Gap Inc.

Gap Inc. showed its ability to evolve and rise from disaster at its facility in Fishkill, N.Y.

By Alan Dorich, Senior Editor at Knighthouse Publishing

After nearly 50 years, Gap Inc. thrives by constantly recognizing the need for change in its industry. This value goes back to co-founder Don Fisher, who instilled it in the company early on, Executive Vice President of Global Supply Chain and Product Operations Shawn Curran says.

“He used to say, ‘Change or fail,’” Curran recalls, adding that Fisher’s  quote is displayed across Gap Inc.’s locations and continues to epitomize its culture. “We want to constantly evolve and challenge our thinking.”

Fisher co-founded the fashion retailer and namesake brand with his wife, Doris, in 1969. At the time, “Don Fisher suffered a bad shopping experience. The pants he had bought from a Levi showroom didn’t fit, and department stores were unable to exchange them for the right size. He and Doris set out to create a store that was always in stock for customers, where they could always be sure to find jeans that were in their size,” Curran says. The two initially grew the company selling Levi products.

But in the 1970s, Gap Inc. began selling its own private-label product and opened specialty apparel stores. Over the years, the company acquired multiple brands, including Banana Republic, which it evolved from a travel and safari clothing line to modern luxury apparel.

Today, Gap Inc. has 3,100 locations and six brands, which also include American fashion brand Old Navy, Athleta, its performance apparel brand for women and its newest brand, Hill City, a premium performance lifestyle brand for men. “We source in over 30 countries and we ship to over 50 across many channels,” Curran says, noting that these include brick and mortar, e-commerce and franchise locations.

“It’s really exciting to think about the journey we’ve been on,” he says. “We are continually looking to improve and pride ourselves in fostering a test and learn culture that pushes teams to innovative and quickly scale new, breakthrough solutions.”

Well Prepared

One incident that tested Gap Inc.’s ability to respond to a challenge was the fire at its Northern Distribution Center (NDC) in Fishkill, N.Y., in August 2016. At the time, Curran was in the process of launching the vision for the company’s new fulfillment network, which is known at the company as “Cross-Channel Logistics Optimization.”

After surveying the competitive landscape, Gap Inc. “developed a blueprint for the network for the future,” he explains. “We were ahead of the curve in what was going to be a significant increase in online demand.”

The company developed a new network design that would transform existing retail distribution centers from single-channel operations to cross-channel fulfillment operations.  The redesign was enabled with new processes and technology that would allow Gap Inc. to respond to both retail and online orders with the necessary speed and agility. “We were probably about two years ahead of the demand that was coming at us and feeling really well positioned,” Curran says.

In fact, the Fishkill location was one of the first that was implementing the Cross-Channel initiative. But that process was interrupted on Aug. 29, 2016, when Curran received a call from Vice President of Logistics Jim Young telling him that the NDC had caught fire.

“You can imagine getting a call like that from a colleague and the anxiousness it builds,” Curran admits. Fortunately, both men were well prepared for such a disaster.

The two had participated in the company’s business continuity planning exercises many times over the years. “At that moment in time, it all came flooding back and we sprung into action,” Curran says, adding that Young  took immediate action to ensure emergency activities were being well coordinated.

Curran asked Young to make sure all the employees were accounted for. But it did not take long for him to respond. “Jim called me back within minutes and said, ‘Everyone’s been accounted for,’” he recalls, noting that the company had performed three double counts, ensuring all were safe. “Everyone knew what to do.”

Against Adversity

The fire at the NDC represented a significant loss for Gap Inc. “It’s in the heart of the Northeast, which is a huge market for us,” Curran says. “It serves approximately 40 percent of our North America market.”

But the company’s CEO, Art Peck, provided Curran with the support he needed to help the company recover. “Art said, ‘Let me know what you need and how I can help,’” he recalls.

Peck also immediately addressed Curran’s concerns about supporting the Fishkill team, recognizing that the facility was down and employees would come in the next morning scared about their future. “Art said, ‘Don’t worry about it,’” he recalls. “‘Tell them they will continued to be paid while we rebuild. The last thing I want is people to worry about their family.’”

This impressed Curran, who notes that Gap Inc. has taken similar approaches when its locations have been affected by hurricanes. “That’s just who we are as a company,” he says. “I’m really proud of that and how we show up against adversity, always putting our employees first.”

