While other retailers shuttered brick-and-mortar stores in response to the growing e-commerce threat, Target took the opposite tack, building out a distribution network that places its stores front and center. That strategy paid off big time when the pandemic hit.
David Maloney has been a journalist for more than 35 years and is currently the group editorial director for DC Velocity and Supply Chain Quarterly magazines. In this role, he is responsible for the editorial content of both brands of Agile Business Media. Dave joined DC Velocity in April of 2004. Prior to that, he was a senior editor for Modern Materials Handling magazine. Dave also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. Dave combines a background of reporting on logistics with his video production experience to bring new opportunities to DC Velocity readers, including web videos highlighting top distribution and logistics facilities, webcasts and other cross-media projects. He continues to live and work in the Pittsburgh area.
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.
Economic activity in the logistics industry expanded in January, growing at its fastest clip in more than two years, according to the latest Logistics Managers’ Index (LMI) report, released this week.
The LMI jumped nearly five points from December to a reading of 62, reflecting continued steady growth in the U.S. economy along with faster-than-expected inventory growth across the sector as retailers, wholesalers, and manufacturers attempted to manage the uncertainty of tariffs and a changing regulatory environment. The January reading represented the fastest rate of expansion since June 2022, the LMI researchers said.
An LMI reading above 50 indicates growth across warehousing and transportation markets, and a reading below 50 indicates contraction. The LMI has remained in the mid- to high 50s range for most of the past year, indicating moderate, consistent growth in logistics markets.
Inventory levels rose 8.5 points from December, driven by downstream retailers stocking up ahead of the Trump administration’s potential tariffs on imports from Mexico, Canada, and China. Those increases led to higher costs throughout the industry: inventory costs, warehousing prices, and transportation prices all expanded to readings above 70, indicating strong growth. This occurred alongside slowing growth in warehousing and transportation capacity, suggesting that prices are up due to demand rather than other factors, such as inflation, according to the LMI researchers.
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
As commodities go, furniture presents its share of manufacturing and distribution challenges. For one thing, it's bulky. Second, its main components—wood and cloth—are easily damaged in transit. Third, much of it is manufactured overseas, making for some very long supply chains with all the associated risks. And finally, completed pieces can sit on the showroom floor for weeks or months, tying up inventory dollars and valuable retail space.
In other words, the furniture market is ripe for disruption. And John "Jay" Rogers wants to be the catalyst. In 2022, he cofounded a company that takes a whole new approach to furniture manufacturing—one that leverages the power of 3D printing and robotics. Rogers serves as CEO of that company, Haddy, which essentially aims to transform how furniture—and all elements of the "built environment"—are designed, manufactured, distributed, and, ultimately, recycled.
Rogers graduated from Princeton University and went to work for a medical device startup in China before moving to a hedge fund company, where he became a Chartered Financial Analyst (CFA). After that, he joined the U.S. Marine Corps, serving eight years in the infantry. Following two combat tours, he earned an MBA from the Harvard Business School and became a consultant for McKinsey & Co.
During this time, he founded Local Motors, a next-generation vehicle manufacturer that launched the world's first 3D-printed car, the Strati, in 2014. In 2021, he brought the technology to the furniture industry to launch Haddy. The father of four boys, Rogers is also a director of the RBR Foundation, a philanthropic organization focused on education and health care.
Rogers spoke recently with DC Velocity Group Editorial Director David Maloney on an episode of the "Logistics Matters" podcast.
Q: Could you tell us about Haddy and how this unique company came to be?
A: Absolutely. We have believed in the future of distributed digital manufacturing for a long time. The world has gone from being heavily globalized to one where lengthy supply chains are a liability—thanks to factors like the growing risk of terrorist attacks and the threat of tariffs. At the same time, there are more capabilities to produce things locally. Haddy is an outgrowth of those general trends.
