Dive Brief:
- Target is in the midst of deploying distribution center automation and design to further support its supply chain modernization efforts, John Mulligan, executive vice president and COO of the retailer, said during its Q3 2019 earnings call Wednesday.
- The retailer is testing the automation technology and integrating it in warehouse management systems in its Twin Cities distribution center. Target intends to extend the tool to more facilities next year.
- Target is modernizing its supply chain and work processes, including the development of "a new inventory planning and control system" to support an optimal omnichannel experience for customers, Mulligan said. The system will more precisely locate inventory positioning throughout Target's supply chain, with the added bonus of reduced backroom inventory levels.
Dive Insight:
Target's Q3 earnings beat expectations, even though they were favorable to begin with. The company's sales increased 4.7% year-over-year, boosting Q3's sales to $18.7 billion.
While digital sales grew 31% during the quarter, the bulk of Target's sales still happen in stores. In Q3 the retailer remodeled 153 stores, finishing nearly 300 since the start of the year, according to Mulligan. The remodel is equipping stores to become hubs and reinventing service management, backed by in-house engineers, replacing contractors.
The shift in Target's digital strategy coincides with the retailer's headway in shipping, drive-up delivery, and a new curation of private labels. But inventory control plays a major role in maintaining a seamless experience from online to in-store.
Modernizing inventory control and process is a top priority for CIOs and CTOs across industries. KFC CTO Chris Caldwell told CIO Dive, "if you have to tackle one thing, attack your inventory process."
Former Johnson & Johnson CIO Stuart McGuigan found inventory constraints as the most important "limiting factor." Remediating those constraints saved the company about $50 million in capital improvement in manufacturing.
Optimizing Target's inventory processes is improving "sortation labor out of store backrooms, organizing shipments to minimize the number of footsteps needed to restock our sales floors and reducing the amount of excess inventory in our store backrooms," said Mulligan.
With shelves stocked and replenished more efficiently, employees are free to take on more important tasks. Reducing manual hours is a Target specialty.
Last year the retailer was able to gain back 40,000 to 45,000 productivity hours related to supply chain and stores after developing Grease, an open source smart tool used for things like execution recovery.
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Samantha Ann Schwartz, Khareem Sudlow
