We study the longitudinal spin transfer of $\Lambda$-hyperon production in semi-inclusive deep inelastic scattering with both current and target fragmentation mechanisms. For existing fixed-target experiments, such as JLab, COMPASS and HERMES, the events from the current region and those from the target fragmentation region are not clearly separated. We find that the contribution from the target fragmentation can significantly suppress the spin transfer to the $\Lambda$ measured at existing experiments. We also perform an estimation based on the spectator diquark model to quantitatively demonstrate this effect. The predictions are consistent with existing experimental data from COMPASS, HERMES, and CLAS12, and will be examined in future EIC experiments.