Adoption of the technologies used in 3D printing has been decidedly uneven, although we do hear about applications like tissue bioprinting and food printing as well as the printing of trays for dental aligners. At Haddy, we saw an opportunity to take advantage of large-scale structural printing to approach the furniture and furnishings industry. The technology and software that make this possible are already here.
Q: Furniture is a very mature market. Why did you see this as a market that was ripe for disruption?
A:The furniture market has actually been disrupted many times in the last 200 years. The manufacturing of furniture for U.S. consumption originally took place in England. It then moved to Boston and from there to New Amsterdam, the Midwest, and North Carolina. Eventually, it went to Taiwan, then China, and now Vietnam, Indonesia, and Thailand. And each of those moves brought some type of disruption.
Other disruptions have been based on design. You can look at things like the advent of glue-laminated wood with Herman Miller, MillerKnoll, and the Eames [furniture design and manufacturing] movement. And you can look at changes in the way manufacturing is powered—the move from manual operations to machine-driven operations powered by steam and electricity. So the furniture industry has been continuously disrupted, sometimes by labor markets and sometimes by machines and methods.
What's happening now is that we're seeing changes in the way that labor is applied in furniture manufacturing. Furniture has traditionally been put together by human hands. But today, we have an opportunity to reassign those hands to processes that take place around the edges of furniture production. The hands are now directing robotics through programming and design; they're not actually making the furniture.
And so, we see this mature market as being one that's been continuously disrupted during the last 200 years. And this disruption now has a lot to do with changing the way that labor interacts with the making of furniture.
Q: How do your 3D printers actually create the furniture?
A:All 3D printing is not the same. The 3D printers we use are so-called "hybrid" systems. When we say hybrid, what we mean is that they're not just printers—they are holders, printers, polishers, and cutters, and they also do milling and things like that. We measure things and then print things, which is the additive portion. Then we can do subtractive and polishing work—re-measuring, moving, and printing parts again. And so, these hybrid systems are the actual makers of the furniture.
Q: What types of products are you making?
A: We've started with hardline or case goods, as they're sometimes known, for both residential and commercial use—cabinets, wall bookshelves, freestanding bookshelves, tables, rigid chairs, planters, and the like. Basically, we've been concentrating on products that don't have upholstery.
It's not that upholstery isn't necessary in furniture, as it is used in many pieces. But right now, we have found that digital furniture manufacturing becomes analog again when you have to factor in the sewing process. And so, to move quickly and fully leverage the advantages of digital manufacturing, we're sticking to the hardline groups, except for a couple of pieces that we have debuted that have 3D-printed cushions, which are super cool.
Q: Of course, 3D printers create objects in layers. What types of materials are you running through your 3D printers to create this furniture?
A: We use recycled materials, primarily polymer composites—a bio-compostable polymer or a synthetic polymer. We look for either recycled or bio-compostable [materials], which we then reinforce with fibers and fillers, and that's what makes them composites. To create the bio-compostables, we marry them with bio-fibers, such as hemp or bamboo. For synthetic materials, we marry them with things like glass or carbon fibers.
Q: Does producing goods via 3D printing allow you to customize products easily?
A: Absolutely. The real problem in the furniture and furnishings industries is that when you tool up to make something with a jig, a fixture, or a mold, you tend to be less creative because you now feel you have to make and sell a lot of that item to justify the investment.
One of the great promises of 3D printing is that it doesn't have a mold and doesn't require tooling. It exists in the digital realm before it becomes physical, and so customization is part and parcel of the process.
I would also add that people aren't necessarily looking for one-off furniture. Just because we can customize doesn't mean we're telling customers that once we've delivered a product, we break the digital mold, so to speak. We still feel that people like styles and trends created by designers, but the customization really allows enterprise clients—like businesses, retailers, and architects—to think more freely.
Customization is most useful in allowing people to "iterate" quickly. Our designers can do something digitally first without having to build a tool, which frees them to be more creative. Plus, because our material is fully recyclable, if we print something for the first time and find it doesn't work, we can just recycle it. So there's really no penalty for a failed first printing—in fact, those failures bring their own rewards in the form of lessons we can apply in future digital and physical iterations.
