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Tour Gap Inc.’s ‘Gold Standard’ Distribution Center

Kevin Kuntz, Gap Inc.’s head of global logistics fulfillment, has spent 33 years with the company and has been with the company since he was a teenager.

The automated cranes glide in and out of the storage aisles with sheer precision, stopping suddenly to retrieve and store cases of product inside Gap Inc.’s new state-of-the art distribution center in Groveport, Ohio. The cranes move swiftly — up and down and from side to side — throughout the 40-foot floor-to-ceiling aisles.

Kevin Kuntz, Gap Inc.’s head of global logistics fulfillment, is walking the floor inside the distribution center and stops to watch the cranes work their magic. Manufactured and supplied by TGW Systems, there are 24 cranes in the building and they comprise the company’s sleek automated storage and retrieval system (ASRS) with 425,000 case-storage capacity.

“This is one of the most automated facilities in the world. As we build other facilities, this is the blueprint,” Kuntz says.

The distribution center was originally built in 1998, but the company spent about $100 million to expand and update it, and now it’s well over 1 million square feet. The facility, known as “OHO,” is entirely devoted to San Francisco-based Gap Inc.’s booming e-commerce business for its seven brands, including Gap, Old Navy, Banana Republic, Athleta, Intermix, Janie and Jack, and Hill City.

It’s a technological wonder. While all of Gap Inc.’s 14 distribution centers feature impressive technology, the OHO combines all the leading-edge systems into what Kuntz calls “the gold standard.”

In addition to the ASRS, which has improved floor space utilization, increased picking accuracy and reduced labor requirements (no need for forklifts), the OHO facility also features two EuroSort bombay unit sorters with stacked configuration. These sorters consist of a conveyor belt of trays that split open in the middle and drop down product into the appropriate chute. Having two sorters allows the facility to be flexible with capacity — there is the option to turn on one sorter to process 500,000 units a day or turn on both to process up to 1 million units a day during peak. Additionally, the twin sorters’ stacked configuration takes up less space. Also, if one sorter goes down or needs maintenance, the other can operate on its own.

Other technology includes the 40 Kindred AI SORT orbs, each using robotic arms to quickly and accurately sort batches of units destined for multiple online orders. The facility also features updated conveyors from Advanced Handling Systems.

And then there’s the software, which enables all of that magnificent machinery to work together in unison. Gap Inc. teamed with VARGO, a material-handling solutions company, to use the company’s COFE warehouse execution system to organize and optimize order fulfillment by sequencing and synchronizing work flows.

Spurred Into Action

The OHO reopened in May, but it wasn’t supposed to open until July. COVID-19 had everything to do with that.

While many businesses around the world were shutting down in March because of the pandemic, Gap Inc. had to spur OHO into action. As its brick-and-mortar stores temporarily closed, the company’s e-commerce business began to pick up intensely. “We knew what was coming,” Kuntz says.

The sleek ASRS, which features 24 cranes, has improved floor-space utilization, increased picking accuracy and reduced labor requirements.

The first order of business was to provide safe working conditions for all of the company’s employees who work inside Gap Inc.’s distribution centers in 10 U.S. locations. The focus was on conducting non-contact health checks, providing face masks, increasing CDC-approved cleaning methods, installing plexiglass dividers between work stations, and implementing staggered shifts to better enable social distancing practices.

However, because of the influx of increased e-commerce orders, it quickly became evident that the time was now to open the OHO facility. But there was a problem: Not all of the new automation equipment was in place, including 20 additional Kindred SORT orbs to add to the existing 20 the facility already had. (Gap Inc. was one of the first companies to pilot the orbs in 2017.) So Kuntz contacted Kindred AI and asked if the company could ship them early. Providing that trusted and longstanding partnerships are key, Kindred AI came through. Considering the SORT orbs can do the work of four people, they were a crucial component to the new notion of social distancing.

The OHO facility employs 1,400 people who comprise four shifts. None of the employees have been furloughed during the pandemic. While maintaining CDC-approved health and safety guidelines, the facility is also hiring 600 more workers for the holiday rush and many of them will be retained because of the coronavirus-caused boom in e-commerce. Gap Inc.’s online business grew 95% in the second quarter, with 3.5 million new customers buying online.

Shortly after opening in May, OHO was processing more than 300,000 units daily. In late November, that will increase to 600,000 units. By early 2021, that number will increase to about 1 million units. Kuntz says he doesn’t know of any distribution centers in any industry that can process that many e-commerce units in a day.

When it originally opened, the facility was built to fulfill e-commerce orders, even though it’s far more automated today. Twenty years ago, Kuntz says he knew e-commerce was only going to get bigger. But nobody could have predicted the e-commerce boom brought on by the pandemic.

Giant Steps on the ‘Happy Path

While he’s enthusiastic about automation and increasing it at OHO and the other distribution centers, Kuntz affirms that none of Gap Inc.’s facilities will ever be fully automated. The human touch will always play a role.

