gap supply chain case study

Technology and Operations Management

Mba student perspectives.

• Assignments
• Assignment: RC TOM Challenge 2017

Gap: Making Supply Chain Fashionable

Inspired by Zara, Gap Inc. has undergone a digital transformation in their supply chain to reduce product development and distribution lead times, thus enabling Gap to be more responsive to customer preferences. Early financial results seem promising, but are uneven throughout Gap's brand portfolio and geographic footprint.

The past two years have been extremely difficult for most fashion retailers. Wet Seal, BCBG Max Azria, Rue21, Gymboree, True Religion, Aeropostale, Pacific Sunwear and American Apparel have all filed for bankruptcy since 2016.[1] However, even against this particularly difficult backdrop, Industria de Diseno Textil SA (commonly referred to as Inditex, which owns Zara) reported in 2016 year-over-year increases of same store sales and net profit at 12% and 10%, respectively.[2]

What was the secret to Inditex’s remarkable performance? One key factor of success is a “highly responsive supply chain that enables delivery of new fashions as soon as a trend emerges. Zara delivers new products twice each week to [each] store.”[3] This is feasible because Zara is able to “design and distribute a garment to market in just fifteen days.”[4] This stands in stark comparison to the typical product development cycle where “apparel retailers were launching collections seasonally” and which took “several months to even a year” to develop.[5]

Immediate feedback from sales to production limits the impact of the bullwhip effect, where small oscillations in retail ordering are amplified further down the supply chain. This allows manufacturers, wholesalers and distributors to adjust rapidly, which reduces excess inventory and limits the need for Zara to discount stale inventory.[6]

Tightly managing inventory also creates a “value proposition [of] newness and scarcity” because “once product is gone, it is gone.”[7] In turn, this drives additional traffic to the store. According to the NPD Group, “the average brand loyal visits a store 4.1 times per year whereas the average Zara shopper vists a Zara store 17 times per year – likely because she is afraid of missing something.”[8] Higher customer throughput in store allows Zara’s fixed costs to be amortized across more units, which in turns allows Zara to price products more competitively.

Recognizing these trends in the industry, Gap Inc. (Gap) CEO, Art Peck launched Product 3.0 which was designed to “move forward very quickly in how we bring product to market and the speed that we bring it to market and the flexibility in our inventory.”[9] This required significant changes in the way Gap operated, such as removing all creative directors, placing a small quantity of goods into stores and seeing how customers responded before placing larger buys, utilizing customer purchase data to predict demand, shifting some manufacturing plants from Asia to the Caribbean and reducing the product development cycle down to 8-10 weeks.[10]

Pathways to Just Digital Future

Successful implementation of Product 3.0 required digitalization of Gap’s supply chain. Shawn Curran, Senior Vice President of Global Logistics at Gap, stated the need to “come up with new and innovative ways to drive value in our supply chain.”[11] One way this was accomplished was to, “capture inventory visibility and track goods at the item level.”[12] This additional level of detail allowed Gap to create an omnichannel experience by allowing “shoppers to reserve an item on the website and have it ready to try on in a physical store of their choosing.”[13] In all, Product 3.0 required $150 million in restructuring costs.

Recent financial performance indicates that Product 3.0 may be having a positive impact on sales and earnings. In their most recently reported quarterly earnings, 2Q17, Gap reported that same store sales had increased 1% and that Gap’s operating margin had increased from 7.2% the year before to 11.9%. Peck announced that in the short-term, Gap will be doubling-down on their Product 3.0 efforts by “taking advance of our operating scale to drive speed to market, responsiveness to customer demands and efficiency.”[14]

However, not all gains have been recognized evenly across Gap’s portfolio. Old Navy (fashionable, but lower price and quality), experienced positive 5% growth in comparable sales year-over-year while Gap and Banana Republic experienced declines of 1% and 5%, respectively. The growth disparity is exasperated when taking a geographic lens. Overall net sales increased in North America by 2%, but declined in Europe and Asia by 14% and 23%, respectively.[15] This stands in stark contrast to expected growth rates in Asia which is forecasted to grow at 5% in 2018.[16]

How should Gap respond? In the short-term, Gap should continue to invest in digitalization of their supply chain. While they have made significant improvements, it still takes Gap 8-10 weeks to go-to-market compared to Zara’s two weeks. In the long-run, Gap should consider divesting brands / customers segments where fast fashion may not drive the same uplift in performance.