Q: You currently produce your furniture in an automated microfactory in Florida, with plans to set up several more. Could you talk a little about what your microfactory looks like and how you distribute the finished goods?
A: Our microfactory is a 30,000-square-foot box that mainly contains the robots that make our furniture along with shipping docks. But we don't intend for our microfactories to be storage warehouses and trans-shipment facilities like the kind you'd typically see in the furniture industry—all of the trappings of a global supply chain. Instead, a microfactory is meant to be a site where you print the product, put it on a dock, and then ship it out. So a microfactory is essentially an enabler of regional manufacturing and distribution.
Q: Do you manufacture your products on a print-to-order basis as opposed to a print-to-stock model?
A: No. We may someday get to the point where we receive an order digitally, print it, and then send it out on a truck the next day. But right now, we aren't set up to do a mini-delivery to one customer out of a microfactory.
We are an enterprise company that partners with architects, designers, builders, and retailers, who then distribute our furnishings to their customers. We are not trying to go direct-to-consumer at this stage. It's not the way a microfactory is set up to distribute goods.
Q: You've mentioned your company's use of recycled materials. Could you talk a little bit about other ways you're looking to reduce waste and help support a circular economy?
A: Yes. Sustainability and a circular economy are really something that you have to plan for. In our case, our plans call for moving toward a distributed digital manufacturing model, where we establish microfactories in various regions around the world to serve customers within a 10-hour driving radius of the factory. That is a pretty large area, so we could cover the United States with just four or five microfactories.
That also means that we can credibly build our recycling network as part of our microfactory setup. As I mentioned, we use recycled polymer stock in our production, so we're keeping that material out of a landfill. And then we tell our enterprise customers that while the furniture they're buying is extremely durable, when they're ready to run a special and offer customers a credit for turning in their used furniture, we'll buy back the material. Buying back that material actually reduces our costs because it's already been composited and created and recaptured. So our microfactory network is well designed for circularity in concert with our enterprise customers.
Generative AI (GenAI) is being deployed by 72% of supply chain organizations, but most are experiencing just middling results for productivity and ROI, according to a survey by Gartner, Inc.
That’s because productivity gains from the use of GenAI for individual, desk-based workers are not translating to greater team-level productivity. Additionally, the deployment of GenAI tools is increasing anxiety among many employees, providing a dampening effect on their productivity, Gartner found.
To solve those problems, chief supply chain officers (CSCOs) deploying GenAI need to shift from a sole focus on efficiency to a strategy that incorporates full organizational productivity. This strategy must better incorporate frontline workers, assuage growing employee anxieties from the use of GenAI tools, and focus on use-cases that promote creativity and innovation, rather than only on saving time.
"Early GenAI deployments within supply chain reveal a productivity paradox," Sam Berndt, Senior Director in Gartner’s Supply Chain practice, said in the report. "While its use has enhanced individual productivity for desk-based roles, these gains are not cascading through the rest of the function and are actually making the overall working environment worse for many employees. CSCOs need to retool their deployment strategies to address these negative outcomes.”
As part of the research, Gartner surveyed 265 global respondents in August 2024 to assess the impact of GenAI in supply chain organizations. In addition to the survey, Gartner conducted 75 qualitative interviews with supply chain leaders to gain deeper insights into the deployment and impact of GenAI on productivity, ROI, and employee experience, focusing on both desk-based and frontline workers.
Gartner’s data showed an increase in productivity from GenAI for desk-based workers, with GenAI tools saving 4.11 hours of time weekly for these employees. The time saved also correlated to increased output and higher quality work. However, these gains decreased when assessing team-level productivity. The amount of time saved declined to 1.5 hours per team member weekly, and there was no correlation to either improved output or higher quality of work.
