Target is redesigning its next-day delivery network
Target is the latest company to prioritize the next-day delivery model made popular by Amazon, announcing a $100 million investment Wednesday to expand its delivery capabilities, as the company appears to take on e-commerce giant Amazon and brick-and-mortar competitor Walmart.
The investment aims to expand the “supply chain sortation network,” in part by building six new sortation centers—facilities where orders that are packed in stores are sorted for local deliveries—by the end of 2026, Target said.
Last year, Target opened three new sortation centers in the greater Chicago and Denver areas, bringing its total to nine, including facilities in Minnesota, Texas, Georgia and Pennsylvania.
Target said it expects to create hundreds of new jobs with the expansion, but did not say where the new facilities would be located.
Target’s A Bullsevy View Press Release Below:
We’re Expanding Next-Day Delivery Capabilities, Bringing Speedier Delivery to Even More Guests
Target’s sortation centers take online orders that our team members prepare in the backrooms of our stores and sort them for quick, local delivery. And now we're scaling up our ability to deliver packages next day — in a big way.
We plan to invest $100 million to expand our flexible, best-in-class supply chain sortation network to more than 15 facilities by the end of 2026, bringing our next-day delivery capabilities to guests across major U.S. markets. Sortation centers and our Last Mile Delivery capabilities support our guest experience and benefit our business — helping us deliver more efficiently and faster, at a lower cost while increasing our capacity.
Target currently has nine sortation centers in Minnesota, Texas, Colorado, Illinois, Georgia and Pennsylvania, including our three most recent facilities in the greater Chicago and Denver metro areas. With this $100 million investment, we’re planning to build more than a half dozen additional facilities. As we grow our network, we anticipate creating hundreds of new jobs in local metro areas with market-leading wages.
And with each new sortation center, our local store team members can focus on what they do best: delivering an excellent shopping experience that brings joy to our guests.
Bigger, faster, better than before: These moves demonstrate the transformative power of our stores-as-hubs strategy, which leverages our store network as a launchpad for online orders. Sortation centers represent the next phase, ensuring faster delivery for guests, saving shipping costs and fueling our long-term growth.
“Now more than ever, our guests rely on us to deliver their everyday essentials and Target favorites when they want and need them most,” says Gretchen McCarthy, Target’s chief global supply chain & logistics officer. “Through our sortation centers and Target Last Mile Delivery capabilities, we’re able to move faster and with more precision — while controlling costs and expanding our network capacity — for years to come.”
Count the benefits
Target piloted its first sortation center in Minneapolis in 2020, sorting online orders efficiently and quickly for delivery to local neighborhoods by a third-party carrier or Shipt delivery route, depending on the lowest-cost carrier option.
Doire Perot, operations director for our Minneapolis sortation center, has seen firsthand how her team, the facility and its operations have evolved over that time.
“We learned that we had to operate differently,” says Doire. “This type of building, the type of next-day delivery capabilities that we can offer to our guests and team, it was going to take a different operating model across every team involved.”
But the why of the strategy has not changed, she says.
“There are three high-level goals that existed on day one and still hold true today: decreasing costs, increasing speed and increasing last-mile capacity,” says Doire. “Those three things are going to be the tune for the next several years as we continue bringing that vision to life.”
Looking at the results so far, it’s clear we are on the right track. Since our first sortation center opened, we have seen:
Getting up to speed
Sortation centers benefit guests and team members across the board.
For guests, it means getting your online purchase that much faster, making Target the easiest place to shop. Our sortation centers delivered 26 million packages to guests in 2022. Up to 40% of Target Last Mile Delivery orders with Shipt arrived at guests’ doorsteps the next day, and we expect to deliver more orders next day as we expand our network.
In partnership with Shipt, we’ve expanded options for drivers to take advantage of larger routes where they can use larger-capacity vehicles that can hold up to eight times more packages per route. We are testing these third-party partnership delivery vans in two of our sortation center markets and plan to roll them out to all markets in the next few years.
And for our store team members, sortation centers not only simplify fulfillment of online orders, but also make our operations stronger. Each sortation center team visits 30 to 40 local stores to pick up packages for delivery. With sortation logistics dedicated off site at our sortation centers, our stores have more room for picking and packing items for guest orders, says Richard Dean, store director for our store in Edina, Minnesota, which is supported by our Minneapolis sortation center.
It also boosts his team’s ability to pick and pack larger numbers of packages every year to serve guests.
“And that's what we're seeing — every year we continue to get better in the stores around the ability to execute,” Richard says. “Being able to simplify it within stores so that we can simply deliver on the guest needs is a huge win.”
Ultimately, our sortation centers and Target Last Mile delivery capabilities help us get guests the products they want, when they want them — unlocking yet another occasion to shop at the Bullseye.