Gap Inc. implemented its business continuity plan immediately, with Young as its leader on the ground in Fishkill, and Kevin Kuntz, senior vice president of global logistics fulfillment, overseeing the rest of the network. Curran also led his team to re-pivot its operations in the United States. For example, “We took all of those stores that were being served out of our Northeast Distribution Center and pivoted them to be served out of our Nashville Distribution Campus,” he recalls.

The company also simultaneously shifted stores in the Midwest and South to be serviced out of its Fresno, Calif., Distribution Campus. “Simply put, we rebalanced the country leveraging our network of regional distribution centers,” Curran says.

Its Old Navy Distribution Center (ODC), also located in Fishkill, strictly serviced Old Navy stores, but was reconfigured to handle a portion of Gap Inc.’s online volume. “The challenge I gave them was that I needed a pop-up operation that could do 150,000 units per day in 10 weeks,” he recalls.

The pop-up operation accomplished that feat by using disassembled equipment from Gap Inc.’s other distribution centers in North America and Canada. The operation was powered by existing associates, as well as hundreds of new hires.

In the face of an enormous challenge, this achievement better prepared the company for the holiday peak that was approaching in the coming months. However, “You don’t do something like that without tremendous laser focus, innovation and collaboration,” he asserts.

Gap Inc. also received help from industry partners during its recovery, as well as competitors who wanted to lend a hand. “They said, ‘I can only imagine what it is like to go through such a horrible event like this,’” Curran recalls.

In fact, UPS offered the services of its head of real estate to help Gap Inc. find new space if needed. “I just can’t speak highly enough about how the industry came together in a way that was not towards any commercial benefit, but to help a valued partner to recover from the tremendous adversity,” he says.

Open for Business

Since the fire two years ago, Gap Inc. has rebuilt and reopened the NDC in Fishkill. In fact, the facility recently celebrated two years of operation and this year will mark its first peak holiday season in the updated facility.

But the facility, which spans a million square feet, did not reopen without some structural changes. While one portion that survived the fire was refurbished, the other side was scrapped “down to the pad,” Curran says. “We designed it in a way incorporating new technology and processes to better enable cross-channel fulfillment.”

Gap Inc. continued converting the NDC to a cross-channel facility, which has led to changes in the way its employees work. Sometimes, Curran notes, these conversions can be more complicated than they initially seem. “The ability to train team members to nimbly move from one facility and specialized operation to another is not typically an everyday operating practice,” he admits.

This required the company to take two important steps, which included first designing and implementing the new cross channel fulfillment design enabling flexible processing between online and store orders. “A lot of retailers are in the early days of learning how to best integrate their online and retail store fulfillment operations,” Curran says.

Second, Curran said, “We needed to change how we worked ensuring employees were trained and incentivized to more seamlessly work across buildings and functions within our campus operations. Our leaders also had to evolve and become experts in facilitating change.

“When you put these together, you have to take down these invisible walls and barriers that are there,” he says. “You have to break them down and you have to do it by teaching and incentivizing your employees.”

This helped make a greater impact on customer service, and its employees felt even more motivated to assist after the fire at the Fishkill facility. “Our 8,000 employees said, ‘How can we help?’” he recalls proudly. “It’s part of the DNA at the company.”

The location added new technologies that it did not have before, including an automated storage and retrieval system and bomb bay sorters. This has significantly helped boost shipping throughput, as it eliminates the needs for workers to walk far distances to process orders.

Gap Inc. has not only added automation and omni-channel operations to its location in Fishkill, but also to its facilities in Gallatin and Fresno, allowing them to provide more online service. Both campuses feature  a fleet of robotic putwalls, known as Kindred SORTs,  which use artificial intelligence and camera systems to look at items and complete orders. “The system uses learning algorithms to learn how to pick up items and deposit merchandise into a cubby, which represents an individual order to be packed out,” Curran says.

The Cross-Channel initiative has allowed Curran to shrink Gap Inc.’s physical distribution footprint, while significantly increasing capacity. While Gap Inc. originally operated 19 distribution centers globally, they now have 14 distribution centers in total – four of which have been transformed into omni-channel operations. Others will follow suit in phases.

But Curran says none of this would have been possible without Gap Inc.’s team. “All of your team members need to be 100 percent committed and laser focused,” he says. “For some companies, it would take many years [to accomplish this].”

Passion for Problems

A longtime veteran of Gap Inc., Curran recently celebrated his 30-year anniversary with the company. Previously, Curran had worked as a manufacturing engineer for Texas Instruments.

