Dive Brief:

• Target is taking a page from Wal-Mart’s book on playing hardball with suppliers, and tightening deadlines and instituting higher late fees and new penalties for problems with product information, Forbes reports.

• Target has eliminated its current two-to-12-day grace period for shipment arrivals and increased its late fees from between 1% and 3% of order value to closer to 5%. Failures to provide complete and accurate product information could incur fines as high as $5,000 to $10,000, according to a report from Reuters earlier this month.

• But Target's approach—which increases the ferocity of penalties without much regard to rewards for timely, effective order fulfillment—could be short-sighted, several experts told Forbes.

Dive Insight:

Target has been beset by problems of empty shelves in some stores, a dilemma widely seen as a key factor in its short-lived expansion into Canada. The retailer has previously said that between 2015 and 2017 it would spend more than $5 billion in supply chain and technology, according to Reuters.

Target last year tapped John Mulligan—who served as interim CEO after the departure of Gregg Steinhafel—to serve as COO, and hired former Amazon VP of operations Arthur Valdez earlier this year as EVP, chief supply chain and logistics officer. (Amazon subsequently filed a lawsuit alleging Valdez violated the terms of the non-competition agreement he signed when he began work at Amazon 16 years ago.)

Inventory maintenance is more vital than ever in today's omnichannel retail environment, of course. It does no good to offer “click-and-collect” services if a product isn’t there, after all, or if online orders deplete shelves, leaving them empty for in-store shoppers. And product information is also key, because shoppers expect to be able to see whether the item they seek is actually at the store near them.

But retailers are highly dependent on their vendors’ own operations, and supply chain speed, accuracy and security are really only as fast, accurate and secure as their slowest, least accurate and least secure vendor. Wal-Mart, already infamous for running a tight ship with suppliers, recently told vendors it also would speed up delivery requirements and raise standards for tardiness.

Several experts told Forbes that these hardball tactics, devoid of much positive reinforcement or any collaborative mindset, could hurt relationships with suppliers and interfere with long-term goal-setting and fulfillment.

“Using penalties definitely works, in the short term. But it is myopic and ineffective in the long term,” Dr. Karl Manrodt, professor of logistics at Georgia College and State University, told Forbes. “We are definitely seeing companies experiment with the use of positive incentives in supplier relationships, and are seeing excellent results. While some of these relationships may still have penalties, the vast majority of have powerful counterbalancing positive incentives that reward suppliers for achieving desired outcomes. Others are eliminating penalties altogether, finding that incentives have a much more powerful effect than penalties.”