The past two years have been both terrifying and exhilarating for retailers. They’ve experienced the lows of pandemic-induced shutdowns that kept customers away from stores as well as the highs of an exploding online marketplace.
Managing it all for Target is Arthur Valdez Jr. As executive vice president and chief supply chain and logistics officer, he oversees all aspects of Target’s global supply chain and logistics network, including inventory management, replenishment, fulfillment, global transportation, logistics, and distribution.
Valdez joined Target in 2016, bringing more than 25 years of retail supply chain and logistics experience to his new role. He previously served in senior leadership positions at Amazon and Walmart, and has spent much of his career building retail supply chain networks in North, South, and Central America as well as in Europe and Asia.
The son of Mexican-American and Cuban parents, Valdez was the first member of his family to attend college. A graduate of Colorado State University, he currently serves on the university’s Global Leadership Council as well as on the boards of directors for Advance Auto Parts and Shipt. He also volunteers his time to mentor other first-generation and minority college students, and assists women and minorities in developing their careers and progressing within Target. He recently spoke with DC Velocity’s David Maloney about the retailer’s innovative stores-as-hubs model and the future of automation and robotics in Target’s supply chain operations.
Q: You have many years of experience managing supply chains for retail companies. How has supply chain management changed during your time in the industry?
A: Supply chains—really, the logistics of supply chain—have evolved considerably over the last 30 years. Early on in my career, supply chains were decentralized; there were several disparate parts to the whole. In the 1990s, the practice of supply chain management was popularized. You saw companies streamlining the planning and logistics of their supply chain network. Ten years later, that evolution morphed into a focus on supply chain integration in service of speed—that is, getting the most out of the network by consolidating or integrating tasks to reduce the number of “touches.” And over the last decade or so, we’ve seen the practice of automating supply chains and the introduction of mechanization and robotics with a more holistic view of the end-to-end process. This most recent change has brought greater insight into inventory, both upstream in supply chain facilities and downstream to stores and digital. It’s this modern approach to supply chain logistics that feeds Target’s path forward.
At Target, our stores are at the center of what we do. We’ve invested in our stores as local shopping service hubs. Doing so has enabled us to fulfill a rapidly increasing number of digital orders by improving speed of inventory, adding throughput capacity, and lowering cost. And we’re building a precise supply chain to keep those stores well-stocked and ready for guests.
Q: You’ve worked for a number of leading retailers. How does Target’s supply chain compare with those other operations?
A: I’ve had the opportunity to work across the retail sector, and one thing that really stands out to me about Target is the balance of the investments in our people and innovation for an improved guest experience. The past two years have been great proof of that, as our investments in our team led to better innovation in service to our guests, which drove business growth on top of growth. Our team is the connection between solving for improved distribution processes and technology, which allows us to deliver safety, ease, reliability, and even joy during times of uncertainty.
In addition, we set ourselves apart through our stores-as-hubs model to sort and ship product, creating efficiencies across our supply chain and leveraging the talent of our team members.
Q: Target has experienced tremendous growth in online sales. How has that changed your distribution strategies?
A: During the pandemic and the growth of online shopping, we knew we were playing a crucial role in communities across the country, making sure our guests had what they needed to take care of themselves and their families. The investments we had made ahead of time helped us play an essential role in our communities where they were choosing to shop online, while putting in place the building blocks for continued growth in years to come.
To do so, we accelerated new capabilities in our supply chain that were needed to support the growing demand in our stores and enable Target’s growth for the weeks, months, and years ahead. From opening new supply chain facilities that could move inventory in new ways to scaling robotics sortation for more precise store replenishment to introducing sortation centers that give stores more capacity to fulfill online orders—we continue to prioritize the investments that will support our team and fuel Target’s growth.
Q: You mentioned that Target has begun using stores as local service hubs. Could you describe what you’re doing?
A: Target has spent years building and scaling capabilities that put our stores at the center of how we serve our guests, no matter how they choose to shop. Our stores are the heart of our business and play a critical role in inspiring our guests; powering fast, convenient in-store and digital shopping trips; and supporting and developing our incredible team.
The investments we’ve consistently made to put stores at the center of our operation have given us flexibility to deliver on our commitments to team members and guests, deepening trust in our brand and positioning us for future growth.
When 2020 arrived, our stores were already positioned as local shopping service hubs to meet guests’ needs quickly and at a lower cost, with the flexibility in our operations to ramp up to meet growing demand. Prior to that, we had made investments in our supply chain to support our stores-as-hubs model—from making store replenishment faster and more precise to building new capabilities so our facilities could serve guests in many ways.