Does fast fashion only improve performance of the fashionable, but lower price and quality customer segment (i.e., Old Navy) or can it succeed in the accessible luxury market (i.e. Banana Republic)? Given the high restructuring costs globally and relatively poor performance in Asia, should Gap continue to invest in international markets?

(Word count: 785)

[1] Lauren Thomas, “Here are the retailers that have filed for bankruptcy protection in 2017,” CNBC, September 23, 2017, https://www.cnbc.com/2017/09/23/here-are-the-retailers-that-filed-for-bankruptcy-protection-in-2017.html, accessed November 2017.

[2] Lauren Heller, “Why Zara Is The Most Exciting Retailer Today,” Forbes, March 15, 2017, https://www.forbes.com/sites/lauraheller/2017/03/15/why-zara-is-the-most-exciting-retailer-today/#3426830d5cd3, accessed November 2017.

[3] Greg Petro, “The Future of Fashion Retailing: The Zara Approach (Part 2 of 3),” Forbes, October 25, 2012, https://www.forbes.com/sites/gregpetro/2012/10/25/the-future-of-fashion-retailing-the-zara-approach-part-2-of-3/#2535351d7aa4, accessed November 2017.

[4] Kasra Ferdows, Michael A. Lewis and Jose A.D. Machuca, “Zara’s Secret for Fast Fashion,” HBS Working Knowledge, February 21, 2005, https://hbswk.hbs.edu/archive/zara-s-secret-for-fast-fashion, accessed November 2017.

[5] Trefis Team, “Gap Inc’s Premium Brands Aren’t Moving Fast Enough,” Forbes, September 16, 2015, https://www.forbes.com/sites/greatspeculations/2015/09/16/gap-incs-premium-brands-arent-moving-fast-enough/#6d6e721b222b, accessed November 2017.

[6] Kasra Ferdows, Michael A. Lewis and Jose A.D. Machuca, “Rapid-Rire Fulfillment,” Harvard Business Review, November 2004, https://hbr.org/2004/11/rapid-fire-fulfillment, accessed November 2017.

[7] Deborah Weinswig, “Retailers Should Think Like Zara: What We Learned At The August Magic Trade Show,” Forbes, August 28, 2017, https://www.forbes.com/sites/deborahweinswig/2017/08/28/retailers-should-think-like-zara- what-we-learned-at-the-august-magic-trade-show/#54a4e57f3e52, accessed November 2017.

[8] Deborah Weinswig, “Retailers Should Think Like Zara: What We Learned At The August Magic Trade Show,” Forbes, August 28, 2017, https://www.forbes.com/sites/deborahweinswig/2017/08/28/retailers-should-think-like-zara- what-we-learned-at-the-august-magic-trade-show/#54a4e57f3e52, accessed November 2017.

[9] Ayelet Israeli and Jill Avery, “Predicting Consumer Tastes with Big Data at Gap,” HBS No. N9-517-115 (Boston: Harvard Business School Publishing, 2017, p. 9.

[10] Ayelet Israeli and Jill Avery, “Predicting Consumer Tastes with Big Data at Gap,” HBS No. N9-517-115 (Boston: Harvard Business School Publishing, 2017, p. 10.

[11] Leela Rao, “Will Gap Be the Next Big Fast Fashion House?” GT Nexus, August 31, 2015, http://www.gtnexus.com/resources/blog-posts/gap-supply-chain-visibility-fast-fashion, accessed November 2017.

[12] Leela Rao, “Will Gap Be the Next Big Fast Fashion House?” GT Nexus, August 31, 2015, http://www.gtnexus.com/resources/blog-posts/gap-supply-chain-visibility-fast-fashion, accessed November 2017.

[13] Leela Rao, “Will Gap Be the Next Big Fast Fashion House?” GT Nexus, August 31, 2015, http://www.gtnexus.com/resources/blog-posts/gap-supply-chain-visibility-fast-fashion, accessed November 2017.

[14] “Gap Inc. Reports Second Quarter Results,” press release, August 17, 2017, on Gap website, http://www.gapinc.com/content/dam/gapincsite/documents/Press%20Releases/GPS_Q217_EPR_FINAL.pdf, accessed November 2017.

[15] “Gap Inc. Reports Second Quarter Results,” press release, August 17, 2017, on Gap website, http://www.gapinc.com/content/dam/gapincsite/documents/Press%20Releases/GPS_Q217_EPR_FINAL.pdf, accessed November 2017.

