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Gap Inc. Supply Chain Exec Explains Clothing Giant’s Logistics Play

It took a little over 50 years, but the doors to Gap Inc.’s logistics network are now open. 

The multi-brand retailer—parent to its namesake, along with Old Navy, Banana Republic and Athleta—has soft launched what it’s calling GPS Platform Services by Gap Inc., opening up its omnichannel fulfillment, warehousing, parcel shipping and reverse logistics services to companies outside its portfolio.  

“We built a pretty robust automated supply chain that we think offers Gap Inc. a competitive advantage in the form of cost and service,” said Kevin Kuntz, Gap Inc. head of supply chain for fulfillment and procurement. “So, the thought of offering that to other folks has always been something that we felt like was the right thing to do, and we’ve been building out our network for the last number of years. Capacity that we have available to sell to other folks has been growing. So it, timing wise, was perfect. And we definitely feel like there’s a growing need out there coming out of the pandemic.”

It’s a second go for Gap Inc. at opening up its logistics services to others, after trying its hand at that about a decade ago. However, the company’s network then was nowhere near the size and capacity it is today. 

GPS has so far signed two customers outside of apparel, although the network can accommodate companies of varying sizes and in different categories, Kuntz said.  

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Interest in GPS has so far been strong, according to the executive, and a good chunk of that has come from prospective clients larger than what the company initially thought GPS would attract. 

It also has a pitch for smaller apparel companies, given its competency in growing fashion brands. 

“When we got started, we thought we would work with a lot of entrepreneurs that were growing their business maybe in the under-$100 million range,” Kuntz said. “But if someone comes in and they’ve got a successful business that’s even smaller than that then, yes, we would definitely work for them and work with them and help them grow. And, hopefully, see the next Gap or Banana Republic or Old Navy developed through that relationship. That would be really inspiring to us.”  

Gap Inc.’s fulfillment center in Fishkill, NY completed an expansion in the summer. The facility is one of 13 in the company’s distribution network.

Gap Inc., which had a recent market cap of $3.5 billion, is the latest retailer to open up its fulfillment and logistics capabilities to outside businesses as companies tighten their grip on points within the supply chain where they can exercise greater control and mitigate risks.  

American Eagle Outfitters Inc. last year scooped up third-party logistics firm Quiet Platforms and parcel shipping startup AirTerra. Quiet’s customer roster includes brands such as American Eagle, Aerie, Outdoor Voices, Birdies, Baggu and Steve Madden

Walmart last year launched its delivery service GoLocal and works with retailers such as Chico’s FAS and The Home Depot. There’s also Amazon Logistics, which provides a variety of supply chain-related services to companies and last week launched Amazon Warehousing & Distribution. The division is set to begin distribution to stores, wholesale customers and other endpoints starting next year. 

In logistics, scale could be considered king for everything from securing freight capacity to ultimately lowering overall costs, making the sharing of services an easy sell in some cases. 

“Gap Inc. wins because we share some of the investment over the long haul,” Kuntz said. “Our clients are going to win because they’re going to gain access to a logistics system that took us 50 years to build and insulates us from some of the labor shortages that may be out there.” 

GPS Platform Services runs 13 distribution centers that process roughly a billion units each year for a company that saw fiscal year 2021 sales total $16.7 billion. 

The facilities tout a 99.8 percent order accuracy rate and 99 percent on-time, ready to ship rate, according to the company. 

The most recent addition to the network was last month’s opening of an 850,000-square-foot fulfillment center in Longview, Texas. That followed the completion of the expansion of its Fishkill, N.Y. facility earlier in the summer. 

“We feel like we’ve got really great coverage across the United States,” Kuntz said. “And we feel like we have a lot of capacity to sell. We won’t ever say that we won’t build the network out; we’ll let the business dictate that.”

The executive confirmed there are currently no plans to build additional facilities, with the near-term focus on “building up what we have.” 

Gap Inc. counted 3,390 stores globally at the end of its fiscal second quarter ended July 30.

GPS Platform Services ideally will generate revenue and earnings, but it also helps Gap Inc. share the cost of its high-tech facilities with others. 

The company’s distribution centers include automated storage and retrieval, artificial intelligence and machine learning to help sort product and it expects to implement dark receiving. The latter means automation with little to no human involvement. 

“Logistics has a completely different meaning today than it did, 15, 20 years ago. You walk into one of our DCs, it’s not a warehouse anymore. It’s literally full of AI, robotics,” Kuntz said. “They’re high-tech facilities that either drive a competitive advantage for your company, or it’s going to be a weakness.”  

While the tech creates efficiencies, it’s perhaps also a hedge against a dynamic labor market where costs are rising and uncertainty abounds in the availability of workers needed to accommodate the projected growth in e-commerce

Tech provides some amount of safeguarding, but it doesn’t mean companies won’t still need to hire in large quantities when it comes to their logistics networks. GPS Platform Services has a worker headcount of more than 9,000. That’ll probably ramp up closer to 12,000 for the upcoming peak holiday season, according to Kuntz. 

“One of the major hurdles that we all collectively in logistics have to overcome is how do we fuel our labor needs?” Kuntz said. “There’s been a lot written out there over the last several years about how that has grown as e-comm has continued to grow and the number of people that we all need. So I think that’s one of the threats that we’re keenly aware of and part of the [facility] buildouts that we’re doing in response to that. If companies aren’t watching out, there’s some real risks there.”