Additional negative organizational impacts of GenAI deployments include:
Frontline workers have failed to make similar productivity gains as their desk-based counterparts, despite recording a similar amount of time savings from the use of GenAI tools.
Employees report higher levels of anxiety as they are exposed to a growing number of GenAI tools at work, with the average supply chain employee now utilizing 3.6 GenAI tools on average.
Higher anxiety among employees correlates to lower levels of overall productivity.
“In their pursuit of efficiency and time savings, CSCOs may be inadvertently creating a productivity ‘doom loop,’ whereby they continuously pilot new GenAI tools, increasing employee anxiety, which leads to lower levels of productivity,” said Berndt. “Rather than introducing even more GenAI tools into the work environment, CSCOs need to reexamine their overall strategy.”
According to Gartner, three ways to better boost organizational productivity through GenAI are: find creativity-based GenAI use cases to unlock benefits beyond mere time savings; train employees how to make use of the time they are saving from the use GenAI tools; and shift the focus from measuring automation to measuring innovation.
According to Arvato, it made the move in order to better serve the U.S. e-commerce sector, which has experienced high growth rates in recent years and is expected to grow year-on-year by 5% within the next five years.
The two acquisitions follow Arvato’s purchase three months ago of ATC Computer Transport & Logistics, an Irish firm that specializes in high-security transport and technical services in the data center industry. Following the latest deals, Arvato will have a total U.S. network of 16 warehouses with about seven million square feet of space.
Terms of the deal were not disclosed.
Carbel is a Florida-based 3PL with a strong focus on fashion and retail. It offers custom warehousing, distribution, storage, and transportation services, operating out of six facilities in the U.S., with a footprint of 1.6 million square feet of warehouse space in Florida (2), Pennsylvania (2), California, and New York.
Florida-based United Customs Services offers import and export solutions, specializing in remote location filing across the U.S., customs clearance, and trade compliance. CTPAT-certified since 2007, United Customs Services says it is known for simplifying global trade processes that help streamline operations for clients in international markets.
“With deep expertise in retail and apparel logistics services, Carbel and United Customs Services are the perfect partners to strengthen our ability to provide even more tailored solutions to our clients. Our combined knowledge and our joint commitment to excellence will drive our growth within the US and open new opportunities,” Arvato CEO Frank Schirrmeister said in a release.
And many of them will have a budget to do it, since 51% of supply chain professionals with existing innovation budgets saw an increase earmarked for 2025, suggesting an even greater emphasis on investing in new technologies to meet rising demand, Kenco said in its “2025 Supply Chain Innovation” survey.
One of the biggest targets for innovation spending will artificial intelligence, as supply chain leaders look to use AI to automate time-consuming tasks. The survey showed that 41% are making AI a key part of their innovation strategy, with a third already leveraging it for data visibility, 29% for quality control, and 26% for labor optimization.
Still, lingering concerns around how to effectively and securely implement AI are leading some companies to sidestep the technology altogether. More than a third – 35% – said they’re largely prevented from using AI because of company policy, leaving an opportunity to streamline operations on the table.
“Avoiding AI entirely is no longer an option. Implementing it strategically can give supply chain-focused companies a serious competitive advantage,” Kristi Montgomery, Vice President, Innovation, Research & Development at Kenco, said in a release. “Now’s the time for organizations to explore and experiment with the tech, especially for automating data-heavy operations such as demand planning, shipping, and receiving to optimize your operations and unlock true efficiency.”
Among the survey’s other top findings:
there was essentially three-way tie for which physical automation tools professionals are looking to adopt in the coming year: robotics (43%), sensors and automatic identification (40%), and 3D printing (40%).
professionals tend to select a proven developer for providing supply chain innovation, but many also pick start-ups. Forty-five percent said they work with a mix of new and established developers, compared to 39% who work with established technologies only.
there’s room to grow in partnering with 3PLs for innovation: only 13% said their 3PL identified a need for innovation, and just 8% partnered with a 3PL to bring a technology to life.