[16] “Regional economic outlook. Asia and Pacific: preparing for choppy seas,” International Monetary Fund, April 2017, Forecast for global retail sales growth from 2008 to 2018, https://www.imf.org/~/media/Files/Publications/REO/APD/areo0517.ashx, accessed November 2017.

Student comments on Gap: Making Supply Chain Fashionable

Great essay! In response to your question about whether fast fashion is just for lower price segments, I believe it is not and that the digitization trend of supply chain is permeating all price points. Take for example, Moda Operandi, a website founded in 2014 which allows women to pre-order high end clothing and accessories (average price point of an order ~$2k) off of the runway so that they do not have to wait for department and specialty stores to purchase a collection before they receive their clothing. The company now has net revenues of almost $100mm. According to an article in Forbes, women receive their items a full 4-6 weeks before they would if they ordered the same items through a third party (department, specialty store). The Moda Operandi approach also helps the designers to digitize their supply chains by allowing them to collect data on demand long before they would receive information from their standard department store distribution channels. This, in turn, allows them to be more agile in planning the production of their lines and in turn helps them financially by producing more of the items that sell well and less of the items that do not.

What a great read! To answer the question I think with right execution fast fashion will not only improve performance of the fashionable but lower price and quality customer segment, but also can succeed in the accessible luxury market. The year-over-year sales declines that Banana Republic and Gap experienced maybe due to poor market positioning. For accessible luxury market, customers would like to have large variety of products available and would need to have a faster fashion turnover. Thus, Gap has to be able to speed up design to market time to meet the customers’s needs. The consumer market in Asia is around 15 times larger than the US, despite the high restructuring costs, Gap should continue to invest in international markets. Refer back to my last point, design to market time is critical. Another factor to keep in mind is that the Asian consumers are more sensitive to pricing due to lower average household income. Therefore, merchandise selections may vary.

Thanks for posting! In response to your question, I also believe that fast fashion can be successful across different price points. As supply chains gather consumer feedback and data more quickly, supply chains will more quickly adapt to fickle consumer preferences… at least over time. Relating back to your post, will that be enough time for Gap to achieve more broad-based growth across its portfolio? Given this ongoing uncertainty, my next question would be, “when should Gap consider divesting brands and customer segments?”

On a slightly different note, I will be curious to see how – if at all – fast fashion companies like Zara evolve going forward. While they can continue to optimize their supply chains, I am interested to see how their price point evolves. If Zara’s brand becomes ubiquitous enough, will they have the ability to increase prices beyond their historical levels.

Regardless, great post!

Steve – Given the market dynamics and trends you described, I wonder if Gap Inc should even continue to operate Gap or Banana Republic brands. At the low end of price and quality, Old Navy can implement fast fashion and compete effectively with Zara using supply chain improvements through digitization. However, these supply chain improvements are predicated on the brand being responsive to its customers and then speedily impacting its supply – which may not be aligned with the brand goals of Gap or Banana Republic. Instead, perhaps the higher end brands, Gap and BR, should utilize a creative director and operate a different business model by not responding to customer demands, but rather creating “fashion” and allowing the customers to follow. I am not certain that Gap Inc should operate both distinct business models and may want to use its scale to continue to operate in fast fashion (as it has done with Old Navy) and sell the high-end portions of the business that may work better with an alternate model. Given the recent performance, Gap and BR certainly don’t seem to be working now.

Thank you for the interesting essay! One challenge fast fashion will face as it moves to more upscale market segments is maintaining quality. A customer may be willing to forgive a certain level of defects from Zara but expect more from a pricier purchase from the Banana Republic. While achieving both speed and quality is not be impossible, it will undoubtedly be a substantial operational challenge.

Additionally, speed may be more of a competitive advantage for Zara than it is for Gap. Zara’s brand image is closely tied to fashion – consumers come to Zara seeking the cheap but cutting edge. On the other hand, Gap’s brands are more closely associated with reusable basics rather than high fashion. Given these two very different brand images and strategies, I worry that speed is more beneficial for Zara than it is for Gap.

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The $16 billion San Francisco-based retail conglomerate seeks to monetize excess capacity at its distribution centers.

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Gap Inc. . seeking to generate additional revenues, has formed a collaboration with Ware2Go to accelerate its strategy to open up its supply chain to other brands and retailers.

The collaboration integrates Ware2Go’s supply chain technology and existing warehousing footprint used by different brands and retailers with Gap Inc. ’s GPS Platform Services for outsourcing the company’s distribution centers and warehouses, returns processing, customer insights, technical and digital capabilities.

