Target’s primary area of focus has been in its supply chain. John Mulligan, EVP and chief operating officer, has shared more details on a multi-year journey Target is undergoing to modernize how it replenishes inventory.
“When I moved into this position eight years ago, store inventory replenishment was a standardized inflexible process that placed a heavy burden on our store team members,” said Mulligan in a recent call with investors. “With this modernization effort, our primary goal is to reduce those labor demands on our stores. We achieved that result by moving work upstream to a distribution center where we can apply the appropriate processes, technology, tools, and automation to accomplish the work at scale.”
New distribution centers for Target include increased tech sortation and loading capabilities, reducing the time previously spent on manual efforts and facilitating shipping processes for smaller quantity break-bulk items.
Mulligan also shared that the company is looking to transform its legacy distribution centers to reduce costs related to replenishment and improve accuracy by implementing increased automation. Much of this has followed a test-and-learn approach.
[Related: Target Launching Nationwide Drive-Up Returns, Highlights Strategic Store and Supply Chain Investments]
“But I want to stress, automation is only one way to deliver value to our business,” he said. “Consider our sortation centers which are positioned downstream from our stores to provide speed and efficiency in support of last-mile delivery. Our sort centers are not highly automated. Instead, they use technology and sophisticated process logic to sort packages and provide a faster and better guest experience at a significantly lower cost.”
Target has scaled these centers quickly, totaling nine today (an increase from three just a year ago) and expecting 15 or more by 2026. Additionally, the company has implemented other upgrades across its supply chain, such as opening an extended sortation facility in Georgia to expand the reach of its next-day delivery service.
Other areas impacted include transportation, where Target has shifted routes to larger passenger vehicles to accommodate for an increased amount of packages per route.
“With these changes, in the first quarter, approximately 65% of our last-mile delivery serviced by Shipt were made with larger vehicles compared with zero a year ago,” said Mulligan.
Within fulfillment, Target is also developing a standardized, expedited way to load its vans, enabling packaged containerization and easy package identification upon delivery.