Target Experiments With Faster Supply Chain
As part of its fight to keep brick-and-mortar shopping relevant and convenient, Target is testing a new approach to supply chain management, one that would replenish inventory much faster than is currently possible. It would also allow stores to reduce the amount of space they need for storage of merchandise while at the same time keeping shelves stocked and ready for business.
Target is currently using a warehouse in Perth Amboy, N.J., as what it calls a “flow center,” sending smaller but more frequent shipments of merchandise to stores in New York City, and minimizing the time between order and delivery. If the program is successful, the company would expand the fulfillment strategy to locations around the country.
Last month, I wrote about how Target is opening dozens of small-format stores in urban and dense suburban areas, as well as near college campuses. The idea behind these smaller stores is to zero in on what customers in a particular area shop for regularly and make the most of the limited–and less costly–floor space and storage space.
To make these stores work, the company has to be flexible and fast. With less space, individual locations simply can’t keep a lot of inventory in the store. That’s where the flow center comes in. Think of it as the opposite of hoarding: Instead of stockpiling heaps of clothing, toiletries, books, towels, knick-knacks or electronics in case you might need them someday, you keep on hand only a few things, with the knowledge that you can just run out to the store–Target, perhaps–and get whatever you need at any time.
That’s basically what Target is trying to do with its supply chain and inventory management. The goal is to reduce the time it takes to restock inventory to just hours, instead of several days.
The new approach would also allow Target to speed up delivery of online orders by filling them with merchandise from stores close to a customer’s home, cutting down on shipping time, and saving on shipping costs as well. Since stores will be able to restock quickly, they won’t have to worry about not having enough inventory to supply both their in-store customers and online shoppers.
The new system could eventually be part of Target’s overall distribution strategy at all stores–big and small–but it’s especially important for the small-format stores. There’s nothing worse for a shopper than dashing out for a much-needed item and seeing an empty space where you want your favorite shampoo to be.