Target wants consumers to feel like they’re part of the company’s inner circle.
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The superstore chain announced during its Q2 2024 earnings call last week that it will open its 11th sortation center in the United States. Its existing sortation facilities pepper states like Colorado, Florida Georgia, Illinois, Pennsylvania and Texas, according to the company.
Michael Fiddelke, chief operating officer and chief financial officer of the company, said doing so will increase the company’s capabilities.
“This month, we’re opening our 11th sort center in the Detroit market, where it’s expected to serve more than 3 million consumers. By 2028, this facility is expected to process up to 60,000 packages daily while operating in a small-than-average footprint,” Fiddelke said on the call.
He noted that the company has been working to intermingle existing facilities—whether sortation centers, stores or otherwise—as it continues to expand its logistics capabilities.
“Beyond growth in the number of these facilities, our existing source centers continue to ramp up their capacity, and we’re finding new ways to integrate them into our broader network. For example, our recently opened sort center in Chicago will be feeding the Detroit sortation center, increasing the number of packages eligible for next-day delivery in that market. Altogether this year, our sortation centers have processed 19 percent more packages than a year ago,” he said.
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According to a fact sheet from the company, it plans to invest heavily in sortation, last-mile delivery and other supply chain capabilities; it will invest as much as $5.5 billion every year, starting in 2025. Though the company noted that it has plans to build several new facilities, it did not disclose where those facilities will be.
When the company opens a sortation center, it feeds packages from 30 to 40 stores in the regional area into the center. From there, the packages get sorted which then get sorted, put into batches and routed for delivery in the local area. Third-party carriers or Target’s own same-day delivery service, Shipt, then handle the distribution of the packages accordingly.
Though for many companies same-day or next-day shipping can prove a logistical hassle and come with increased costs, Target said its sortation center operations actually decrease both the average wait time for orders and the cost of shipping to the consumer.
“A critical aspect of this strategy is faster delivery speeds as local orders processed through a sortation center arrive more than a day faster than our network average. But notably, that increase in speed doesn’t require more dollars, as our unit delivery costs from a sort center are about 20 percent lower than our network average,” Fiddelke said.
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