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“Together we will help SMBs grow their brands with our combined logistics infrastructure and cutting-edge automation,” said Kevin Kuntz, head of global logistics fulfillment at Gap Inc.

“It’s a pay-as-you-go model. You pay for the storage, shipments and labor that you utilize,” said Steve Denton, chief executive officer of the Atlanta-based Ware2Go. “For us, the collaboration with Gap opens up a whole new market around apparel and soft goods. We had a void there.”

Denton defined small- to medium-sized businesses as those generating anywhere from $5 million to $250 million in volume. He said the collaboration with Gap Inc. involves moving product through the supply chain “from factory floor to front door — we do it all.”

Ware2Go’s fulfillment platform incorporates machine learning and data science. The cloud-based platform records sales patterns and offers customized inventory and distribution insights based on customer data. Gap Inc. won’t get access to data from other retailers and brands accumulated by Ware2Go, the two companies indicated.

According to the executives, by outsourcing, retailers and brands can focus more on what they are typically best at — product development and marketing — rather than logistics and fulfillment. The collaboration will also enable brands and retailers to more easily enter the U.S.

The collaboration is an extension of Gap Inc.’s business relationship with UPS, which owns Ware2Go and has long handled incoming and outgoing Gap Inc. parcels.

Ware2Go has 35 warehouse partners in its network and now adds Gap’s distribution centers in North America. Ware2Go already works with many small- and medium-sized businesses as well as larger companies such as Coca-Cola and Thrasio, an Amazon aggregator. Gap does not disclose the large brands that work with its GPS Platform service.

The Gap strategy is reminiscent of American Eagle Outfitters ‘ acquisition of Quiet Logistics in 2021 for $350 million in cash, building upon its  acquisition of logistics firm AirTerra earlier in the year to enhance its supply chain capabilities and extend them to other brands and retailers.

Gap Inc. has 13 distribution centers situated on six campuse in the U.S. and one in Canada, several of which have transformed into highly automated, cross-channel fulfillment centers which the company refers to as “customer experience centers.” In addition to Longview, the distribution centers are located in Fresno, California; Phoenix; Groveport, Ohio; Gallatin, Tennessee; Fishkill, New York, and Brampton, Ontario.

Several Gap Inc. distribution centers are rigged with such technology advancements as sort orbs with robotic arms geared to quickly and accurately sort batches of units destined for multiple online orders; automated storage and retrieval systems with automated cranes that race up and down aisles of storage space to stash away or retrieve thousands of cases; unit sorters for high-speed sortation of small lightweight items, and robotic baggers to quickly and efficiently wrap e-commerce orders.

“We want to monetize what we have built. We have made some large strategic investments over the years and have a lot of capability,” Kuntz said.

He said Gap Inc.’s supply chain has kept up with its demand online, which has grown significantly through the pandemic, but has excess capacity to service non-Gap Inc. brands. Kuntz said Gap’s distribution centers are about 80 percent utilized, with some having the capacity to handle a million units a day, meaning they have about the 200,000 unit capacity available.

For several seasons, Gap has experienced slowing sales due to internal factors such as fashion misses and store closings, as well as external factors, contributing to the excess supply chain capacity.

Many small- to medium-sized brands and retailers already use third-party logistics companies, though according to Denton, “89 percent have their own warehouses, but they need optionality to expand.”

According to a Ware2Go survey of SMBs:

• 74 percent of SMBs believe the future of fulfillment is shared, co-warehousing models that allow SMBs to easily scale;
• 89 percent of SMBs report they own and operate at least one warehouse; 47 percent have explored more flexible warehouse strategies over the last two years;
• 65 percent of SMBs are actively planning over the next one to two years to make either short- or long-term investments to expand leased warehousing space, and
• 90 percent of respondents stated they would be open to sharing a warehouse with another retail brand and outsourcing fulfillment to that retailer.

“The future of fulfillment looks like SMBs owning zero warehouses,” Denton contended. “Our merchants want to remain focused on growing their business and product portfolios, and not worry about the ins and outs of their inventory placement or building up a labor workforce to support peak season.”

