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The Target Distribution Center Network

The Target Distribution Center Network

Please Note: We do NOT represent Target Corp.  This is only an article for information purposes.  Please do not call us if you need to contact Target

Introduction and Company Background

This white paper provides a detailed look at Target's distribution center network and its evolution since the company opened its first distribution center in Fridley, MN in 1969.  Target is the fourth largest retailer in the United States and the tenth largest retailer in the world with annual sales of $73.1 Billion in 2013. Target's history dates back to 1902 when George Draper Dayton opened the Goodfellow Dry Goods store in a six-story building in downtown Minneapolis. In 1910, the company changed its name to Dayton Company and over th next five decades the business grew organically under Nelson Dayton’s leadership.

In 1962, the first Target store opened in Roseville, MN and the Target discount chain was launched. By 1968, The Dayton Company had 11 Target stores generating $130 Million in sales revenue.  In 1969, Dayton Company merged with Detroit-based J.L. Hudson Company to form Dayton-Hudson Corporation which consisted of Target and five other major retail chains obtained through acquisition.  In 1969, Dayton-Hudson Corporation became the 14th largest retailer in the United States and the company went public on the New York Stock exchange.

In the 1970’s Target grew to 80 stores surpassing $1.0 Billion in revenue in 1979.  In 1978, Dayton Hudson acquired Mervyn's, a California-based chain of 50 moderate-priced department stores which would later be sold off in 2004. By then end of the decade, Target was Dayton-Hudson’s top revenue-generating subsidiary paving the way for significant growth and nationwide expansion in store count.

Between 1980 - 2000, Dayton-Hudson grew to $33.66 Billion through a combination of organic growth and a series of retailer acquisitions. In 1990, the company acquired The Marshall Field & Company, a Chicago-based department store operator which would eventually be sold off in 2004.  In 1995, Target introduced its first SuperTarget  store which has a larger footprint (typically in the range of 175,000 square feet) and which offers an extensive product assortment in grocery, fresh produce, bakery, dairy, deli, and frozen foods.  In 1998, the company acquired the Rivertown Trading Company, a Minneapolis-based mail-order firm as a means to enter into the e-commerce market.  

In January, 2000 the company changed its name to Target Corporation (NYSE: TGT).  With 977 Target discount stores (including 30 Super Targets) in 46 states generating $29.7 Billion in sales, Target was poised for continued growth over the next decade.  In 2000, the company launched Target Direct as a separate company to oversee Target’s e-commerce business operations (renamed Target.com in 2004).  Target.com was originally launched in 2002 based on Amazon’s Enterprise Solutions whereby Amazon provided the order fulfillment services and technology platform for Target’s on-line store front.  This partnership would end in August, 2011 when Target.com launched its own platform independent of Amazon.  One of the most important events of this decade was the sale of Mervyn’s (257 stores and 4 distribution centers) and Marshall’s (62 stores and 3 distribution centers) for $4.9 Billion in cash proceeds.  This important strategic move enabled the company to focus on expanding its Target chain of discount stores rather than expending resources in other areas of the business.  Since 2004, Target has achieved consistent organic growth by converting close to 800 traditional general merchandise stores into Expanded Food Assortment stores; by adding over 100 new SuperTarget stores nationwide; and by introducing smaller footprint CityTarget stores.

In 2011, Target launched Target Canada Corporation by acquiring the leaseholds of 189 Zellers store locations across the country. Target Canada kept 125 of the store leases and opted not to acquire the Zellers distribution centers.  The first Canadian Target stores opened in 2013. As well, three regional general merchandise distribution centers were built to specification to service general merchandise and apparel to the stores.  The Canadian market proved to be more challenging than the company anticipated and start-up operations were challenged with massive inventory shortages at retail stores nationwide.  In January 2015, after spending billions of dollars to establish its business operations in Canada, Target formally announced that the company was exiting the Canadian market and closing all of its stores and distribution centers.  This decision has resulted in the loss of over 17,600 jobs across the country which is one of the largest private sector layoffs in Canadian history.

