Inside Target’s Store-as-a-Hub Supply Chain

The opening keynote session of this week’s Council of Supply Chain Management Professionals (CSCMP) EDGE conference in Orlando provided an inside look at the supply chain of Minneapolis-based Target, one of the world’s largest retailers.

In a fireside chat with Mark Baum, chief collaboration & commercial officer, for FMI-The Food Industry Association, Target Chief Supply Chain and Logistics Officer Gretchen McCarthy looked back at Target’s $7 billion investment to manage its in-store experience and optimize related assets for the benefit of its customers, whom it refers to as guests, and also leverage its fulfillment levels.

“We realized that our stores were a terrific opportunity for us to drive more efficient operations in the fulfillment space, as 75% of Americans live within 10 miles of a Target store,” she said. “You can see the efficiency that can be gained by putting ourselves that much closer to the gap. We invested about $7 billion over the course of the years continuing to refresh our stores as well as build out our fulfillment options and expanding services.”

Sortation investments

McCarthy also touched upon Target’s $100 million investment into its sortation centers and how it has helped to build up its supply chain network, as well as its last-mile delivery operations.

“This investment will expand our sortation center network to 15 by the end of 2026,” she said. “We are picking up packages from 30-to-40 stores that feed into a sortation center to pick up packages for delivery to a regional or national carrier or through our Target last-mile delivery, which is powered through our Shipt drivers. Those drivers are able to allow us to get a hyperlocal delivery, increasing our speed, allowing them to deliver more next-day packages and also offering a lower cost for us, when you think about the shipping expense piece of it.”

What’s more, she added that the sortation centers help to move work upstream, with those processes that would have been handled at a store can now be handled at a sortation center.

As for Shipt, McCarthy explained it is a wholly-owned subsidiary of Target and is completely integrated into the company’s last-mile operations.

“We are able to actually route the packages at the time the guest places the order, which then allows the Shipt drivers to see those routes and choose the routes that work for them…and we’re able to leverage those thousands of Shipt drivers that are on our platform.” 

Guest-centered supply chain

Moderator Baum observed that Target’s guest-centered supply chain provides the company with an opportunity to continuously evolve its operations, with its guests, or customers, top of mind.

McCarthy said that is top of mind for every supply chain decision Target makes, which was on display at one of Target’s fulfillment centers.

“And as we were walking through and looking at the performance of the building, all of those key performance indicators—safety, lead time, and productivity,” she said. “And when we got to productivity, the operations director shared with the visiting team, how we have been talking to their team about productivity. And then the comment that he made was, ‘we’ve taught our team that every single partner represents a guest, which in a fulfillment center is 100% true. Because every part that is moved to that building is going to end with a guest. And for me, it did two things. First, I love the connection of really hard work that teams every single day with Target’s purpose, which is to help all families discover the joy in everyday life. Second, it was just a reminder that we can’t stop talking about our destiny. When everyone is focused on that and guest experience, we can’t possibly go wrong.”

She also noted it’s thinking about how Target helps its partners, and fills in the gaps, as a lot of the work that it has been underway is about removing complexity and driving ease into its stores and to its store team members.

“As an example, we’ve been really focused over the last year or two on driving accuracy in our trailer forecast,” she said. “We move thousands of trailers a week to these stores. And it’s important for the store team to be able to plan for that, as well as a consistent flow of inventory. Now, we didn’t do that alone, but the net result of that partnership between storage and supply chain is that it lets our store team members spend way more time helping guests or fulfilling orders and a lot less time managing inventory.”

Automation

Addressing supply chain automation at Target, McCarthy said Target has been focused on supply chain automation for 20 years, noting that the company continues to look for ways to implement it more, with the caveat it takes a thoughtful approach and needs to complement, and not compromise, its teams physical and mental needs.

“As we think about automation and different solutions, we’re really focused on ensuring that there’s a real problem there to solve,” she said. “I think automation is a piece of the solution and a very, very important piece of the solution … but also augmented by the right technical capabilities, the right team, the right process and the right tools. So, we’re trying to look at it very holistically and we set out our strategy and our roadmap over the next few years.”

In a handful of Target’s supply chain facilities, she said that it is sorting more strategically through automated processes.

“We’re seeing terrific efficiencies in the time the team is spending unloading the trailer to the organization and the safety of the team members,” she said. “That’s a great example of where I think an automation upstream can drive the benefit more of an end to end across the supply chain.”

Inventory management

When the topic of inventories arose, McCarthy made the case that it should be viewed in the physical sense, in terms of what it delivers for Target’s business, as well as in terms of inventory flows, which she said are just as important in making sure the company has the right virtual inventory intelligence that allows it to know if it is moving inventory as efficiently as it can.

“Do we have the right safety stock at the right time? Are we loading up for the holidays and winding down after?” she said.

Looking ahead at what may be in store for the supply chain, McCarthy said it requires looking back at the early days of the pandemic, when it became clear that the most important requirement it had was inventory visibility, where it is coming from and where it is, as well as getting control over how much inventory was needed.

“That was really where our focus was, ensuring that we were building better tracking better visibility tools,” she said. “As we worked through the last few years, it’s been a bit of a consumer reset. The piece around control, we continue to work very closely with our vendors to ensure that we’re driving reliability. And in performance, we’re figuring out what information needs to go both ways in order to set us up to deliver for our guests. As I look ahead, yes, certain macro environment factors are more positive and provide a little bit more of a tailwind. The import supply chain is probably the most obvious example of that, while things are improving. But we can’t rest on that. What I continue to be impressed by my team and the conversations that we’re having is that each and every day, we’re taking what we’ve learned, but we’re continuing to drive into that future operating model and how might we do this better. I think there’s enough volatility in the macro environment that we all need to be really aware and maybe even a little bit paranoid about what could possibly happen around the corner so that we can be resilient and flexible.”

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