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Gap, Inc., 2019

By: John R. Wells, Benjamin Weinstock

In 2000, The Gap, Inc. (Gap) was the world's largest player in specialty fashion retailing, and companies such as Inditex of Spain, H&M of Sweden, and Fast Retailing of Japan were less than a quarter…

• Length: 35 page(s)
• Publication Date: Sep 18, 2019
• Discipline: Strategy
• Product #: 720377-PDF-ENG

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In 2000, The Gap, Inc. (Gap) was the world's largest player in specialty fashion retailing, and companies such as Inditex of Spain, H&M of Sweden, and Fast Retailing of Japan were less than a quarter of Gap's size. But after two decades of growth, Gap's progress stalled in the early 2000s, while these players continued to expand. Inditex overtook Gap in 2008, H&M in 2010, and Fast Retailing in 2016. Inditex continued to set the pace ten years later in 2019, and Gap appeared to be falling ever further behind. Since 2000, four Gap CEOs had struggled to turn around the company. While several temporary profit increases appeared to herald a recovery, a sustained rally remained elusive and the share price remained volatile. Mickey Drexler, who joined the firm in 1983 and became CEO in 1995, had been primarily responsible for Gap's rise to global prominence, but he was fired in 2002 after two years of double digit, same-store sales declines and a 75% drop in the stock price. His successor, Paul Pressler, appeared to have engineered a remarkable recovery, but was fired in 2007 after disappointing sales and another slump in profits, leaving Gap to be run by interim CEO Robert Fisher, son of founder Donald Fisher. Pressler's permanent replacement, Glenn Murphy, fresh from a successful turnaround at a Canadian drug-store chain, promised tighter price controls, lower administrative costs, and a leaner, more aggressive Gap. He cut costs and drove up earnings per share, but sales continued to decline in his first few years in office. A sales and profit revival in 2012 looked promising, driving the company's share price up 50%, but it proved short-lived, and Murphy announced in 2014 that he would step down, handing over to company veteran Art Peck (HBS '79). After four years under Peck's leadership, the company was still struggling to rediscover its old magic, while Inditex was going from strength to strength.

To add to the challenges, some analysts estimated that online giant Amazon had become the world's leading clothes retailer in 2018, up from nowhere in 2000. How could Peck revive Gap's fortunes?

Learning Objectives

This case intends to teach students about the strategic challenges of fast-fashion retailing, which include attention to supply-chain dynamics, design sourcing, and management structure. Students will also discuss the challenges of turning a failing company around once financial performance begins to fall and the difficulty of going beyond the "point of no return."

Sep 18, 2019 (Revised: Jul 5, 2021)

Discipline:

Geographies:

Spain, Sweden, United States

Industries:

Apparel accessories

Harvard Business School

720377-PDF-ENG

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Home > CMC > CMC_STUDENT > CMC_THESES > 3072

CMC Senior Theses

How a supply chain stumble changes a company’s policies and progress 20 years later: a case study of gap inc..

Alexandra Futterman Follow

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Open Access Senior Thesis

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Bachelor of Arts

International Relations

Hilary Appel

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2022 Alexandra M Futterman

Gap Inc. is the third-largest American retailer. Founded in 1969, Gap Inc. holds four brands, Gap, Banana Republic, Old Navy and Athleta. In the late 1990s and early 2000s Gap Inc. made headlines for child labor abuses along with many other large brands. After this negative attention, Gap Inc. began developing policies and practices to combat ethical supply chain issues. These policies included a Human Rights Policy, a Code of Vendor Conduct, working conditions standards, and even capacity building programs that boarded company reaches into communities they touch. In conjunction with the policies Gap Inc. has published several social responsibility reports that have displayed the outcomes of their policies. Overall, this thesis explores how Gap Inc. policies and practices have developed since receiving negative media attention and how Gap Inc. compares in a fashion industry that does not play fair.

Recommended Citation

Futterman, Alexandra, "How a Supply Chain Stumble Changes a Company’s Policies and Progress 20 years Later: A Case Study of Gap Inc." (2022). CMC Senior Theses . 3072. https://scholarship.claremont.edu/cmc_theses/3072

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Home » Enterprise Architecture » Gap Analysis Report: Identifying and Addressing Performance, Capability, and Resource: A Case Study

Gap Analysis Report: Identifying and Addressing Performance, Capability, and Resource: A Case Study

• Posted on April 13, 2023
• / Under Agile Development , Enterprise Architecture , Strategic Analysis

What is a Gap Analysis

A gap analysis is a tool used to compare the current state of a business or organization with its desired future state. It involves identifying the gap between where the organization currently stands and where it wants to be, in order to identify areas of improvement and develop strategies for closing the gap.