Overview of Target's North American Supply Chain

As at 2016, Target's North American distribution infrastructure consists 41 distribution centers totaling 52.4 Million square feet consisting of the following different facility types:

  • Regional General Merchandise Distribution Centers
  • Import / Redistribution Centers
  • Perishables Food Distribution Centers
  • E-Commerce Fulfillment Centers
  • Returns Processing Facilities

Target's Import Supply Chain

Like most retailers, Target sources a significant volume of import merchandise (e.g. general merchandise, apparel, footwear, toys, etc.) from different countries around the world.  Published estimates are that Target imports about 500,000 containers of merchandise produced in countries like China, Indonesia, Vietnam, India, and Thailand. Through the use of overseas consolidators, Target merges overseas goods to ensure full container loads are shipped to North America.  These import containers arrive at domestic ports in: Seattle/Tacoma, WA; Los Angeles/Long Beach, CA;  Norfolk, VA; Savannah, GA; Oakland, CA; Newark, NJ; and Prince Rupert, BC.

Import containers are either shipped from the ports to a network of seven de-consolidators run by third party companies, or directly to the company’s four import warehouses.  Five of the de-consolidators are positioned near major ports of entry: Sumner, WA; Carson, CA;  Norfolk, VA; Savannah, GA; Oakland, CA; and two are inland: Chicago/Elwood, IL; and Dallas, TX. Ocean containers handled by the de-consolidators are essentially de-stuffed, sorted, and loaded into full-size 53’ trailers to be shipped into the domestic Target distribution network which consists of import redistribution warehousTarget Rialto, California Import and Regional Distribution Center Campuses and regional distribution centers.

In 2001, Target first introduced its first import redistribution warehouse into its network once the concept was proven to be an effective strategy by Walmart and K-Mart.  The import warehouse serves as an important inventory buffer where import merchandise is stored until such time that it is needed by the regional distribution centers.  Some people might consider this concept to be inefficient as it introduces another stocking point within the distribution network which adds cost penalties for handling and storage.  While this is true, Target’s 4 import warehouses prevent the 26 regional distribution centers from being flooded with inventory that is not needed in the short term. This in turn improves the deployment of inventory within the network and also increases the efficiency and use of the regional distribution centers.  It also minimizes inbound transportation expense to the regional distribution centers by ensuring that all transfers are shipped as full truckloads.

Overview of Target's North American Supply Chain

Domestic vendors flow directly to Target's regional distribution centers when purchased in full truckload volumes.  For smaller shipments of less than truckload volumes, Target has established a network of seven domestic consolidation points run by third party companies.  These facilities are not designed for the storage of inventory, ratheTarget Cedar Falls, Iowa Regional Distribution Center and Perishables Distribution Center Campusr they serve as a merge in transit point to maximize the number of full truckloads inbound to the regional distribution centers which is an important strategy to minimize the cost of inbound freight in any market that has a large geography to cover.  This is similar to Walmart’s Center Point network in that these domestic consolidation facilities act as cross dock terminals. At these facilities, pallets are offloaded and consolidated by regional distribution center such that mixed-vendor full truckloads can be shipped inbound to Target’s regional distribution center and food distribution center network.   Target’s domestic consolidation points are located in: Fontana, CA; Chicago, IL; Atlanta, GA; Oakland, CA; Sumner, WA; Dallas, TX; and Bergen, NJ.