As he worked in the high-tech field, “I learned that I had a passion for solving complex problems, but doing it with people,” he recalls, noting that he initially explored a career in industrial engineering with Banana Republic.

When he discovered the company was opening a new distribution center in Erlanger, Ky., “I did some research and decided to apply,” he explains, adding that he later took an operations role at the advice of a mentor.

“I went and worked in operations and never looked back,” Curran says, noting that he also oversees Gap Inc.’s global transportation functions today. “We have a control tower capability where we coordinate all of our inbound and outbound transportation movements.”

Currently, Gap Inc. has 400 vendor locations and coordinates all the inbound movement of freight from origin to destinations through one single team. The company also focuses on leveraging the scale of its brands by consolidating all of the cartons from its different brands into containers.

Curran notes, “We’re highly coordinated, tracking all product real time as it moves from origin to distribution centers.”

Curran takes pride in Gap Inc.’s culture, which continues to follow the ethics of the Fishers. “This company has always stayed true to its values, even in the most difficult of times,” he says. “The unwavering way we show up every day and how we do what we do is so important here at Gap Inc.”

Not only has the company prided itself on serving its customers well, but it also helps its employees achieve their dreams. “I wouldn’t be here 30 years if that wasn’t the case,” he says, adding that he personally mentors many employees throughout the organization.

“It’s really about helping individuals understand what it is they want and conquering barriers that are in their way,” Curran explains. “The environment here is about all of that.”

Shaping the Future

Curran sees a strong future for Gap Inc., which will continue reshaping the way it does business. “We’re continuing to see the need for companies to embrace change, and to test, fail, learn quickly and learn to change at scale,” he says.

For example, he says, companies used to be focused in finding the lowest cost countries to source products. But, as costs increase across the globe and unemployment rates shrink in the United States, Gap Inc. will need to look at more ways to use both automation and its talented partners and workforce to respond to demand.

The company also will need to train employees to work alongside robotics. “That’s exciting in terms of teaching new skills and pivoting our workforce to adapt to where the industry is headed,” he says.

SIDEBAR – Making it Easy

Gap Inc.’s automated storage and retrieval system (ASRS) has provided massive advantages to its NDC in Fishkill, N.Y. In a Gap Inc. video about the Fishkill campus, Vice President of Logistics Jim Young explains that the location’s ASRS system holds 215,000 cases and services both retail and online business.

The system also has 19 levels with rows that are about 300 feet long, and approximately 300 shuttles “that are operating at any given time,” he said, adding that it uses electronic eyes and scanners to know where parcels are in the system.

The bomb bay sorter, he notes in the video, operates by bringing cases in that are scanned by associates,  and lets them know how many units are needed for each case. “The heavy lifting has been eliminated, but we still need to invest in people to keep this thing running,” he added.

Operations Supervisor of Online Anthony Martel explains in the video that the NDC still has the same number of associates, but has reassigned them to processes that are more efficient for a single person to complete. Instead of having a person walk 50 miles in a factory to complete tasks, “You’re in one place and you’re efficient,” he said. “There’s no stopping us. The sky’s the limit.”

Although some employees were skeptical about the additions, their minds changed when they saw how they would be needed to manage the machines. “If you work Supply Chain Gap, even at the associate level, you’re working with technologies that very few companies have,” Young said in the video.

“We are hiring a lot,” he added. “The ability for us to add the technology and continue to hire is very unusual. To see the shift followed by Gap’s ability to respond effectively to that and be able to support this very, very large business is awesome to be involved with.”

SIDEBAR – Most Wonderful Time of Year

The holidays are always a busy time for retailers, but a recent Gap Inc. report showed that this year’s Black Friday and Cyber Monday were some of the busiest shopping days of the year. At 1 p.m. eastern time on Black Friday and 9 p.m. eastern time on Cyber Monday, Gap Inc. experienced its highest online traffic.

In addition, the company’s Black Friday shopping on its mobile app doubled compared to the numbers it saw in 2017. Cyber Monday also saw the highest “Buy Online, Pick Up In-Store” orders per day ever for Gap Inc. The company also shipped nearly half a million packages per day on Black Friday, as well as on the Saturday and Sunday that followed.

Holiday hiring also has been strong for the company. Gap Inc. saw 65,000 jobs open in its stores, distribution centers and contact centers. While December has yet to end, it looks like a very happy holiday season for the company.