Target’s continued investment in its stores-as-hubs model places our more than 1,900 stores at the center of how we serve guests, continuing to enhance the guest experience, including shipping online orders in store and offering same-day pickup and delivery, while providing an easy and safe in-store experience for our guests.
Q: Target has recently acquired several businesses, including Shipt, Grand Junction, and Deliv. How have these helped you meet your service commitments?
A: Today, the e-commerce race is focused on speed. And while that’s a crucial component of delivery, the future will be much more about precision with a focus on providing a customized, local experience and ultimately giving consumers even more choices and control over how they shop.
The investments we’ve made over the last few years have allowed us to integrate Target’s technology, facilities, and operational capabilities to be even more precise and efficient, allowing us to create a customer-centric experience that’s fast and helps fulfill orders closer to the guest and drive growth of our digital delivery.
Target acquired Shipt and Grand Junction in 2017 to bolster our fulfillment capabilities and provide quick and efficient same-day delivery to guests across the country. This accelerated the work we had done to improve our speed of delivery to allow guests to get products on their own terms. Our acquisition of Deliv’s technology in 2020 is another opportunity that focuses on last-mile delivery at Target, ensuring stores are kept at the center of our strategy and lowering shipping costs, all while delivering packages even quicker.
Our continued investments and innovation will drive growth and differentiation for years to come, including bold investments across the business of $4 billion annually.
Q: Can you talk about your new facility in New Jersey that fills both store replenishment and direct-to-consumer orders from the same pool of inventory?
A: Supply chain facilities like the one in Logan, New Jersey, were created to use one inventory for the use of however the guest needs it—whether we send it to a store or ship it right to a guest. Having the capability to do both allows Target to get orders to guests faster and keep our shelves stocked by delivering the right amount of merchandise to a store when it’s needed and in a way that makes it easy for our store teams to put it on the shelf.
Target’s aim is to replenish stores in hours and to maximize the inventory placed on the sales shelf, especially in new small-format stores and locations in denser urban areas. This approach also uses the same pool of inventory to replenish stores and fulfill online orders. These facilities send shipments to stores more frequently and in smaller lots tailored more precisely to demand rather than shipping big cases of products.
We’ll continue to invest in our stores, our supply chain, and our team members, which all fuel Target’s growth, to build the supply chain of the future.
Q: You’ve built four new sortation centers. How do they fit into your network?
A: Our sortation centers are just one part of our extensive global supply chain and logistics network that is fully mobilized to support our guests, no matter how they choose to shop.
With Target’s stores fulfilling the majority of guests’ online orders, sortation centers make this process even faster, retrieving packages frequently from stores and sorting, batching, and routing them for delivery to local neighborhoods.
By removing the sorting process from our backrooms, we save valuable time and space for our store teams to fulfill additional orders, and because our sortation center technology presorts and arranges packages for easy pickup, it reduces processing time for our delivery partners too.
Q: Labor can be tough to find these days. What do you do to attract and retain workers?
A: We care about and invest in team members and consistently hear from them that they’re attracted to Target because of our industry-leading pay and benefits, caring culture, and opportunities for ongoing career development. We’ve invested in pay and benefits that include a $15 starting wage, education assistance, bonuses, access to counseling services and doctors, and more-stable schedules.
Due to our longstanding investments in our team members and listening to their needs, we have been able to retain our team and confidently staff our supply chain facilities and stores during an unprecedented labor market. In fact, we’ve exceeded our goal to hire 30,000 new supply chain team members and 100,000 seasonal team members at our stores across the country. These investments have helped us evolve and pivot successfully over time, leading to higher guest satisfaction and greater efficiency, all of which help to fuel our continued business success, safety culture, and ability to flex to meet guest demand.
Q: What roles will automation and robotics play in the future of Target’s supply chain operations?
A: At Target, we’re focused on building capabilities that give our guests options for how they engage with us—whether it’s shopping in-store, online, or through drive-up order pickup. We’re committed to providing the easiest and safest shopping experience in the years to come.
To do so, we’ll continue to invest in many developments across our stores and supply chain that fuel Target’s growth. We’ve laid out more automation, robotics, and artificial intelligence throughout our supply chain to build a fast, efficient, and precise supply chain. Target is always exploring automated solutions upstream to support the work of our team. We invest in automation that helps sort and move millions of items quickly and precisely, so our teams deliver them to our stores and our guests where, when, and how they want.
We’ll continue building the supply chain of the future, while keeping our stores and our team members at the center of how we deliver a joyful shopping experience to our Target guests.