In the United States, Target operates 26 regional general merchandise distribution centers totaling nearly 40 Million square feet.  In Canada, Target operates 3 regional general merchandise distribution centers totaling 4.0 Million square feet.  These massive facilities average 1.5 Million square feet and are easily recognized from overhead by their unique construction which has a wing extension that is typically perpendicular to the main complex.  This wing portion of the building is usually sized at about 200,000 square feet and has depth of 260’.  The extension has dock doors on either side to support an extensive cross docking operation of fast moving merchandise whereby inbound merchandise is received on one side and outbound loads to the stores are shipped on the other side.  Target Regional Distribution Center in Fontana, California

Within the main complex, extensive conveyor systems that are typically 6 - 8 miles long are used to flow through and sort pre-labeled cases directly from the receiving doors to the shipping doors to minimize handling and manpower requirements.  Part of the Inbound dock area is dedicated to a semi-automated process for unloading and sorting freight. Target calls this area ART, for "Automated Receiving Technology." Dock doors on the receiving dock are fitted with powered conveyor systems that extend directly into the trailer. Rather than using a forklift for unloading, workers place all conveyable cartons from the semi-trailer onto a powered conveyor belt where a scanner reads the carton's label and determines whether the carton is Flow Through or Putaway to Reserve. If a carton is Flow Through, the carton is sent via conveyor to an elevated mezzanine, where it is transported until it reaches the outbound shipping lanes which are assigned door per store.  If, however, the carton is Putaway to Reserve, it circles around on a conveyor belt so that it is deposited by the same dock door from which it was unloaded. Inbound workers then stack these reserve cartons onto pallets staged for putaway by forklift and/or by an automated AS/RS storage system . Target's regional distribution centers typically employ between 800 - 1,000 associates and are often designed with high-rise Automated Storage and Retrieval Systems for high density pallet storage with the capacity to hold 300,000+ pallets.

Target operates a separate food distribution network in the United States. Target currently has four perishables distribution centers in the U.S. and this network is expanding as Target increases the number of stores with an expanded food assortment.  Since 2008, Target has gradually been increasing control over its food distribution network by adding automated perishables facilities to replace the use of wholesale distributors such as Supervalu.  To this end, Target has worked with Swisslog and WITRON to build semi-automated and fully automated perishables distribution centers which are amongst the most advanced in North America.

  • Target partnered with Swisslog for its first two perishables distribution centers at Lake City, FL and Cedar Falls, IA. At these facilities the company deployed a technology called the CaddyPick system which is a semi-automated monorail picking system that transports store-specific monorail-suspended trolleys through aisles for order fulfillment.  A video of this technology can be seen here.  These frozen and refrigerated distribution centers are equipped with a high bay warehouse with 18 stacker cranes to automate pallet putaway and retrieval.Target Food Distribution Center Rialto, California
  • In 2013, Target opened a fully automated perishables distribution center in Denton, TX.  The 360,000 square foot distribution center operates with a system from WITRON Logistik from Germany and is one about a dozen global installations working in a perishables and frozen environment where temperatures range from +34 degrees to a -15 degrees Fahrenheit and building heights reach up to 115 feet.  A good overview of this facility is available here. As well, overviews of this automation technology can be found here and here.
  • Looking ahead, Target is rolling out 2 more WITRON Perishables/Frozen distribution centers in West Jefferson, OH and Rialto, CA so we can conclude this automation technology is proving to be cost effective for the company.

In Canada, Target outsourced the distribution of temperature-controlled (i.e. Dairy, Frozen, Perishables and Chocolate) merchandise and some ambient merchandise through Sobeys Inc.  A small percentage of food merchandise was delivered by vendors directly to the stores as DSD shipments which is typical in the industry.  Three distribution centers were built to specification in Cornwall, ON, Mississauga, ON and Calgary, AB and all three facilities are scheduled to be closed in or around April, 2015 as Target exits the market.  These distribution centers are currently operated by a 3PL called Eleven Points Logistics, a subsidiary of Pittsburgh-based Genco which was acquired by FedEx in December, 2014.

To support the Target.com business, Target operates three dedicated distribution centers in: Woodbury, MN; Tucson, AZ; and Ontario, CA (with some support from Savannah, GA).  Target has a sizable on-line business and the type of distribution center required to efficiently support e-commerce order fulfillment is different from a retail distribution center.  As such, the company has  developed a separate network of e-commerce fulfillment centers that operate as separate entities from the retail distribution network.  In 2015, plans are underway to launch two new e-Commerce fulfillment centers in Memphis, TN and York, PA.