SIDEBAR – Wardrobe of Favorites

Founded in 1978, Banana Republic specializes in providing global apparel and accessories. “Curious, connected and out in the world, Banana Republic provides a wardrobe of favorites — clothing, eyewear, jewelry, shoes, handbags and fragrances — all made for a life in motion with the finest materials and fabric innovations,” the Gap Inc.  website states.

The company’s Old Navy brand also specializes in offering “wardrobe must-haves” at affordable prices, ranging from t-shirts and jeans to seasonal fashion favorites. “[Old Navy makes] current fashion essentials accessible for every family,” the website states. “As one of the largest apparel brands in the world, we offer customers fabulous fashion online as well in our 1,000-plus stores around the world.”

Gap Inc.’s Athleta specializes in being a premium fitness and lifestyle brand for women. “Designed for — and by — women athletes and active women, we integrate performance and technical features across our collection to carry a woman throughout her life in motion,” the Athleta website states.

“At Athleta, our mission is to ignite a community of active, healthy confident women and girls who empower each other to reach their limitless potential,” the site says. “We believe alone we are strong, but united we thrive; bringing this to life through the Power of She campaign.”

SIDEBAR – Sought-After Selections

Gap Inc.’s brands also include INTERMIX, which provides “the most sought-after styles from an edited selection of coveted designers,” the website states. “We’re known for mixing on-trend pieces in unexpected ways while delivering a unique point of view and personal approach to shopping and styling.”

INTERMIX offers a curated range of rising and known designers and seasonal fashions. “Each boutique’s assortment is hand-selected to reflect the nuances of its neighborhood and the lifestyles of our clients,” the site says. “Within our intimate shopping environment, personal stylists offer one-on-one attention to create the most compelling looks.”

Gap Inc. also recently launched Hill City, which is a high-performance men’s apparel brand that provides technical clothing. “Launched in 2018, the product line fuses a clean aesthetic with hidden technical innovation that is felt, rather than seen, allowing men to focus on purchasing fewer, more versatile pieces,” the company says in a recent release.

“Incubated alongside the highly successful Athleta business, Hill City has been designated a B Corp certified brand by integrating sustainability throughout many of its products, using high-quality renewable, recycled fibers to create performance fabrics,” the release states.

SIDEBAR – A Force for Good

Hill City’s sustainable products reflect Gap Inc.’s own corporate focus on global sustainability. “At Gap Inc., we are guided by the belief that business can and should be a force for good,” CEO Art Peck said in the CEO letter on the Gap Inc. Global Sustainability website.

“Doing what’s right — supporting fair treatment and dialogue between garment workers and factory management, tackling climate change and fostering an inclusive workplace where everyone is welcome — is a competitive advantage,” he said. “Our business succeeds when everyone is given a chance to thrive.”

According to Peck, Gap Inc. reached several milestones in 2017. Its fastest growing brand, Athleta, achieved B Corp-certification in recognition of its commitment to protecting the planet and empowering women girls to reach their potential.

Additionally, “Three of our largest brands have partnered with the Boys & Girls Club of America to scale our on-the-job training program, This Way Ahead, because we understand the transformative power of a first job and the value that comes from hiring a more diverse and engaged workforce,” he said in the letter.

Gap Inc. also made a commitment at the enterprise level to conserve 10 billion liters of water by the end of 2020 through improved manufacturing practices. “Thanks to new ways, we’re working with our partners and a revised goals, [and] we’re also setting our sights on ultimately reaching many more than 1 million women through our decade-long life-skills P.A.C.E. program,” Peck said.

But Peck noted that a single company cannot solve all the challenges Gap Inc. faces, so it is evolving existing and building new partnerships. Last year, it announced a public-private partnership with the U.S. Agency for International Develop to promote solutions for women and water in communities touched by its supply chain in India.

“Earlier this year, we also joined forces with the Ellen MacArthur Foundation and other reading apparel brands, to help create a more circular future for apparel design and manufacturing,” he added in the letter.

“The global apparel industry must do more to protect the environment and workers who manufacture our products,” Peck continued. “The challenges are complex, but we will continue to do our part.”

Moving forward, Gap Inc. plans to shift to an annual sustainability reporting schedule to provide a more frequent assessment of how it is performing against its 2020 goals. “We started this work more than 20 years ago, and we understand the agency in the task before us,” he said in the letter.