Target is testing a new product distribution strategy aimed at cutting down its replenishment cycle from days to hours while reducing overall inventory at stores, especially at small-format ones. Preston Mosier, Target's senior vice president of global supply chain and logistics field operations, made the announcement last week during a keynote presentation at the Retail Supply Chain Summit in New York City, according to The Wall Street Journal. Target is testing the new strategy at a Perth Amboy, N.J. warehouse. The company is sending inventory shipments to stores more frequently and in smaller batches tailored more precisely to demand rather than shipping big cases of products. Target is also creating a new warehouse management system intended to better integrate its distribution and fulfillment operations, which now use separate systems even when they share the same building, Mosier noted.
Total Retail's Take: This is exciting news in the not-so-sexy world of supply chain logistics. Target's new distribution strategy should mean less inventory is held at its stores, typically a huge cost center for the company. What's more, with less inventory at stores, Target can dedicate more room to digital fulfillment. After all, 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 store real estate. This latest announcement is part of Target's $7 billion investment in store and digital improvements.