As far as reverse logistics is concerned, Target stores generally send palletized returns back to a subset of regional distribution centers or LTL hubs where goods are consolidated and shipped to a centralized returns processing center located in Indianapolis, IN.  This operation is run by a third party logistics company called Genco which has a strong track record in operating returns processing facilities.

Below is a list of Target’s distribution centers in North America listed by Type.

Go Back to Network Strategy

Regional

Distribution

Center

Location

Country

Square

Feet

Year

Opened

Description of Operation

T-580

6175 Greenbrier Rd, Madison, Alabama, 35756

United States of America

1,357,500

2000

 

T-588

25 N 75th Ave, Phoenix, Arizona, 85043

United States of America

1,530,700

June

2002

 

T-0553

14750 Miller Avenue, Fontana, California, 92336

United States of America

1,423,000

July

1987

  • Phase 1 constructed to 672,000 SF and Phase 2 expansion completed in 1988

T-0555

2050 East Beamer Street, Woodland, California, 957776

United States of America

1,862,000

1988

  • Originally constructed to 750,000 SF; Expanded to 1.5 M sq ft. in 2000; and expanded again by 362,000 SF

T-0593

3880 Zachary Ave, Shafter, California, 93263

United States of America

2,100,000

Mar

2003

  • Originally built to 1.7 Million sq ft.; Expanded by 192,000 sq ft. and by 252,000 SF in 2010
  • Swisslog Split Case Automation

T-3806

3105 N Mango Ave, Rialto, California, 92377

United States of America

1,850,000

July

2006

  • Originally built to 1.5 Million SF  and expanded in 2011
  • Swisslog Split Case Automation

T-0554

34800 United Avenue, Pueblo, Colorado, 81001

United States of America

1,500,000

Apr

1986

  • Originally built to 1.1 M SF and later expanded

T-0556

110 West Jordan Road, Tifton, Georgia, 31794

United States of America

1,560,000

1989

 

T-3808

1247 Sunbury Rd, Midway, Georgia, 31320

United States of America

1,500,000

Aug

2007

 

T-3809

1115 Macom Dr, DeKalb, Illinois, 60115

United States of America

1,500,000

Aug

2006

 

T-0559

7551 W Morris, Indianapolis, Indiana, 46231

United States of America

1,470,000

est.

1998

  • Replaced Indianapolis a 414,000 SF distribution facility that was obtained through the acquisition of L.S. Ayres & Company

T-0590

2200 Viking Rd, Cedar Falls, Iowa, 50613

United States of America

1,350,000

Feb

2003

  • Swisslog Split Case Automation

T-3803

1100 SW 57th St, Topeka, Kansas, 66609

United States of America

1,350,000

June

2004

 

T-0587

12735 E L Ave, Galesburg, Michigan, 49053

United States of America

1,357,400

Mar

2002

 

T-0551

7120 Highway 65 N. E., Fridley, Minnesota, 55432

United States of America

1,156,000

1969

  • Target’s 1st distribution center was originally built to 460,000 SF and was later expanded in 2000

T-0579

129 North Road, Wilton, New York, 12831

United States of America

1,500,000

Feb

1998

  • Originally built to 1,3 Million SF and later expanded

T-3802

1800 State Highway 5S, Amsterdam, New York, 12010

United States of America

1,476,500

March

2005

  • Target purchased the 1.0 Million SF unfinished distribution center from K-Mart and later expanded it by in 2011
  • Swisslog Split Case Automation

T-3811

1800 Stover Ct, Newton, North Carolina, 28658

United States of America

1,670,000

June

2009

  • Swisslog Split Case Automation

T-3804

1 Walker Way, West Jefferson, Ohio, 43162

United States of America

1,500,000

June

2004

  • Originally built to 1.35 Million SF and later expanded

T-0558

875 Beta Drive SW, Albany, Oregon, 97321

United States of America

1,470,000

Nov

1997

  • Originally built to 630,000 SF and later expanded in 2001 

T-0589

3001 Archer Dr, Chambersburg, Pennsylvania, 17202

United States of America

1,350,000

Feb

2003

 

