Target has opened an upstream warehouse in Houston aimed at adding storage capacity earlier in the supply chain for select imported goods.

The mass merchant debuted its first “receive center” on Wednesday, a 1.2-million-square-foot facility that takes product shipments directly from Target’s global vendors and holds them until they are needed downstream.

The location, which cost $265 million to build, is designed to replenish inventory based on consumer demand to prevent distribution centers and store backrooms from getting overcrowded.

The receive center will service six regional distribution centers and one flow center.

Target says the expanded capacity is most beneficial for items that are seasonal, bulky, challenging to forecast or have long lead times.

With the facility, Target says it can secure popular items earlier on from vendors, like trending toys for the holiday season, ensuring that the company offers a relevant assortment based on demand.

When Target needs to move goods to the distribution centers, the mass merchant will either load full pallets directly into outbound trailers or run products through a sortation system before they are brought into the trailers.

The receive center was built in Houston since it is a centralized U.S. location designed to complement the mass merchant’s import warehouses in Georgia and Washington, which handle ocean-borne containers entering the U.S. through the Ports of Savannah, Seattle and Tacoma. Those buildings play a similar role in the supply chain as the Houston warehouse, supporting its nationwide network of distribution centers,

The Texas site complements those coastal facilities by adding regionally based capacity, cutting distances traveled so products can get to the right distribution center faster, and at a lower cost.

Executives from the Minneapolis-based retailer joined workers at the Target warehouse Wednesday for a ribbon-cutting ceremony and to send off its first fully loaded truck, bound for one of the regional distribution centers.

Target supply chain teams designed the warehouse using 3D visualization and simulation technology at the retailer’s XR Experience Center in Minneapolis, which serves as the testing ground for store and supply chain layouts.

“We’ve leveraged this technology over the past several years to design and remodel properties, but this was the first time it was used end to end in the design process to create an informative and influential 3D digital model of the facility before construction began,” the company said in its announcement. “This allowed teams to pressure test layouts, processes, and operational flow in a virtual environment to ensure maximum confidence in what was ultimately built on the ground.”

According to Lisa Sizemore, Target’s director of supply chain design and implementation, said the team designed two independent line sorters for the location that take up a smaller amount of space than a typical automated sortation system seen in the retailer’s logistics network.

The design saved nearly $700,000 in construction costs, she said.

“We wanted to minimize its footprint but maximize its capabilities. We started with a design that used a divert arm to shift cartons to the correct lane, but it raised concerns around inventory quality, jam potential and maintenance access,” Sizemore said. “The team took that feedback and came up with an alternate design, using simulation to confirm it would address those concerns while still meeting throughput requirements”.

Since starting inbound operations at the Houston receive center, the team has applied data from the ramp-up period and either vetted or updated it or for future location design.

“By using data obtained from the physical system back into the models, we can calibrate these models and make them more accurate over time,” said Jordan Kirkland, a senior director of distribution at Target. “As we open future facilities, we have that intelligence to reference and then have that next site be even better.”

Target says the receive center will host 185 new jobs, adding to the more than 6,300 Target employees who already work at the company’s 40 stores and sortation center in the area.

The upstream fulfillment center is one example of Target’s recent push to grow its supply chain footprint and cut delivery times. The company currently has 11 sortation centers operating across the country, up from just three in 2022. As part of a $100 million project, Target plans to increase that number to 15 by the end of 2026.

In the fourth quarter, same-day deliveries at Target jumped 30 percent annually, a year after those shipments saw a more than 25 percent increase. This spring, the retailer is next-day delivery capabilities to 20 new U.S. metro areas.