Dive Brief:
- Target is increasing its use of larger delivery vehicles in markets served by its sortation centers, improving capacity and creating more efficient routes, executive vice president and COO John Mulligan said on an earnings call last week.
- For routes previously served by sedans, SUVs and minivans can deliver more than double the number of packages while the company's "high-capacity vans" are able to service nearly five times as many packages, Mulligan said. Target has been testing high-capacity van routes at Dallas and Minneapolis sortation centers.
- About 65% of Target's last mile deliveries served by its subsidiary Shipt were made with a larger vehicle in the first quarter, versus zero a year ago, Mulligan said. "This resulted in meaningful cost savings for our last mile delivery program overall," he added.
Dive Insight:
Leaning more on high-capacity vehicles is just one way Target's last mile delivery operations are evolving to more closely mirror parcel carriers' processes.
The retailer is also working on "a standardized, faster way to load those vans, enabling package containerization and easy identification of the correct packages at delivery," Mulligan said. This both simplifies the loading process for drivers and allows the company to safely move more Shipt drivers in and out of its sortation centers, boosting last mile delivery capacity.
These initiatives will help the company handle the growing number of packages flowing through its sortation centers in a more cost-effective manner. The company delivered 26 million packages via these centers in 2022, and it aims to roughly double that amount this year.
The opening of new sortation centers should also boost volumes. In February, the company announced a $100-million investment to expand its next-day delivery capabilities by adding more sortation centers. The company has nine of these centers today, Mulligan said on the May 17 call, and that number is expected to climb to more than 15 in 2026.
Target is working to maximize the next-day delivery capabilities of its sortation centers. It opened an "extension facility" this month in Smyrna, Georgia, that expands the company's reach in the Atlanta market, Mulligan said.
Online orders that fall outside of Target’s Atlanta sortation center can be transferred to the Smyrna facility, Mulligan said. Drivers can pick up those orders in Smryna and deliver them to additional neighborhoods.
"With the opening of this extension facility, our next day delivery capability is now reaching more than 3 million guests in the Atlanta market," Mulligan said.
