The Supply Chain Interview: Gretchen McCarthy

As consumer expectations for delivery speed continue to grow, Target is rewriting the playbook on retail fulfilment. 

The Minneapolis-headquartered giant, which operates almost 2,000 stores across the US, has embarked on a sophisticated supply chain transformation that promises to increase speed for customers while simultaneously reducing costs – a rare combination in today's competitive landscape.

At the helm of this evolution is Gretchen McCarthy, Executive Vice President and Chief Supply Chain and Logistics Officer, who oversees Target's global supply chain and logistics network.

Having spent almost two decades at the company and with leadership experience spanning various continents, Gretchen is orchestrating a nuanced strategy that treats each store and distribution facility as a unique asset – rather than a one-size-fits-all fulfilment node.

Next-day delivery expansion

Target's latest milestone is the expansion of next-day delivery to 35 top US metropolitan areas – timed strategically for the critical holiday shopping season. 

The rollout represents more than just a service upgrade. Instead, it is the visible outcome of years of infrastructure investment and operational refinement. By next year, the company plans to extend next-day delivery to more than 20 additional metro areas, progressively covering more of its customer base.

"Speed matters more than ever to consumers, so we've prioritised expanding faster delivery across the country," Gretchen explains. "This past quarter, we delivered over two million more packages the next day than we did this time last year."

The expansion sits within a broader ecosystem of convenience options that has become Target's competitive differentiator. Today, at least 80% of the US population can access same-day delivery (free for Target Circle 360 members), while 99% can receive items within two days. 

Nearly all Target stores offer same-day Order Pickup and Drive Up services, which are always free and available on customers' timelines.

The stores-as-hubs evolution

What distinguishes Target's approach from competitors is its very deliberate stores-as-hubs model, which positions physical locations as mini fulfilment centres.

Gretchen is keen to emphasise that this strategy is evolving with increasing precision.

"This year we've introduced a new strategy that evaluates every store and supply chain facility at a granular level to ensure each one is focused on the work they do best within fulfilment," she reveals. 

"We're refining how we use our buildings so we can deliver as fast and cost effectively as possible while reducing complexity for stores where needed."

The strategy acknowledges a fundamental truth: not all stores are created equal and forcing uniformity can compromise operational efficiency and customer experience. 

It is an approach that considers multiple variables: store size, backroom capacity, foot traffic patterns, proximity to other fulfilment assets and seasonal demand fluctuations. A store near a university campus, for example, might reduce shipping operations during the back-to-college rush to protect the in-store experience when foot traffic peaks. Conversely, stores with larger backrooms and lower walk-in traffic can concentrate more shipping volume.

"For some stores, this will mean taking on more shipping volume; for other stores, it will mean less or none," Gretchen notes. "We'll also shift volume from certain stores to nearby fulfilment centres." 

Crucially, stores with reduced shipping responsibilities can reinvest that capacity into enhancing the walk-in guest experience or accelerating same-day services like Drive Up and Order Pickup.

Technology drives intelligent routing

Behind Target's expanding delivery capabilities lies sophisticated technology that makes split-second decisions about order fulfilment. Real-time signals – including inventory locations, staffing levels and cost structures – guide the system in assigning each order to the optimal building.

The company's 11 sortation centres play a crucial role, batching orders packed from stores for delivery through Shipt, Target's owned platform operating as Target Last Mile Delivery (TLMD), or through third-party carriers, selecting whichever option costs less. Partnerships with national carriers and an expanded programme with Shipt drivers who pick up directly from stores provide additional flexibility.

Advanced routing and forecasting technology has enabled Target to extend order cutoff times significantly. The majority of next-day delivery markets now have an "order by" time of 3pm local time or later, with several extending to 6pm. 

"Since we know many digital guests shop later in the day, giving them this additional time to purchase leads to more next-day deliveries we're able to do," continues Gretchen. 

The technology even uses geolocation tools for multi-unit destinations like apartment buildings, ensuring packages reach the exact drop-off point rather than a general building entrance.

Chicago: The proving ground

Before rolling out its refined strategy nationally, Target conducted an intensive pilot in Chicago, beginning in May. The market offered ideal conditions for stress-testing the approach: high customer density, dozens of stores, two fulfilment centres and two sortation centres.

The operational changes were substantial. Target concentrated a higher percentage of shipping volume into six stores, removed shipping capabilities from 18 stores entirely and increased the volume processed through fulfilment centres. The transformation was rolled out in weeks – a remarkable feat given the complexity.

The results validated Gretchen's thesis. Chicago became almost a full day faster with shipping and could offer next-day delivery on five times more local shipping demand. Promise speed improvements drove immediate incremental sales gains in categories like baby products and household cleaning. 

Perhaps most impressively, local fulfilment cost per unit dropped significantly, making Chicago one of Target's least expensive shipping markets across the entire network.

"That increase of promise speed is leading to incremental sales gains, which we saw almost immediately in certain categories like baby and household cleaning," says Gretchen.

"Local fulfilment cost per unit is also significantly lower than before the test and Chicago has become one of our least expensive shipping markets across the network – proving that we can be faster for our guests and cheaper for our business at the same time."

The benefits extended beyond pure logistics metrics. Stores that exited shipping operations consistently beat sales forecasts throughout the summer months and team members prepared Pickup and Drive Up orders at quicker rates.

This served as evidence that operational simplification improves both commercial performance and employee efficiency.

Profitable digital growth

Gretchen is emphatic that Target's digital business remains profitable even as it scales – a distinction in an industry where many retailers struggle with the economics of online fulfilment. 

"Our digital business is profitable and, as digital demand continues to rise, our supply chain needs to keep enabling that growth in ways that are good for Target's bottom line," she states.

The momentum is undeniable. Same-day services have delivered year-over-year growth every quarter for nearly a decade. 

This past quarter, Target fulfilled almost 80% of all online orders within one day via same-day services and approximately 80% of same-day deliveries arrived within three hours or less.

Rolling out nationwide

Emboldened by Chicago's success, Target is now deploying elements of the strategy across the country, tailoring the approach market by market.

The organisation is concentrating shipping operations within select stores in 10 other markets while transitioning shipping out of stores across 36 markets.

"We're turning on and off capabilities based on local demand and needs," Gretchen adds. "This includes how we've been activating and expanding next-day delivery throughout this year and next.”

The strategy represents a maturation of the stores-as-hubs model, rather than an abandonment. Stores will continue to fulfil the majority of online orders, but which stores handle shipping will be determined by local context rather than corporate mandate. Here, supply chain management becomes a precision instrument, as opposed to blunt tool. 

For Gretchen and her team, the mission remains constant even as methods evolve: "Delivering joy on time, every time." 

In an industry where speed and cost have traditionally been opposing forces, Target is demonstrating it can be complementary – provided you are willing to treat your network with the sophistication it deserves.