Gap is investing in its online fulfillment and customer service centers to prepare for the holiday season, and using automation as a stop-gap to a nationwide labor crunch.
The retail has recently enacted an aggressive growth strategy with its Power Plan 2023: it will close 350 Gap and Banana Republic stores, move away from malls and build out its e-commerce, among other goals disclosed in the plan.
In order to build out its e-commerce business, Gap first is working to speed up its customer service and fulfillment operations by investing more in automation. This year, Gap invested $100 million in two online customer service and fulfillment centers in Phoenix, Arizona and Gallatin, Texas.
Some of the technology Gap has invested in to speed up the processing of orders includes Bombay Unit Sorters — conveyer systems that drop product into the appropriate chute — as well Kindred Orbs, robotic machinery with arms that grab and sort different products into bins.
Next year, Gap plans to invest more money to build another 850,000 square-foot e-commerce fulfillment center in Longview, Texas to support Old Navy, and update existing locations in Fresno, California and Fishkill, New York.
Modern Retail spoke with Gap’s svp of global logistics, Kevin Kuntz, about the company’s investment in logistics in preparation for the holiday season, and how it is leaning on automation to combat staffing shortages. This interview has been edited for length and clarity.
You invested $100 million recently to expand customer service and fulfillment centers in Phoenix and Texas, but I’m curious where those dollars were centered?
As part of Power Plan 2023…we want to meet our customers where they want to be. So we’ve made a lot of investments in our network in total, and more than tripled our online capacity over the last five years.
Phoenix was an existing online facility… and we’ve completely modernized that facility [and] brought it up to our standard online fulfillment suite, with all of the automation that we have in our other locations. We dropped in a Bombay Unit Sorter… and we’ve got Kindred Orbs in place. We’re more than doubling the throughput there, which we needed to for this holiday. So that was the big driver: continuing to stay up to speed, as far as our capacity needs, and being able to make faster promises to our customers.
In Gallatin when we took a retail facility [and expanded it to accommodate digital online sales fulfillment as well], because of some enhancements that we’ve made even years before that, we were able to tear down some old pick modules and drop in a whole new 500,000 orders per day online operation. So we’re now sharing space in a 1.4 million square foot retail center. It’s now retail and online.
Can you talk a bit about how your investments in automation, in particular, have served you? What has been working thus far and where do you hope to go next?
We made some early decisions seven or eight years ago to choose long-term strategic partners [to help with these processes]. And that decision has really been a very important one for us, especially through the last couple of years where there are supply chain disruptions and shortages of materials. But, because of the long term partnerships we’ve maintained with our material handling vendors, we’ve been able to continue to deliver our distribution centers on time and on budget.
The company TGW does all of our automated storage and retrieval systems [and] I believe, at this point, we’re their largest customer in the world. That’s a good thing because we’re important for them, they’re important for us and we work hard for each other to make sure we deliver all that on time. [The TGW logistics] are big because it helps us on our inbound side, as well as replenishment: machines are putting away and pulling cartons and that means I don’t need as many forklift drivers.
We’ve innovated more recently with Kindred Orbs and we see big improvements there… You used to have one person in every single station no, one person can cover four orbs and they’re basically just removing completely sorted orbs… Anytime that you adopt something early and it works out really well, you get a lot of advantages in that way.
More recently, we’ve got a very exciting new technology that we’re really looking forward to starting up here in the next 30 days, which is Exotec [automated returns unit handling] and that’s going to help us with all the online growth that the industry has experienced.
As supply chain issues spread across more companies and industries, do you feel like consumers are more in touch with fulfillment and supply chain processes? Are consumers changing their expectations and behaviors to accommodate online delays?
I feel like consumers are educated, they see what’s going on out there, they understand that we are an interconnected world today and everything’s not centered to one country… I think folks are learning to be more patient, they’re learning to plan a little bit earlier.
But I would say for Gap Inc., what’s really good for our customers is [that] we’ve been on a pretty long journey here to just to get better in the online space and be more competitive. So we’re delivering our products faster than ever — even through the Covid times — from the time of order to delivery to the customer’s home. So the investments we’ve made really paid off for us.
If you’re one of our loyalty members, we’re making promises at the top tier [to ship] in two to three days. Even in the second tier, you’re getting [your orders] in under five. Whereas [other companies] are going the opposite direction because of delays,.
Now, will that continue on holiday? Highly unlikely. We’re dependent on a lot of very important strategic partners that do a great job for us, but the total network capacity will come into play. But we’ve prepared ourselves the best that we can to get [product] through our facilities and out in the network.
How has Gap Inc. been affected by today’s labor crunch? Do you think your investments in automation will help to meet demand both now and during the holiday season?
I’d say we’re probably doing as well as anybody out there… Every single [customer service] location that we operate now [has a pay rate] well over $15 an hour up to $20-plus, if you’ve been here a while. And then the automation has really, really helped us.
Just as one example, before Kindred Orbs [we] used to have to have four people [on one process]. If you take those four people and run four shifts a week, then it’s really 16 people. Now I can do the same amount of work with four individuals across those shifts. So those advantages have really played a big part in our growth and capacity.