T-0594

22 Corporate Dr , Lugoff, South Carolina, 29078

United States of America

1,802,000

June

2003

  • Originally built to 1.35 Million SF and later expanded in 2010

T-0578

13786 Harvey Road, Tyler, Texas, 75706

United States of America

1,752,500

1997

  • Originally built to 1.63 Million SF  and later expanded 

T-3801

4333 Power Way, Midlothian, Texas, 76065

United States of America

1,350,000

June

2004

 

T-0560

345 Mount Vernon Road, Stuarts Draft, Virginia, 24477

United States of America

1,650,000

Jan

1997

 

T-0557

1100 Valley Road, Oconomowoc, Wisconsin, 53066

United States of America

1,500,000

Jul

1994

  • Originally built to 1.1 Million SF and later expanded in 2001

T-7301

260199 High Plains Blvd, Balzac, Alberta, T4A 0P9

Canada

1,300,000

May

2013

  • Outsourced to 3PL Eleven Points Logistics
  • Facility scheduled to be closed in 2015

T-7300

8450 Boston Church Road, Milton, Ontario, L9T 8E4

Canada

1,320,000

May

2013

  • Outsourced to 3PL Eleven Points Logistics
  • Facility scheduled to be closed in 2015

T-7302

1501 Industrial Park Drive, Cornwall, Ontario, K6H 7M4

Canada

1,350,000

June

2013

  • Outsourced to 3PL Eleven Points Logistics
  • Facility scheduled to be closed in 2015

Import Warehouse

Location

Country

Square

Feet

Year

Opened

Description of Operation

T-3807

3110 Alder Ave , Rialto, California, 92336

United States of America

1,530,000

July

2006

  • Positioned on a campus of 2 buildings

T-3810

211 Little Hearst Pkwy, Savannah, Georgia, 31407

United States of America

2,029,500

Dec

2006

 

T-3800

300 Manning Bridge Road, Suffolk, Virginia, 23434-8592

United States of America

1,800,000

July

2003

  • Originally built to 1.5 Million SF and expanded by 300,000 SF in 2005

T-0600

3500 Marvin Road N.E., Lacey, Washington, 98516

United States of America

2,000,000

Apr

2003

  • Originally built to 1.5 Million SF and later expanded by 500,000 SF

Food

Distribution

Center

Location

Country

Square

Feet

Year

Opened

Description of Operation

T-3899

2245 W Renaissance Rd, Rialto, California, 92376

United States of America

500,000

June

2014

  • WITRON automated Perishables/Frozen facility close to the Rialto Airport

T-3892

3049 North US 441, Lake City, Florida, 32055

United States of America

430,000

Aug

2008

  • 1st Food DC. Equipped with ASRS  and Swisslog CaddyPick. Originally operated by Supervalu and transitioned to Target in 2011

T-3880

42 Commerce Parkway, West Jefferson, Ohio, 43162

United States of America

438,000

June

2014

  • WITRON automated Perishables/Frozen distribution center to Serves about 350 Target stores in 10 states

T-3895

2115 Technology Parkway, Cedar Falls, Iowa, 50613

United States of America

430,000

Aug

2009

  • 2nd Food DC. Equipped with ASRS  and Swisslog CaddyPick. 

T-3897

3952 Corbin Road, Denton, Texas, 76207

United States of America

360,000

Mar

2013

  • 9-story WITRON automated refrigerated facility shipping 30 Million Cases/Year

E-Commerce

Fulfillment

Center

Location

Country

Square

Feet

Year

Opened

Description of Operation

T-9478

8940 E. Rita Park Drive, Tucson, Arizona, 85747-9108

United States of America

975,000

Aug

2008

  • First E-commerce facility built from the ground up.  

