Target’s Supply Chain Model
At the recent IBF flagship event, industry experts and leaders gathered to share their expertise on current processes and foresight on where supply chains are heading. While all of the sessions were insightful, informative, and inspiring, one in particular has come back up for discussion due to recent headlines. As the first retailer to offer their customers same-day delivery and drive up service from the PST to EST time zone, Target is offering free 2-day shipping to all of their customers with no minimum purchase or membership required from November 1st to December 22nd, 2018.
This is made possible via a sophisticated, seamless supply-chain model. Target revolutionized the space by treating each store as not only a brick and mortar for their customers, but also as a hub for distribution.
When you look at the map with only distribution centers, you see that it is well-established, with each location carefully planned. However, the network is not wide enough. When you overlay brick-and-mortar stores, you see that Target’s coverage expands immensely. This allows them to serve almost any customer in the US, not to mention shorten delivery times with a closer distance between an in-store item and the customer’s front door.
Tim Hotze, SVP Global Network Planning and Global Intelligence at Target, did a phenomenal job explaining Target’s hub concept and other business ventures, like acquiring Shipt to better serve their customers, at the recent IBF conference.
These are only a few of Target’s efforts to modernize retail. With small effort and big payoff, following are some of the other strategies Target is using to revolutionize the industry:
|56 store remodels in Q1||2% to 4% sales lift after a store remodel; 100 more stores scheduled for remodeling in Q2|
|Flow center automation||Ability to customize shipments to individual stores, reducing store labor without a need for more square footage in upstream facilities|
|New inventory logic||Out-of-stocks are 40% lower than the previous benchmark|
|Free two-day shipping||Immediate increase in the number of orders, basket sizes, units, and sales|
|Stores as fulfillment hubs||Stores fulfilled more than two-thirds of digital volume in Q1|
SOURCE: Target Q1 2018 earnings call transcript
Target has successfully implemented these changes with the support of an industry-leading supply chain. With the fall of Toys R Us and Sears, the retail industry has taken some major hits. Target has not only been able to survive but thrive, with plans to outpace current competitors this holiday season. According to the National Retail Federation, in 2017 consumers spent $691.9 billion during the holiday season on physical products; this does not include restaurants, automobile dealers, and gasoline stations, which saw a 5.5% increase from 2016. Based on projections, this year will be no different.
As Target gears up for their biggest season yet, give some credit to the minds behind the bullseye dog, and the delivery people making it all possible this year. They are making your Target run easier than ever before.