Gap analysis can be used by individuals, teams, or organizations to identify areas for improvement in a variety of contexts, such as:

• Business strategy: To identify gaps in the organization’s business strategy and align it with the overall goals of the business.
• Human resources: To identify gaps in employee knowledge, skills, and performance, and develop training programs to bridge these gaps.
• IT systems: To identify gaps in the organization’s IT infrastructure and systems, and develop plans to upgrade or replace them as needed.
• Regulatory compliance: To identify gaps in compliance with industry regulations or legal requirements, and develop plans to address these gaps.

In short, gap analysis is a useful tool for anyone looking to identify areas for improvement and develop strategies for achieving their goals. It is particularly useful in situations where there is a gap between the current state and desired future state of an organization, process, or system.

Example of GAP Analysis for Different Use Cases

Here are some examples of how gap analysis can be used in each of the four areas I mentioned:

• Business strategy: Suppose a company wants to expand its market share in a particular region. They can conduct a gap analysis by comparing their current market share in that region to their desired future market share. By identifying the gap between the two, they can develop strategies for improving their marketing efforts, expanding their distribution network, and building stronger relationships with local customers.
• Human resources: Imagine a company has identified a skills gap among its employees in a particular department. They can conduct a gap analysis by comparing the current skills of their employees to the skills required for their roles. By identifying the skills gap, they can develop training programs to bridge the gap and improve employee performance.
• IT systems: Suppose a company is experiencing frequent downtime and slow response times with its current IT infrastructure. They can conduct a gap analysis by comparing their current infrastructure to industry best practices and identifying areas where their infrastructure falls short. By identifying the gaps, they can develop plans to upgrade their hardware, software, or network infrastructure to improve system performance and reliability.
• Regulatory compliance: Imagine a company is subject to a new regulatory requirement that they must comply with. They can conduct a gap analysis by comparing their current processes and procedures to the new regulatory requirements. By identifying any gaps, they can develop plans to update their processes, policies, or technology to meet the new regulatory requirements and avoid penalties or fines.

A Case Study: ABC Corp

The purpose of this gap analysis report is to identify and address the gaps in performance, capability, and resources that are hindering ABC Corp’s growth and competitiveness in the marketplace. By conducting a thorough analysis of ABC Corp’s business strategy, this report provides insights into the areas where the company is falling short and recommends a gap closure plan to help ABC Corp achieve its growth objectives. The report covers key areas such as product portfolio, customer engagement, and distribution network, and includes a summary table and gap closure plan to provide a clear roadmap for improvement. The use of ABC Corp as a case study was purely fictional and was used for the purpose of illustrating the gap analysis process. The example provided was not based on any real company or situation.

ABC Corp is a mid-sized manufacturing company that produces consumer electronics. The company has been facing increased competition from both domestic and international players in recent years, resulting in a decline in market share and revenue. To address this problem, the company’s senior management has decided to conduct a gap analysis to identify areas for improvement and develop a new business strategy.

The gap analysis will focus on three main areas: product portfolio, customer engagement, and distribution network. The company’s current product portfolio is limited, with most products targeting a narrow segment of the market. Additionally, the company has not been effective in engaging with customers through social media and other digital channels. Finally, the company’s distribution network is limited, with most products sold through traditional retail channels.

The gap analysis will involve comparing ABC Corp’s current performance in these areas to industry benchmarks and best practices. The company will collect data on key performance indicators (KPIs), such as revenue, market share, customer satisfaction, and distribution channel effectiveness. The company will also conduct surveys and focus groups with customers to understand their needs and preferences.

The results of the gap analysis will be used to develop a new business strategy for ABC Corp. This strategy will focus on expanding the company’s product portfolio to appeal to a wider range of customers, improving customer engagement through digital channels, and expanding the company’s distribution network to reach new markets.

The gap analysis will provide ABC Corp with a comprehensive understanding of its strengths and weaknesses, as well as the opportunities and threats in the market. By developing a new business strategy based on this analysis, ABC Corp can position itself for growth and success in the years ahead.

