In 1871, the Great Chicago Fire offered an opportunity to rebuild and plan a city that was safer and more efficient than before. Chicago — APICS’s hometown — was reborn and subsequently experienced a building and population boom as the area was cleared and recreated. On a smaller scale, Gap Inc. experienced its own phoenix moment in 2016 when its largest distribution center was partially burned down. This gave the company an opportunity to rethink business and innovation in its facility and operations, Fast Company reports.
On the evening of August 29, 2016, Gap’s Fishkill, N.Y., distribution center caught fire. Fortunately, nobody was hurt. However, a half-million square feet were lost, and another half-million sustained smoke damage. The fire also destroyed much of the company’s merchandise right before the busy holiday shopping season. As Gap supply chain leaders set to work rebuilding the facility and figuring out how to fulfill orders, a wave of innovation swept through the company, according to Fast Company staff writer Elizabeth Segran. “On the fly, managers … were forced to invent more efficient ways of running the business,” she writes. “The company quickly piloted more powerful technology that would speed up operations and make up for the lost productivity, and then implemented this new machinery in other distribution centers.”
One solution managers crafted to compensate for the lost space was a pop-up packing facility. Within six weeks, Jim Young, regional general manager at the destroyed distribution center, converted one of the facility’s intact storage units into a place where workers could manually pick products from makeshift racks and pack the items for shipment. Because it was a rudimentary system, the company needed four times as many workers to fulfill orders than if a machine were involved, Young explains in the article. During peak periods, these workers could only pack 125,000 units per day, a fraction of the 300,000 units that the facility previously churned out before the fire. Still, some productivity is better than none. Meanwhile, other warehouses across North America increased their capacity.
As the distribution center got back on its feet, supply chain leaders used the opportunity to update the facility’s technology. Young notes that the company likely would have continued using its late-1990s technology if there had been no fire. “There’s not a great business case for tearing down a perfectly good sorting machine … for a new one that can pick up a few more units per hour,” he is quoted as saying in the article. In one upgrade, Young replaced a damaged tilt-tray machine, which had a 98 percent accuracy rate, with a Bombay sorter that has a 99.9 percent accuracy rate. Although a 1.8 percentage point difference may not seem like much, it actually helps the company avoid thousands of returns.
The Fishkill facility became an incubator for warehouse and distribution technology. When one upgrade proved helpful, it was rolled out to other facilities to optimize the entire company. At the corporate level, CEO Art Peck used the opportunity to better align Gap’s e-commerce and retail businesses. Because the company started as a brick-and-mortar business, the e-commerce vertical was set up separately when the online shopping boom transpired. The distribution center fire offered an opportunity to integrate in-store and e-commerce inventories and software and create a more seamless shopping experience across platforms. “I want all demand, wherever the customer is starting [his or] her shopping experience, to be connected with all supply,” Peck says in the article. “This is the foundation for being able to do that. It’s also obviously more automated, and we’re looking at some [artificial intelligence] and computer vision solutions.”
Two years later, Gap not only survived the fire, but also recovered from the sales slump it had been experiencing before the disaster. During the 2017 holiday shopping season, the company’s fourth-quarter sales grew 7.9 percent while other big retailers experienced flat holiday sales. In addition, Gap now can distribute a higher volume of clothes to customers more efficiently. When disaster struck, Gap supply chain leaders and workers viewed the opportunity as a clean slate and were invigorated to make the company better than it was before.
Find your own improvement opportunities
Ideally, no business would need to experience a disaster to prompt investment in operations and innovation advancements. Instead, companies should practice continuous improvement, which the APICS Dictionary defines as, “The act of making incremental, regular improvements and upgrades to a process or product in the search for excellence.”
APICS 2018, which will take place September 30-October 2 in Chicago, will be full of ideas and solutions to help spark your own improvement initiatives. Marc Randolph, cofounder and founding CEO of Netflix, will share his four decades of experience in creating successful start-ups and investing in lucrative tech ventures in his keynote speech. Presenters of educational sessions will help you overcome supply chain challenges such as managing disruptions, improving forecast models to better manage inventory, developing supply chain talent, enhancing operations through digital transformation and more. To learn more about APICS 2018 or to register, visit apicsconference.org.