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Target is just one of many retailers in a battle with e-commerce. New consumers aren’t looking so much for a brick-and-mortar store experience; they prioritize speed, convenience, and variety in products. However, the superstore has been quick to adapt to the changing retail environment. It has adopted new practices in everything from the way warehouse shelves are packed to increasing transparency in its supply chain, ensuring that Target will continue to be a household name for years ahead.
Target’s supply chain has recently undergone a significant modernization effort to drive efficiency, improve visibility, make better use of store space, and reduce operating costs.
Maximizing Efficiency and Visibility
Pick-and-Pack Strategy
Target has adopted a pick-and-pack strategy for many products. Rather than shipping full cases of a product (such as a case containing two dozen jars of pasta sauce), each store receives a tote from the distribution center containing a “mixed bag” of different items they’ve ordered. This move has enabled the company to reduce inventory management and labor costs, along with better utilization of space in stores.
Store Fulfillment
To cut down on shipping costs, Target shifted digital fulfillment from distribution centers to stores. Customers can either pick their order up in-store or have an employee bring it to their vehicle. Target now fulfills 80% of online orders from brick and mortar stores and has seen a 40% reduction in fulfillment costs as a result. This is a major change from the typical warehouse-based fulfillment model.
Supply Chain Visibility
According to Target’s Director of Supply Chain Joe Delussey, “Visibility is no longer optional – there can no longer be a black hole between different nodes in the supply chain.”
The company has invested in new technology and processes to create better supply chain visibility through real-time tracking efforts for whole shipments and individual cases while automating shipment processes to reduce human error.
Smaller backrooms
The adoption of pick and pack means that Target stores no longer require as much backroom square footage. They’ve put that space to good use, turning backroom square footage into storage space to upgrade the customer “experience factor.” The new backroom model has also allowed the company to open smaller format stores.
Owned Brands
Target has developed more than a dozen lines of store brands (otherwise known as Target brands or owned brands) ranging from underwear to snack food and furniture. Owned brands enable higher margins and better control over sustainability in the supply chain.
Target’s Future Supply Chain
Target’s future plans involve reimagining the in-store customer experience, adopting new and innovative technology while driving sustainability to meet growing consumer expectations.
Shop-in-Shop Spaces
The recent modernization has made a trip to Target an experience for customers, with “shop-in-shop” spaces such as Starbucks or even mini Disney stores located in 25 Target stores. These mini-stores feature music, interactive displays, and comfortable seating where customers can relax. Ultimately, the shop-in-shop concept could turn Target into a destination like a shopping mall.
Innovative Supply Chain Technology
With Target’s commitment to a cutting-edge supply chain comes the constant development and acquisition of new technologies to support operations. For example, Target recently applied for a patent for a supply chain application known as Store Fulfillment Manager (SFM). The technology would help coordinate fulfillment processes by separating store fulfillment and distribution-center-based fulfillment. Target has also recently acquired technology from eCommerce delivery company Deliv, which may be used to strengthen the same-day delivery offering.
Improved Sustainability
In 2019, Target set sustainability goals that aimed for a 30% reduction in greenhouse gas emissions by 2030, focusing initially on vehicles, facilities, and purchased power such as gas and electricity. The company intends to reduce emissions in-house while working with at least 80% of suppliers to lower emissions throughout the entire length of the supply chain.
Image Credit: krblokhin / iStockPhoto
