Target centralizes last mile with sorting centers

The outside of a Target retail store

Written by James Shea

Logistics is a huge challenge for restaurants and retailers, but Target is developing a centralized system with its delivery partner Shipt.

The retailer has opened a sorting center in Minneapolis, Minn. where the company is headquartered. Under the pilot project, a truck picks up delivery packages at all the stores in the region. The packages are sorted by zip code and allocated to specific delivery drivers, reducing the overall miles needed to deliver packages.

“The stores-as-hub model is really centered around this assumption that we can use the store in a guest’s local community to fill all their needs,” said Sara Thomas, vice president of global supply chain & logistics at Target. “So, in our backrooms, we have team members that are continuously processing digital orders.”

When the store receives a digital order, an employee fulfills the order and packs the box. The separating of the package by route takes place at the sorting center. The goal is to reduce the time required to pack each box and thus increasing the amount of time that employees can spend filling orders.

“So the store just focuses on the picking and the packing,” said Rebecca Swartz, director of global supply chain & logistics at Target. “Then we’re able to have a Target-controlled truck going to multiple different stores multiple times per day and bring them to the sortation center.”

The move changes the role of the Shipt driver. Previously, Shipt drivers fulfilled and delivered the order. Now, Shipt contract drivers are only responsible for delivery.

For the project, Target is using technology obtained through the acquisitions of Grand Junction in 2017 and Deliv last year. Grand Junction developed software that helps companies manages local delivery operations, and Deliv specialized in routing and batching last-mile delivery.

“The magic happens when we’re able to sort the packages to an individual route that can be passed on to a driver-partner for immediate delivery down to that neighborhood level,” Schwartz said. “That enables us to get packages to guests faster and in fewer physical deliveries with all of your packages arriving at the same time.”

The move comes at a time as online orders have become more important to Target. Digital sales grew 145 percent in the fourth quarter of 2020 when compared to the previous year.

Target plans to open five of the sorting centers over the next year and wants to expand the idea nationally. The company sees efficient last-mile delivery as a way to increase profits through online sales. There are added costs of picking, packing and delivering an order, but consumers have shown they want the services.

“(The process) means fewer touches, less time, and ultimately lower costs across the board,” Thomas said.

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