Dive Brief:
- Target is opening a sortation center in the Detroit area this month, the 11th in the company's network, CFO Michael Fiddelke said on an Aug. 21 earnings call.
- The facility with "a smaller-than-average footprint" is expected to serve more than 3 million customers in the market and process up to 60,000 packages daily by 2028, according to Fiddelke.
- The Detroit location will also receive volume from Target's Chicago sortation center, increasing the number of packages eligible for next-day delivery in the market, the CFO added. Overall, the retailer's sortation centers have helped boost the number of next-day deliveries by more than 150%.
Dive Insight:
Target's expanding sortation center footprint aims to ramp up delivery speeds while lowering costs, according to Fiddelke.
Compared to Target's network averages, local orders processed through a sortation center arrive more than a day faster, and per-unit delivery costs from a sortation center are about 20% lower. Opening a sortation center frees up processing space in the area stores it serves, as well.
"With all of these benefits, you can see why we're excited to continue expanding the reach of this capability," Fiddelke said.
Target's other sortation centers are located in Minnesota, Texas, Colorado, Illinois, Georgia, Florida and Pennsylvania, according to a company fact sheet about the facilities. In markets with sortation centers, the retailer brings packages from 30 to 40 local stores to the facility for sorting and delivery to homes.
"By removing the sorting and packing process from our store backrooms, we save valuable time and space for our store teams to fulfill additional orders and serve guests," Target said. "And because our sortation center technology presorts and arranges packages for easy pickup, it reduces processing time for our delivery partners."
The addition of Detroit advances Target's previously announced $100 million investment to grow its sortation center footprint to more than 15 facilities by the end of 2026.
The company is not shying away from further supply chain spending. Next year, it plans to start investing up to $5.5 billion annually "to deepen capabilities across the business, including our supply chain network," the company said in its fact sheet.