T-9479

1505 South Haven, Ontario, California, 91761

United States of America

725,000

Feb

2009

  • Originally this building was Target’s first import warehouse launched in 2001 that had a 2nd 500,000 SF building beside it 
  • Converted to an E-commerce fulfillment center in 2009

T-9407

9501 Hudson Rd, Woodbury, Minnesota, 55125

United States of America

325,000

est. Jan

1988

  • Originally this building was an older GM warehouse
  • A Target.direct facility in Eagan, MN was consolidated into this building in July 2002
  • Converted to E-commerce fulfillment center in 2009

TBD

5461 Davidson Road, Memphis, Tennessee,38118

United States of America

900,000

Q2

2015

  • Facility cost $55 Million and employs 400 people
  • It services the SouthEast market with fulfillment of Internet orders.
  • Operated by 3PL Innotrac

TBD

325 S. Salem Church Road, York, Pennsylvania, 17408

United States of America

785,400

Q3

2015

  • Operated by 3PL Genco
  • 250 people
  • Facility was originally 624,800 SF and was expanded by 160,600 sq. ft. prior to go-live.

Central Returns

Center

Location

Country

Square

Feet

Year

Opened

Description of Operation

 

225 Transfer Drive, Indianapolis, Indiana, 46214

United States of America

190,000

est. 1992

  • Outsourced to 3PL Genco Distribution System, Inc

Target Distribution Centers That Have Been Vacated

Since Target introduced its first distribution center in 1969, the company has vacated several distribution centers.  A list of the facility closures that we are aware of follows and there may be others which are off the record.  Note that we purposely exclude facilities that were run for other operating companies such as L.S. Ayres & Company; Mervyn's and Marshall Fields.

Distribution

Center

Type

Location

Country

Square

Feet

Year

Opened

Description of Operation

T-3893

455 S. 75th Avenue, Phoenix, Arizona, 85043

United States of America

138,000

Jan

2005

  • Formerly a Perishables DC owned by Americold signed in 2010. Prior to this Supervalu serviced Target’s stores from this facility

T-0595

Import

Warehouse

1505 South Haven, Ontario, California, 91761

United States of America

1,225,000

Aug

2001

  • Campus of 2 buildings of 725,000 and 500,000 SF in the Inland empire
  • The 725,00 SF facility was converted into an E-commerce fulfillment center in 2009 (T-9479)
  • The Import Warehouse was moved to the Rialto, CA site  (T-3807)

T-0552

Regional Distribution Center

600 Carnahan Drive, Maumelle, Little Rock, Arkansas, 72113

United States of America

852,000

1982

  • Facility closed in Apr 2009
  • It was the 2nd oldest facility in Target’s network

T-3894

5500 South Freeway, Fort Worth, Texas, 76115

United States of America

769,800

Mar

2008

  • Was a Supervalu distribution center run by their 3PL division Advantage Logistics
  • Converted to a Target Food DC in 2011 and later released when the Denton facility opened up in 2013

T-7301

260199 High Plains Blvd, Balzac, Alberta, T4A 0P9

Canada

1,300,000

May

2013

  • Outsourced to 3PL Eleven Points Logistics
  • Facility scheduled to be closed in 2015

T-7300

8450 Boston Church Road, Milton, Ontario, L9T 8E4

Canada

1,320,000

May

2013

  • Outsourced to 3PL Eleven Points Logistics
  • Facility scheduled to be closed in 2015

T-7302

1501 Industrial Park Drive, Cornwall, Ontario, K6H 7M4

Canada

1,350,000

June

2013

  • Outsourced to 3PL Eleven Points Logistics
  • Facility scheduled to be closed in 2015

Maps and Graphs

As at 2016, Target’s North American distribution network is depicted in the map below. As well, Target’s growth in distribution center space is depicted in the graphs below where one can visualize the rapid increase in distribution capacity between 2002 - 2010.  We also provide a unique graph that depicts the relationship between Target’s retail store square footage per distribution center square footage over the time period where this data is available.  Note that these graphs exclude all square footage and retail sales revenues related to other operating companies such as L.S. Ayres & Company; Mervyn's and Marshall Fields and revenue.  As well, charts showing retail sales revenues are for merchandise sales from Target stores only and exclude credit card revenue.

