Assessing sales floor capacity and replenishment strategy

Abstract

Target stores (and the upstream supply chain) have been traditionally designed for a predominantly brick and mortar business, fed by a push supply chain model. With the growing need for omnichannel sales fulαllment, supply chain engineering has become signiαcantly more complex. Based on the traditional model, ideal inventory levels in the store, as well as the upstream replenishment logic are derived with a focus on the in-store customer experience. Two pain points of this design are: 1. The long tail, in the product assortment distribution, of low-velocity items carried in all stores. 2. Inβexibility to use dynamic unit of measure (deαned as the type of packaging an item is transported in - can be an each, case pack, pallet), because merchants set the unit of measure system-wide thus overpack items are overpack in all stores regardless of sales volume. Both are backroom space and labor intensive. In anticipation of stores becoming shipping hubs in the future and the need to fulαll Target's long-term planning, we will take a data driven approach to determine optimal sales βoor item capacity in order to αnd eciencies in upstream sortation leading to cost reductions in downstream, without impacting critical functions including customer reception and experience in store and demand signal fulαllment.