Target Corp.

started to prepare for possible supply-chain challenges this year right after the 2020 holiday season concluded, with the help of technology tools to predict consumer purchasing patterns and mapping out potential bumps along the way that could hamper deliveries from manufacturers to its shelves.

With the start of the holiday shopping season, the retailer reported it had 17.6% more in inventory in its fiscal third quarter ended Oct. 30 compared with a year earlier, well exceeding a 13.2% growth in sales.

Target is also facing complications seen by many companies this year, including manufacturing disruptions and travel restrictions wrought by the coronavirus pandemic as well as a tight labor market.

Preparing to ensure that holiday shelves are full and the season goes smoothly is a result of risk predictions, updates with the board members and coordination across teams, said

Don H. Liu,

who has served as Target’s chief legal and risk officer for the last five years.

Mr. Liu, who was new to retail before joining Target, said his background in corporate legal leadership roles at tech companies was helpful to Target as it incorporates technology into its core business. Before joining Target in 2016, he was general counsel and secretary for workplace technology firm Xerox Corp.

Mr. Liu, who manages about 500 people from the company’s Minneapolis headquarters, also has been actively involved in efforts to combat Asian-American hate and support justice for victims of attacks, including co-founding the nonprofit Alliance for Asian American Justice.

The Wall Street Journal spoke with him about how the company has managed calls for responsible sourcing and supply-chain transparency, how it ensures ethical conduct among its employees, and his perspective on the risks Target faces in the coming year. Edited excerpts follow.

WSJ: It’s the beginning of the holiday shopping season. What’s your role in making sure that Target’s shelves are full for the holiday season?

Mr. Liu: I think we knew well ahead of time that this year’s holiday season would face the risk of supply-chain challenges, going from the manufacturer all the way to our shelves, and there were different types of risks at each phase of that supply chain…. Our job is to identify that risk in advance, make sure that our supply-chain team has covered them in a way that is sensible, using their subject-matter expertise to be prepared, and to make sure that we communicate effectively to those who need to know, whether it’s the board or the members of the management team or our consumers and our team members.

Don Liu is chief legal and risk officer for Target Corp.



Photo:

Target Corp.

We’re well aware of the trade restrictions that the U.S. has imposed upon some of the products that get imported, particularly [those] from China, and we’ve had to get ahead of that curve to make sure that we’re prepared to deal with various different types of trade restrictions that may come up, maneuver around that to make sure that our supply-chain folks are aware of them and help them guide through the regulations.

WSJ: Responsible sourcing and supply-chain transparency are increasingly hot topics among retailers these days. What’s your role in this process at Target and how do you ensure compliance when supply chains these days are getting more complex?

Mr. Liu: We find ourselves not only learning the political environment in which we work, not only at the national level, but the international level. We have to invest in technology because responsible sourcing requires us to know the ingredients that go into our products and to be able to do due diligence on the vendors [and] the conditions under which vendors’ employees are working, for example. All of that requires a tremendous amount of investment on our own on technology and utilizing third-party vendors to be able to help us to the extent that we need, either on the ground or because they had relative experience that we can learn from.

We do utilize technology like Zoom or some variation of it, but there are also limits on how much you can learn if you’re not at the factories themselves. We have had better conditions this year for us to do some, but we’ve had to rely substantially on both technology and third parties to be able to do some of the work that we used to do ourselves. And that’s been challenging frankly, not just for Target… We’ve had to rely significantly on [communication from] the manufacturers themselves… that made up for some of the travel restrictions.

WSJ: What kind of ethical issues are you managing within Target’s workforce?

Mr. Liu: During the pandemic, we’ve had all kinds of issues about more challenging ethics issues. What if our team member says, “I cannot wear a mask,” even though we’re requiring the masks to be worn at the store. It may be based on religion; it may be based on their health; it may be based on their politics. On what basis should we allow our team members not to wear the mask and on what basis should we say, “No, that claim of not wearing a mask is not acceptable to us. You’re going to have to either not work or wear a mask at the store.” That’s all part of my risk and compliance team’s work, working with HR in coming up with the right policies so that we could implement them at the store.

We’re facing that now with the federal mandate right around the corner. What should be our policy for our team members who refuse to get vaccinated or refuse to test, if you will, which will be required if you’re not vaccinated. So we’re still in the midst of that. We’re having discussions regularly to come up with our own policy.

WSJ: In your opinion, what are some of the biggest risks in the coming year?

Mr. Liu: I think the risks are not going to be so surprising. Pricing resulting from inflationary trends are very much on top of our list. Labor risk… and the cost of maintaining your labor team so that they can serve our consumer is a significant concern. We’ve had a much better experience than other retailers have. I think it helped a lot that we were way ahead of the curve on the minimum wage front, going to a $15 minimum wage well before most retailers have.

Write to Mengqi Sun at mengqi.sun@wsj.com

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8