Tag: Target

Guest Post: Target Tests New Paths to Faster, Cheaper Delivery

 

Dr. Jon Jackson is Professor of Operations Management at Providence College. Jon has created AI classroom exercises for every chapter of our text. They are found in the on-line Instructor’s Resource Manual.

Target is experimenting with new fulfillment models as it tries to reverse a multi-year sales slump and better compete with Amazon and Walmart (The Wall Street Journal, Dec. 4, 2025). With online orders now making up nearly 20% of total sales, the retailer is searching for faster, cheaper ways to deliver packages while also improving in-store conditions for shoppers frustrated by clutter, stockouts, and long wait times. To do this, Target is piloting three distinct approaches in Chicago, Cleveland, and San Diego.

Chicago: Shifting Fulfillment Away from Busy Stores
In Chicago, Target stopped fulfilling next-day, ship-to-home orders from 18 of its busiest stores. Those orders are now handled in less busy locations. The result: delivery times sped up by about a day, shipping costs dropped to the lowest level among all Target markets, and stores became cleaner, better stocked, and less chaotic for in-person customers.

 Cleveland: A Dedicated Sortation Center
Cleveland is home to a new 40,000-square-foot sortation center operated by Ryder. Stores still pick and pack orders, but the sortation center batches them by neighborhood and hands them off exclusively to Shipt drivers. This frees store teams from the labor-intensive sorting process and enables more frequent pickups than national or regional carriers typically provide.

San Diego: In-Store Sorting for Local Delivery
In markets without a sortation center (e.g., San Diego), Target is testing a lighter-weight model. Stores sort brown-box deliveries in the backroom and hand them directly to Shipt drivers for local delivery. It’s a hybrid approach that allows next-day delivery without major new infrastructure.

Classroom Discussion Questions

  1. Which model seems most scalable for Target nationally, and which seems most context-specific?
  2. How might competitors respond if one of these approaches proves highly successful?

Video Tip: The Bullwhip Effect Hits Stores This Season

This could be the year of clearances and deals. Retailers have seen a surge of inventory as they found themselves carrying too much stuff that consumers no longer want so much of, including basic apparel, home appliances and furniture. says The Wall Street Journal (Oct. 5. 2022) in this 4 minute video (click here).

Ahead of last holiday season, retailers ordered with plenty of cushion in mind to prevent empty shelves. Now a bullwhip effect, which we discuss in Supplement 11, could be in store. The latest indication was from Kohl’s which reported that inventory rose 40% compared with a year earlier.  Walmart and Target saw inventory swell by 32% and 43%. Off-price retailers Burlington and Ross Stores indicated that they also saw closeout inventory start to skyrocket.

There are broadly two shifts going on that threw a wrench to retailers’ inventory planning. One is a shift from discretionary to essentials, which both Walmart and Target saw. And within discretionary spending, consumers are still spending, but getting pickier with their dollars. Kohl’s, Target and TJX Cos. all said sales in the home category have declined.

Spending instead is shifting to what shoppers need as they go back to the office, attend concerts and travel again such as dressier apparel, makeup and luggage. This isn’t an entirely surprising or alarming picture of consumer health, but low-income consumers clearly are feeling the pinch from inflation, which outpaced wage growth for 5 consecutive months. Walmart, for example, said some consumers are switching from gallons of milk to half gallons. They also are switching away from name brands to private label on categories such as deli and lunch meat.

Retailers with slower inventory turns—such as department stores and apparel sellers—might find current conditions especially difficult to navigate. On average, Macy’s  and Kohl’s sold and replaced inventory 3.88 times and 4.34 times, respectively, last year. By contrast, Walmart, Target and off-price retailer TJX all turn over inventory more than 6 times a year.

Retailers were on a high last year when everything—supply chain delays, low inventory, homebound customers and stimulus checks— conspired to feed their bottom lines. A comedown was inevitable.

Classroom discussion questions:

  1. Explain how and why the bullwhip effect takes place.
  2. Inventory turns are illustrated in Example 3 in Chapter 11 (see page 460). What do they mean and why are they an important measure of supply chain performance?

OM in the News: Target’s New Online Staffing System

Target now sources 80% of its online orders from stores, not warehouses.

Retailers are trying to adapt to a world where shopper behavior is changing and competition for online spending is fierce, writes The Wall Street Journal (Dec. 2, 2019). Target, Walmart, and other retailers are staffing stores differently in an effort to meet new competitive challenges, as well as attract workers and control payroll costs amid the tightest labor market in decades. (Online sales reached $7.4 billion on Black Friday, up from $6.2 billion last year, while foot traffic to U.S. stores fell 6.2%). Big chains have posted strong sales in recent years by adapting to the shift to online shopping. They use their stores to handle deliveries or convince shoppers to pick up orders rather than wait for an Amazon package.

Target says it now sources 80% of its online orders from stores, not warehouses. At the Brooklyn store around 80 workers handle internet orders, collecting products from shelves or putting items into boxes in the backroom for delivery. Target retrained the bulk of its 300,000 U.S. workers over the past year, giving them new titles and responsibilities. It hopes to mold each into an expert for a specific area of the store such as the beauty department, toys or online fulfillment to offer better customer service and use labor spending more efficiently.

Under the new staffing system, more Target workers are responsible for the full chain of tasks needed to keep their department well stocked and shoppers happy, including finding products in the backroom and stocking shelves, tracking inventory and answering shoppers’ questions. Target added technology on hand-held devices to guide workers through the store more efficiently to gather or send out online orders. And more workers are putting products on shelves during the day, not at night, to be able to help customers at the same time.

Walmart uses stores to fulfill its online grocery orders, and is increasingly relying on stores for other types of e-commerce orders.

Classroom discussion questions:

  1. Compare Target’s approach to that of Amazon.
  2.  What is Target doing to increase operational efficiency?

OM in the News: Target Tests Retail ‘Flow Center’ for Faster, Nimbler Distribution

The company hopes to send shipments to stores more frequently and in smaller lots tailored more precisely to demand rather than shipping big cases of products.

“Target is testing a new distribution strategy aimed at speeding up its restocking and making the retailer more nimble as it competes with rivals like Amazon and Walmart”, reports The Wall Street Journal (May 15, 2018). The aim is to pare Target’s replenishment cycle from days to hours and reduce inventory at stores. The approach, now in pilot mode at a warehouse in N.J., also uses the same pool of inventory to replenish stores and fulfill online orders, a departure from Target’s existing supply chain.

Under the operation, through a “flow center,” the company sends shipments to stores more frequently and in smaller lots tailored more precisely to demand rather than shipping big cases of products. That could mean shipping “five bottles of shampoo, a case of ketchup, two polo shirts on hangers and a pallet of water, all prepared to move out directly to the sales floor,” said the Supply Chain VP.

Target is also creating a new warehouse management system intended to better integrate its distribution and fulfillment operations, which now use separate systems. The logistics effort comes as Target is investing $7 billion in improvements as it adjusts to the changing consumer shopping patterns that have buffeted the retail world. The explosive growth of e-commerce has put a premium on rapid delivery to online buyers and pressured traditional retailers to make better use of their “big box”real estate.

Target has been expanding its use of stores to fulfill online orders, and nearly 70% of its online volume is handled by stores. With less inventory held at stores, “we can dedicate more room to digital fulfillment. Shipping more orders from our stores reduces our costs, while allowing us to move faster,” said the COO. Stores supported by the flow center have reduced back-room inventories “to a fraction of the norm.”

Classroom discussion questions:

  1. Describe Target’s existing and new distribution strategies.
  2. What is a “flow center?”