A Template for Gap Analysis

Gap Analysis Template

• Purpose of the gap analysis
• Scope of the analysis
• Key stakeholders and team members
• Description of the current state of the organization, process, or system
• Key performance indicators (KPIs) and metrics
• Strengths and weaknesses of the current state
• Description of the desired future state of the organization, process, or system
• Goals and objectives for the future state
• Key performance indicators (KPIs) and metrics for the future state
• Comparison of the current state to the future state
• Identification of gaps in performance, capability, or resources
• Root cause analysis of the gaps
• Ranking of the gaps based on their impact and urgency
• Identification of quick wins and long-term initiatives
• Description of strategies and actions needed to close the gaps
• Resources required to implement the strategies
• Timeline for implementation
• Definition of performance metrics and KPIs to track progress
• Monitoring and reporting mechanisms
• Review and update frequency
• Summary of the gap analysis process
• Key findings and recommendations
• Next steps and follow-up actions

This template can be customized to fit the specific needs of the organization, process, or system being analyzed. It provides a structured framework for documenting the gap analysis process, from current state assessment to gap identification, prioritization, closure, and monitoring.

Case Study – Continue

here’s an example of a gap analysis document based on the template I suggested earlier:

Gap Analysis Document for ABC Corp

• Purpose of the gap analysis: To identify areas for improvement and develop a new business strategy for ABC Corp
• Scope of the analysis: Product portfolio, customer engagement, and distribution network
• Key stakeholders and team members: Senior management, marketing team, sales team, and customer insights team
• Product portfolio: Limited, targeting a narrow segment of the market
• Customer engagement: Ineffective, with limited use of digital channels
• Distribution network: Limited, with most products sold through traditional retail channels
• Product portfolio: Revenue by product, market share by product
• Customer engagement: Customer satisfaction, social media engagement
• Distribution network: Number of retail outlets, sales by distribution channel
• Product portfolio: Strong reputation for quality, but limited product range
• Customer engagement: Strong in-person relationships with some customers, but ineffective use of digital channels
• Distribution network: Strong relationships with existing retail partners, but limited reach into new markets
• Product portfolio: Expanded to appeal to a wider range of customers, with new product lines and features
• Customer engagement: Improved through effective use of digital channels, including social media and email marketing
• Distribution network: Expanded to reach new markets and customers, through partnerships with online retailers and other distribution channels
• Product portfolio: Increase revenue and market share by expanding product range and targeting new customer segments
• Customer engagement: Improve customer satisfaction and brand loyalty by delivering a seamless and personalized customer experience across all channels
• Distribution network: Increase sales and revenue by expanding reach into new markets and customer segments
• Product portfolio: Revenue by product line, market share by product line
• Customer engagement: Customer satisfaction, social media engagement, email open and click-through rates
• Distribution network: Sales by distribution channel, number of new retail partners and distribution channels
• Product portfolio: Limited product range, targeting a narrow segment of the market, compared to expanded product range targeting a wider range of customers
• Customer engagement: Ineffective use of digital channels, compared to effective use of digital channels to deliver a seamless and personalized customer experience
• Distribution network: Limited reach into new markets and customer segments, compared to expanded reach through partnerships with online retailers and other distribution channels
• Product portfolio: Lack of expertise and resources to develop new product lines and features
• Customer engagement: Limited knowledge and expertise in digital marketing and data analytics
• Distribution network: Limited partnerships and resources to expand reach into new markets and customer segments
• Product portfolio: Lack of investment in product development and innovation
• Customer engagement: Inadequate training and resources for digital marketing and data analytics
• Distribution network: Limited resources and focus on expanding partnerships and distribution channels
• Product portfolio: High impact, medium urgency
• Customer engagement: High impact, high urgency
• Distribution network: Medium impact, high urgency
• Product portfolio: Expanding the product range is critical to reaching new customer segments and increasing revenue, but may take time and resources to develop.
• Customer engagement: Improving digital engagement is essential to staying competitive in the marketplace and meeting customer expectations, and has a high sense of urgency.
• Distribution network: Expanding the distribution network is important, but may not have an immediate impact on revenue, hence has medium impact.
• Product portfolio: Invest in research and development to expand product range, acquire or partner with experts in new product development, and conduct market research to identify new customer segments and opportunities.
• Customer engagement: Hire or train experts in digital marketing and data analytics, implement new technologies to improve customer engagement across all channels, and develop personalized marketing campaigns.
• Distribution network: Develop partnerships with online retailers and other distribution channels, expand physical retail presence in new markets, and invest in logistics and supply chain management to support new channels.
• Product portfolio: Conduct market research and identify new product opportunities (Q1), acquire or partner with new product development experts (Q2-Q3), develop new product lines and features (Q4-Q5).
• Customer engagement: Hire or train digital marketing and data analytics experts (Q1-Q2), implement new technologies to improve engagement (Q2-Q3), develop personalized marketing campaigns (Q3-Q4).
• Distribution network: Identify potential partners and channels (Q1), establish partnerships and expand retail presence (Q2-Q3), invest in logistics and supply chain management (Q4).
• Product portfolio: Research and development budget, investment in new product development expertise, additional staff resources.
• Customer engagement: Budget for technology and software, investment in training and hiring new staff, additional staff resources.
• Distribution network: Investment in partnerships and logistics infrastructure, additional staff resources.
• Product portfolio: Risk of developing products that do not meet customer needs or fail in the market.
• Customer engagement: Risk of implementing technologies that do not improve customer engagement or damage brand reputation.
• Distribution network: Risk of investing in partnerships that do not generate significant revenue or expansion costs that outweigh benefits.
• ABC Corp needs to expand its product range, improve digital customer engagement, and expand its distribution network to reach new markets and customer segments.
• The gap analysis has identified the gaps in performance, capability, or resources that need to be addressed to achieve the desired future state.
• The gap closure plan outlines the actions needed to close the gaps, along with the timeline, resource requirements, and risk assessment for each action.
• Assign responsibilities and accountabilities for executing the gap closure plan.
• Monitor progress against the timeline and milestones.
• Conduct regular reviews and adjust the plan as needed to ensure alignment with business goals and changing market conditions.
• Evaluate the effectiveness of the gap closure plan and identify opportunities for continuous improvement.
• List any sources of information used in the analysis, such as market research reports, industry publications, and internal data sources.
• Include any additional information, data, or analysis that supports the findings and recommendations of the gap analysis.