“I think people sometimes go overboard with automation, and they want it to cover 100% of the work,” Kuntz says. “I don’t think automation is ever going to do 100% of anything.”

If automation can get 90% of the work done, Kuntz considers the mission accomplished.

The company’s state-of-the-art facility in Groveport, Ohio, will soon process 1 million e-commerce units a day.
Despite increased automation at the distribution center, Gap Inc. places a premium on the human touch.

“We call automation the ‘happy path.’ If I can get 90% of our work down the happy path, that’s great,” he says. “It’s a giant step forward.”

Many Gap Inc. employees have come to embrace automation, as the retailer trains workers on how to use the cutting-edge systems — thus arming them with important and transferrable job skills. Kuntz is steadfast in the idea that automation won’t replace their jobs, but it will make them easier and less strenuous. Consider the two auto baggers used at the OHO facility, which can quickly and efficiently wrap e-commerce orders in the company’s blue packaging. By automating the simple task, employees can be assigned to other areas of the operation that need more attention.

The e-commerce boom has increased the need for more employees in several areas of the supply chain, including receiving, distribution and returns, Kuntz says. In fact, he says it takes five times more employees to fulfill e-commerce orders than it does for retail brick-and-mortar orders. On top of that, more employees are also needed to maintain the automated equipment.

“We are increasing jobs, despite automation,” Kuntz says. “In the history of our supply chain evolution, automation has never caused us to lay off employees.”

In regard to the 10% of the work that still needs to be done by people, Kuntz says it’s about teaching them to work alongside automation and adapt to new processes so everything can run in harmony.

“The machinery part is the easy part; it either works or it doesn’t,” he says. “If someone asks me what the key to our success is, I say it’s about the people embracing the changes. You still need great talent and people that can execute.”

A Student of the Profession

Kuntz, who has spent 33 years with Gap Inc., began working for the company when he was in high school. He assumed his current role in 2016.

Kuntz recalls the late 1980s, when the company’s technology centered on manual data entry and hand-written documents. My, how the times have changed, considering that data entry now involves all kinds of technological gadgets and software applications.

Having worked for Gap Inc. for more than three decades and performing a myriad of jobs at the company’s distribution centers, Kuntz has become a student of logistics fulfillment. He has a knack for knowing quickly what technology will and won’t work. He has schooled himself to know a distribution center’s process flows at an intimate level. And through it all, he adheres to an uncomplicated rule.

“Keep it simple,” he says. “You look at technology and ask yourself, ‘Does it fit?’ If you have to start making a ton of adjustments and try to wiggle a technology into your process flow, you learn pretty quickly to stay away from it.”

Kuntz isn’t afraid to try a new technology that may fail, but he notes that it’s crucial to recognize early on that it isn’t going to work. “If it doesn’t work, get out. We’ve had our share of technologies that didn’t work, but we knew when to exit,” he says.

While he firmly believes that people will always be a part of the process, improving automation is constantly on Kuntz’s mind. And because of Gap Inc.’s successes in automation, Kuntz says the company’s executives support the investment. “They believe in what we’re doing because it’s bearing fruit,” Kuntz says.

Going forward, Kuntz would like to see the OHO facility and other Gap Inc. distribution centers become more automated in the area of returns and picking.

Kuntz says Gap Inc. has achieved a positive reputation among vendors for being a “catalyst” for automation. Hence, vendors are willing to work with the company.

“If you can find the right vendor that’s willing to co-develop and experiment and do some pilots programs, then the sky’s the limit,” he says.

One of those vendors is Hilliard, Ohio-based VARGO, which Gap Inc. has partnered with for about six years. Art Eldred, VARGO’s client executive for systems engineering, says the two companies are working “to grow the blueprint forward” at the Groveport facility.

“This used to be a large e-commerce operation with a very long order cycle time,” Eldred says of the Groveport facility.

But that approach doesn’t fit today, what with orders having to be out the door in two to four hours, which doesn’t jibe with batch production. Previously at the Ohio facility, a buffer was used to store product that had been picked and then sequenced to be consumed somewhere else down the chain, Eldred explains.

“We’ve basically eliminated batch production all together,” he adds. “We now use software and processes to do that automatically. There is no buffer. If something starts at the picking process, it goes all the way through to the shipping dock. It never leaves its sequence. It’s a process that’s very fluid, so you are gaining a lot of operational efficiencies.”

Kuntz says the beauty of the COFE software is that it’s programmed to prioritize orders for overnight delivery. The software sends such products to the front of the pick manager system, where they are processed in minutes.

The software and all of the other technology will enable OHO to soon process 1 million e-commerce units a day, a milestone Kuntz is eager and excited to achieve.

“We may be the first to ever reach that number,” he says.

For someone who “grew up” in Gap Inc.’s supply chain, it’s also a personal milestone.

“I can’t wait to achieve it,” a beaming Kuntz says.