Dive Brief:
- Target leverages data science to help improve on-shelf availability, reduce inventory levels and create operating efficiencies, according to Paritosh Desai, SVP and chief data and analytics officer, speaking at The AI Summit in New York last week.
- The company hosts 30 million shoppers per week at its 1,800 stores. "We're dealing with problems that are extremely large," said Desai. "And we're not just solving for today but for next week and next month."
- To solve its complex data science problem, leadership blends traditional data science methods with modern techniques like neural networks to improve performance of demand-forecasting models.
Dive Insight:
Winners in the retail market are putting data to work.
In the case of a national chain the size of Target, that means keeping tabs on an inventory of around 1 million products, then using data to ensure availability.
In 2017, Target began testing algorithms to increase fulfillment velocity in its supply chain. By the following year it saw its out-of-stock levels decrease 40% at a facility in Perth Amboy, New Jersey.
In its approach to modernization, Target has learned to lean on the physicality of retail to achieve better results.
"A lot people have predicted that stores will not have a place in the future with online shopping and e-commerce taking over," Desai said. "What we say is that stores are our most important asset."
With 70% to 80% of Americans living within 10 miles of a Target store, the chain opted to rely on the stores as hubs to help fulfill digital demand. Services such as buy online, pick up in store (BOPIS) and Drive Up add complexity and scale to the math the data science team is solving for.
"When you have so many ways to fulfill demand, it's important to have the product in the right place at right time," Desai said.
With initial improvements proving valuable, the company is planning further efforts around distribution center automation and design, said John Mulligan, Target EVP and COO, during its Q3 2019 earnings call.
Correction: This article has been updated to clarify Target's out-of-stock levels decrease of 40% was in Perth Amboy, New Jersey.
