At 10:30 one recent morning, a few dozen cars pulled into the garage at Target's sortation center in northeast Minneapolis, and a countdown clock started.

Drivers scanned in, then waited for boxes to be carted to each vehicle. With the clock ticking down from 30 minutes, some drivers sprawled on the floor to arrange boxes, then stuffed them into trunks and seats. The scene repeats more than a dozen times a day as Target tries to get orders out faster and cheaper.

"If you are closer to the guest, you lower the shipping costs," said John Mulligan, chief operating officer for Target, in an interview. "And now we are taking that to its next evolution, and that is the sort center, where we can sort in a more granular level."

For years, Target relied on workers in its 1,900 stores to fill the orders it gets on its website and apps. But in October 2020, after digital orders soared during the height of pandemic lockdowns, the company opened this sortation center to test a new way to operate. With it, the company found that it could lower its average unit fulfillment cost by nearly a third.

Now, Target has six sortation centers across the country. And it announced three more this week: two in Chicago and one in Denver. The company also gave its first behind-the-scenes look at the Minneapolis sortation center.

Digital orders account for 18% of Target's overall sales. More than 95% of Target's digital and store orders are fulfilled by the store, but sortation centers will make that process a lot easier and cheaper for several metro areas.

At first, the Minneapolis sortation center only served 12 stores in the Twin Cities metro and delivered 600 packages a day. Now, it handles orders and goods from all 43 metro area stores and has the capacity to deliver 50,000 packages a day.

Packages arrive on pallets from stores and are put on belts where staffers look for a code to determine how far they must go. Packages going a short distance are routed overnight and delivered by drivers from Shipt, the delivery service Target owns. Those going farther out will be delivered by a third-party carrier, such as the U.S. Postal Service.

Shipt drivers use their own vehicles and are allowed to see their routes before they agree to take them. Shipt driver Lloyd Abrahams normally takes three or four routes per workday.

"It allows me the freedom of choosing the routes," Abrahams said.

How Target's sortation centers work

Some Target online orders are being organized and shipped from sortation centers instead of directly from stores. The packages are sorted by ZIP code, with close-in deliveries handled by Shipt drivers and farther-away ones handled by the postal service or others.
Image shows a four-step process where the customer places an order, it is packed, goes through the Sortation Center and to Shipt drivers before arriving at a home.
1. Store After a customer places an online order, Target employees pick and pack the items to be shipped. Instead of employees in the backroom sorting the order by carrier and location, the items are picked up by trucks and transported to a local sortation center.
2. Sortation center Using codes, packages are divided into Target last-mile orders for Shipt drivers and other deliveries for carrier partners. At night, orders are routed to provide the most efficient way for a Shipt driver to deliver them to each neighborhood.
3. Shipt drivers Shipt drivers using their own cars arrive at the sortation center to pick up the orders for their routes. These dispatches happen several times a day.
4. Home delivery Packages arrive at customers' doorsteps.
Source: Target • By Mark Boswell, Star Tribune

Target's sortation center continues to evolve. The company tests different layouts of its pickup garage. In the past few weeks, Target has also begun to test its first commercial van for a Shipt driver, which would take the place of their own personal vehicle. The vans can hold up to eight times more packages than stuffed-to-the-ceiling back seats.

It is also likely in the future that more automation could be added to sortation facilities to make them more productive.

Store managers say the sortation center model saves time for their workers and space in their backrooms, which fill up during the holidays and beginnings of new seasons.

For example, workers at the Target store in Edina used to have to get creative to store enough goods for shoppers who visited the store and those nearby who sought delivery or pickup.

Popular products for online pickup — such as food, health and beauty, cleaning supplies and paper goods — are now picked from the backroom first before workers search for them on the store floor. Last summer, the Edina store added a walk-in cooler to handle an increase of fresh food orders.

Space in the receiving area has also been better utilized because, instead of workers having to sort packages for each carrier to pick up and deliver from the store, that work is done at the Minneapolis sortation center.

Target staffers at the Edina location need only pick products from the backroom or store shelves, possibly prep them by wrapping them in plastic and then pack them to go to the center to be sorted.

Target, which has reported it is dealing with an unusually high backlog of inventory, has also tried to save space in its backrooms by storing some of its overflow inventory in rented spaces near ports and distribution centers.