Target North American Distribution Network
Graph of Target Distribution Center Square Feet Over Time
Graph of Target Retail Store Square Feet Over Time
Ratio of Retail Square Feet to Distribution Center  Square Feet
Ratio of Retail Merchandise Sales to Distribution center Square Feet

Key Learnings- Interpreting the Analytics

The above charts are sourced from Target’s annual statements and they help to illustrate several key learnings about the value of having distribution space to support a retail business.  In our experience, there are still many retail executives who do not fully understand the critical importance of having a strong supply chain to support the retail stores. The typical thinking is that it is better to invest capital into opening new stores to increase sales revenue than it is to sink money into distribution infrastructure which will only drive up expenses.  In fact, companies that strategically invest into distribution infrastructure recognize that increasing market share can only be achieved if the overall operating expense structure to effectively support the stores is maximized for efficiency at all times. 

  • From the above charts we can see that Target has 4.8 square feet of retail store space for every square foot of supporting distribution center space.  That same figure for Walmart in the U.S. is currently running at about 6.2 which is an interesting set of figures. In the mid-2000 time period Walmart was closer to 5.4 and since then this figure has been on the rise. This tells us that this ratio should gradually improve over time as distribution infrastructure leverage is improved.
  • Target’s retail merchandise sales per square foot of retail store space is information that is publicly available and closely watched but retail sales as it relates to distribution space if not something that people pay attention to.  Partly this can be explained because many retailers outsource portions of their supply chain to third parties so the distribution space requirements are difficult to compare without having a detailed understanding of how each company operates which is typically not disclosed information.  For example, Target outsources all import de-consolidation and domestic consolidation work to specialized third party companies. Technically if this distribution space is dedicated to Target then it should be included in their distribution infrastructure requirements.  We have excluded these facilities because (a) we have incomplete  information about these facilities; (b) these facilities are typically much smaller buildings relative the rest of the distribution centers in the network; and (c) these operations may or may not be shared 3PL facilities where space allocation is shared between several companies  The bottom line is that the estimation of distribution space requirements is not an exact science so information is never perfect.
  • Lastly, based on our research, Target has $1,437 retail merchandise sales revenue per square foot of distribution center space.  By our estimates, that same figure for Walmart is running closer to $2,750. Now one may erroneously draw a conclusion from these two data points to say that Target has too much distribution space to support its business, but in fact the exact opposite may well be the case.  Why is this?
    • First off, it is always dangerous to compare the effectiveness of retail supply chains by using the value of the merchandise being sold as part of a performance metric.  If a retailer has sales revenue generated from pharmaceuticals or from fuel sales then these revenues are very high with minimal impact on distribution space or cost requirements which can significantly distort comparative data.
    • Secondly, the type of product categories being sold at the retail stores drives revenue dollars.  To illustrate this point using a ridiculous example, we could compare the retail sales revenue per square foot of distribution center space for a dollar store retailer versus a home hardware retailer.  The fact that the home hardware retailer sells much higher value merchandise will cause their retail sales per square footage of distribution center space to appear much better than the dollar store company.
    • The percentage of volume being sourced to the stores through the direct store delivery (DSD) channel also has a direct impact on this ratio. The higher the percentage of merchandise that is supplied as DSD, the less the need for distribution infrastructure, but in fact DSD may be an inefficient way to move goods to market and the retailer may be losing margin as a result.  Similarly, by outsourcing the distribution of certain product lines to wholesalers, the need for distribution capacity is reduced but this may also result in reduced margins
    • Clearly, the comparison of sales revenue per square foot of distribution space is not all that meaningful of a statistic for retail executives to compare.   

This discussion serves to point out the potential for consulting firms to mislead companies through the use of comparative supply chain industry benchmarking data.  The supply chain strategy that works for one company may be a disaster for another company.  Clearly, the onus is on each company to have sharp critical thinkers within their supply chain management organization who question the validity of the facts and figures being presented for all aspects of the decision making process.  This is  particularly true for capital investment decisions that are based on promises for big savings that may or may not ever pan out.  

