: sustainable sites, water efficiency, energy and atmosphere, materials and

resources, indoor environmental quality, and innovation and design processes.

DATA AND MEASUREMENTS

In seeking LEED certification, Target can take advantage of a plethora of tools available through

US Green Building Council. The categories and maximum possible points are:

1) Sustainable Sites (27) Metrics include such subcategories as site selection, pollution control,

site development, community connectivity, alternative transportation, storm water design,

and heat island effect.

2) Water Efficiency (10) Metrics include water use reduction, landscaping, and innovative

technologies.

3) Energy & Atmosphere (35) Metrics include building energy systems, energy performance,

enhanced refrigeration, measurements and verification, and green power.

4) Materials & Resources (14) Metrics include handling of recyclables, reuse of materials, use

of recycled materials, use of renewables, and waste management.

5) Indoor Air Quality (15) Metrics include minimum standards, outdoor air delivery monitoring,

ventilation, thermal control, indoor pollution management, and use of natural daylight.

The council also provides metrics for measuring innovation and design performance and regional

priority credits. The number of points earned determines whether the construction qualifies for one

awards: Certified, Silver, Gold, and Platinum. Because Target has been so progressive in water

conservation, energy efficiency, use of materials and resources, and water efficiency, the only area that

may require significant additional investment to qualify for LEED certification would be Indoor Air

Quality. Thus, LEED certification should only increase the cost of construction by approximately 2%.

Figure A: Current Pre-Construction Process

Figure B: Additions to Construction Plan Approval Process

Construction Plan Approval

Tree Protection Fencing

Permit Application

Survey Property

Inspections & meetings

Submit to Project Coordinator S&E Measures

Letter of Approval from Public Works

Pre-Construction Meeting

Install construction entrance, etc

On-Site Inspection, Certificate of Compliance

Management Input

Create Project Checklist

Review Project Checklist.

Design

Project Registration

Commission Planning

Construction and Documentation

Periodic Updcate to client

Commisioning and documentation

Compilation and Submission

Review Comments

Revise and Resubmit

Notification of Award

SubcontractorManufacturer Input

LEED Architect Input

CAUSES AND EFFECTS

Current generations are paying for the greed and inattention of prior generations. The industrial

and technological revolutions, together with advances in medicine which caused population explosion,

have resulted in worldwide damage to the environment. To combat global warming, loss of wetlands, and

other environmental issues, many businesses are seeking to reduce their impact on the environment.

Governmental and agency incentives, together with consumer pressures, have fueled these efforts. LEED

certification is yet another way for Target, which is highly committed to environmental issues, to further

its strategic goals in this area. The fishbone diagram, below, illustrates the key factors which impact

Target’s ability to obtain LEED certification.

Figure C: Fishbone Diagram

Manpower Method

LEED Training Permits, Manuals, etc Builders

LEED Architects Task Steps, Sequencing Supplier LEED Certification

Lighting Energy Star Specs Heating/Cooling Ventilation LEED Specs

Green Roof Materials Measurements

COSTS/BENEFITS SUMMARY

Costs

There are two types of costs associated with LEED certification: hard costs and soft costs. Total

costs typically add 4-11% to the entire cost of the project. (LEEDuser, 2010).

Hard costs, which account for the bulk of expenses, are actual construction costs associated with

incorporating newer green technologies. Such costs could add anywhere from 2-17%, to the construction

budget, with the higher sticker price involving the use of renewable energy generation technologies.

Detailed information regarding costs associated with LEED certification are detailed in a report from

BuildingGreen, LLC. This report lists many technologies used to achieve LEED credits in each of the six

categories and includes a cost estimator for implementing each of these methods. Examples include

demand-controlled ventilation at $1/cfm, and changing room with showers at $400/FTE. (LEEDuser,

2010). However, if the design team is experienced with LEED certification and goals are moderate,

actual construction costs can be kept within original budget guidelines. (Ibid.)

Soft costs associated with LEED certification include the initial registration of the project, the

cost of documentation and managing compliance, the cost of extra research and design, the cost of

commissioning and modeling for compliance, and increased costs of construction. (LEED user, 2010).

However, the costs of LEED certification are quickly recouped. It has been shown that an upfront

investment of 2% is recouped ten times over the life of the building.

Benefits

LEED-certified buildings are designed to increase asset value while reducing operating costs.

Reduced costs come primarily from reduced energy and water consumption, but also result from tax

rebates, zoning allowances, and other governmental incentives. In addition, LEED certified properties are

safer and healthier for employees because of their focus on air quality, which results in increased

productivity. Finally, LEED certification makes the shopping experience more appealing to consumers

and increases customer loyalty. Thus, sales also increase. (Ibid).

Studies suggest that an upfront investment of 2% is returned 10 times over the life of the

building. (Ibid.)These studies estimate that LEED certified buildings are 25-35% more energy efficient.

However, there are other benefits as well. Improved ventilation, better temperature controls, improved

indoor air quality, and better lighting are all results of LEED certification that increase productivity and

reduce operations costs. (Ibid). In addition, investing in LEED certified buildings will enable Target to

access carbon credits. Carbon credits are based on GHG emissions. Unused credits can be sold for profit,

which increases the company’s bottom line. 

The SWOT analysis below illustrates Target’s strengths it has to leverage in pursuing LEED

certification, which includes Target’s existing EMS program and initiatives, it’s commitment to

incorporating technological innovations into its designs, its strong relationships with distributors and

customers, and its knowledgeable management team Target has already adopted many policies that go a

long way towards reaching LEED specifications. Target should employ the services of a team of LEED

Professionals to assess existing warehouses in the Twin Cities Metropolitan Area and estimate the cost of

bringing them up to LEED specifications. This team of experts should also be able to estimate the

average annual reduction in inventory costs by becoming LEED certified. By instituting GSCM

practices, Target will experience improved compliance, customer retention, decreased distribution costs,

and increased service differentiation.

.

Figure C: SWOT Analysis

STRENGTHSEMS

Techno SavvyDistribution Channels

Customer LoyaltyManagement

WEAKNESSES

Lack of LEED Professionals

OPPORTUNITIESBetter Work Environment

Increased ProductivityDecreased Operation Costs

Decreased Distrubution CostsEarn Carbon Credits

Qualify for Tax benefitsIncreased CustomerRetention

THREATS

Changes in Governmental PolicesWorsening of Economic Crisis

Tax IncreasesPoor Design Plan.M

CONCLUSION 

LEED certification of existing buildings and new construction would have many positive effects.

LEED Certification will reduce operating costs, reduce taxes, and increased profit. Relationships with

customers, distributors, and suppliers can only be enhanced by this process, which may result in increased

market penetration. Target is already viewed as a leader in environmental issues. LEED certification

would strengthen that position even further.

Although LEED certification process will raise the cost of construction by 2%, these costs should

be recouped within 1-2 years of completion in the form of tax credits and increased profit. (LEEDuser,

2010). By improving indoor air quality in Target stores and increasing the use of natural daylight, Target

will be the preferred shopping experience for consumers’ daily retail needs.

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