Target really needs a win this holiday season.
The company has struggled in recent years with declining comparable sales, and it has cautious expectations for the all-important fourth quarter of this year.
One aspect of the business that incoming CEO Michael Fiddelke is keenly interested in improving is making sure products are actually available on shelves for shoppers to buy.
“If you’ve trusted us with a trip to the store, we can’t let you down by being out of stock, and we haven’t been good enough over the last several years on that front,” he said during a November earnings call.
Few days are more unforgiving of out-of-stocks than the day after Thanksgiving. Black Friday has changed a lot in recent years, but it’s still the marquee sales event of the holiday shopping season.
That means stocking stores with the right quantities of toys, electronics, apparel, and other items.
The bullseye retailer invited Business Insider to take an exclusive look behind the curtain at one of its distribution centers, where merchandise from suppliers gets sorted and sent to individual stores across the region.
Target also fulfills more than 97% of its e-commerce orders from one of its retail stores, so that means almost everything the company sells online or offline must first pass through one of these distribution facilities.
Business Insider visited the warehouse a week before Thanksgiving and saw firsthand the overwhelming volume of items that go into ensuring each Target store has exactly what it needs each day.
Here’s how Target is gearing up for the holiday rush.
Target’s regional distribution center is located a half hour outside Milwaukee in the town of Oconomowoc, Wisconsin.
The 1.5 million square foot facility serves 81 stores across four states: Wisconsin, Illinois, Minnesota, and the Upper Peninsula of Michigan.
Senior site director Julie O’Clary started her career with Target as an intern at this facility and has worked at several locations over the years.
O’Clary says her facility typically processes about 600,000 cartons of merchandise in a normal week, but that number balloons to 800,000 a week during the holiday rush.
An additional 300,000 cartons also flow through the facility without active sorting, bringing the holiday volume to well north of a million cartons this week.
The sprawling warehouse could fit nearly 26 football fields and runs like a small city with more than 1,050 employees.
Trucks arrive from suppliers with inventory that must be unloaded and sorted. The warehouse handles roughly 45,000 different product codes.
A shipment of toys is unloaded from the truck onto conveyor belts and scanned with a laser rig.
Here’s where pallets of toys like these Cozy Coupe cars from the Little Tikes brand arrive.
The inbound loading docks are a ballet of people and forklifts in the days leading up to Black Friday.
“We see a lot of brown boxes here, but inside that brown box, there’s toys or cosmetics — something that our guests want, something that brings them joy — so that’s our job,” Clary said.
All around the facility, towers of best-selling Black Friday items can be seen — such as these flat-screen TVs.
The warehouse also gives a sneak peek into what could be the next viral toy, like these child-sized Target shopping carts.
Here, pallets of Mario Kart racing toys are stacked next to electric scooters and kid-sized four-wheelers.
Almost everything in the building needs a label, and these printers spool off barcodes nonstop.
The company also routinely tracks all problems — and potential problems — on whiteboards throughout the facility, which are updated hourly.
Though it’s not a store, some employees still wear Target’s classic red plaid shirts.
This facility is also where Target tailors inventory orders to give each individual store the exact number of items it needs.
For example, each box here is headed to a different store, and each contains different quantities of apparel in the right sizes and colors.
Items are then sent upstairs to a network of conveyor belts that guide each box to the correct truck.
Boxes pass by at high speed, and the system automatically slows down to allow items from multiple belts to merge into one.
As one of Target’s higher-volume distribution centers, the flow of goods continues around the clock.
Some shipments take a detour for extra labeling.
An elevated conveyor belt carries sorted merchandise to trucks waiting at the loading docks. Other big and bulky items are stored near the outbound docks for quicker access.
Boxes are automatically tipped onto rollers that feed right into a waiting truck.
The parade of boxes are then loaded into tractor-trailers like a life-size game of Tetris.
More evidence of the holidays is on display in the form of a pallet of Target-branded artificial Christmas trees on the loading docks.
O’Clary says the facility processes about 40 million outbound cartons a year. Some stores receive a truck every day, but during the holiday rush, they may take multiple deliveries a day.
O’Clary says her team is putting in thousands of hours of overtime this week to make sure Target customers have well-stocked shelves for their holiday shopping.
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