Target's Supply Chain - Predictions for the Future

This discussion looks ahead to where potential opportunities may exist to strengthen the Target North American supply chain.  The information below is 100% based on our opinions, conjecture and market experience in working with retail distributors and has no relationship at all to any factual information.  

  • Currently there exists already a number of retail grocery companies that are significantly smaller than Target that self-distribute pharmaceuticals and particularly generic drugs.  Walmart has established a dedicated supply chain for the self-distribution and reverse logistics of pharmaceuticals products.  We expect that it makes economic sense for Target to move in this direction given that this concept has already been fleshed out by others.
  • The Target food distribution network is still in its infancy relatively speaking.  We expect that the company will continue to invest into adding highly automated Perishables/Frozen Food distribution centers in key market areas where the distance between the existing food distribution center network and the stores is highest.  The most obvious example of this is that Target stores in the Northwest of the U.S. are a significant distance from the nearest food distribution center which is in Rialto, CA.  Similarly, stores in the Northeast of the country are a long distance from the perishables distribution center in Cedar Falls, Iowa.  The transportation savings associated with moving distribution closer to market will be critical to provide competitive prices for food merchandise.
  • We also expect that Target will continue to invest into its e-commerce distribution infrastructure to increase speed to market as Amazon continues to drive other retailers in this direction. 

Lastly, we feel it is important to say that Target is considered an excellent operator and a solid leader within the retail supply chain industry.  Target is willing blaze unproven trails by making investments into innovative technologies and particularly distribution automation technologies. At the same time, Target takes great care to protect its corporate image and the company spends a significant amount of energy and resources to take decent care of its employees.  We see this balance as being essential attributes to maintain into the future to keep out of the hot water that has been highly problematic for some competitors.  The reality is that being a good corporate citizen towards a company’s associates, particularly the people who do the heavy lifting in the distribution centers, will take on much greater importance in the future due to the increasing media attention and public awareness of the distribution industry as a whole.

Legal Disclaimer

We have researched Target’s distribution network because we are supply chain experts who are interested in sharing how the world's most successful companies strategically distribute goods to market. Within the retail industry, Target is widely considered to be a strong operator and our intent is to provide insight to supply chain professionals.  All information within this white paper was sourced from publicly available material.  In preparing this material, MWPVL International Inc. has not intentionally or knowingly disclosed any private or confidential company information.

MWPVL International Inc. does not represent Target nor do we have a business relationship with Target.  This is a research paper for educational purposes only.  The information assembled in this research paper is intended to provide the reader with intelligence on the subject of world class strategies for distribution networks.   MWPVL International Inc. has made every effort to ensure that the information contained within this white paper is as accurate and as up to date as possible. However, it is important to note that distribution networks change over time and for this reason there is a possibility that information contained within this paper may be out of date or inaccurate.  If you wish to submit any information to improve the quality of this white paper, please be sure to send us some feedback. Conclusions

Marc Wulfraat is the President of MWPVL International Inc.  He can be reached by clicking hereMWPVL International provides supply chain / logistics network strategy consulting services. Our services include: distribution network strategy; distribution center design; material handling and automation design;  supply chain technology consulting; product sourcing; 3PL Outsourcing; and purchasing; transportation consulting; and operational assessments.

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MWPVL International Inc. is a full-service global Supply Chain, Logistics and Distribution Consulting firm.  Our consulting services include Supply Chain Network Strategy, Product Sourcing Strategy, 3PL Outsourcing Strategy, Purchasing and Inventory Management, Distribution Center Design, Material Handling Systems, Supply Chain Technology Advisory Services (WMS, TMS, LMS, YMS, OMS, DMS, Purchasing, Forecasting, Slotting), Lean Distribution, Lean Manufacturing,Transportation Management, Distribution Operations Assessments, Warehouse Operations Consulting and much more.

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