Overall, the gap analysis has helped ABC Corp identify the gaps in its business strategy and develop a plan to address them. By expanding its product range, improving digital customer engagement, and expanding its distribution network, ABC Corp can achieve its growth objectives and stay competitive in the marketplace.

Summarize The Finding

Note that this is just an example and the actual content and format of the summary table may vary depending on the specific needs of the business and the gap analysis.

ABC Corp is facing significant challenges in expanding its business and staying competitive in the marketplace due to gaps in its performance, capability, and resources. The gap analysis has identified key areas of improvement, including expanding the product range, improving digital customer engagement, and expanding the distribution network. The gap closure plan outlines specific actions and timelines to address these gaps, along with resource requirements and risk assessments. By implementing this plan, ABC Corp can achieve its growth objectives and stay ahead of the competition in the ever-evolving business landscape.

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How Gap's Growth Story Became One Of A Kind

Table of contents, here's what you'll learn in gap's strategy study:.

• How finding a solution to a personal problem can become the basis of a new successful business.
• How to expand your brand portfolio without risking too much in the long term.
• How adherence to one brand's former success can destroy future performance.
• How adapting speed impacts business performance.

Founded in 1969 in San Francisco, GAP's history could be described as a start-up success story, but today the once shiny brand has faded, international success has slowed down and expansion has stopped - which can be clearly seen from the financial metrics.

GAP's market share and key statistics:

• Number of employees worldwide: 97,000 in Jan 2022
• GAP reported $16.62 billion in revenue for 2021 .
• The company’s digitally-led business made over $6 billion in annual online sales
• GAP is present in 40 countries around the world through its franchise partners

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Humble beginnings: How did GAP Inc start?

Building up a chain of stores.

Donald Fisher, a real estate aget aged 40 in 1969, found it difficult to find Levi's that fitted properly. Instead of continuing his search for the perfect fit, he decided to create his own store, which became GAP. On Ocean Avenue in San Francisco, Fisher and his wife, Doris, opened the first store of the chain. The Levi's and record store, named in honor of Ms. Fisher (and to acknowledge the generation gap between the founders), sold Levi's and records for three months. Vinyl was soon removed from the store, as it did not engage customers at all. It may come as a surprise now, but GAP did not have any products of its own, to begin with; instead, the founders based their strategy on Levi's - which was run by one of Donald's friends.

Levi's guaranteed that The Gap would always be stocked with Levi's apparel overnight from Levi's San Jose, California warehouse, and Fisher agreed to stock Levi's apparel in every style and size. Levi's Director of Advertising offered to pay up to half of The Gap's radio advertising upfront in exchange for a marketing package to any store that sold only Levi's products.

When the Fishers opened their store, the wares on offer were snapped up quickly, even though Levi’s was the hottest brand in the country at the time. Gap opened its second store in San Jose in 1970. Six thousand five hundred square feet of the facility were dedicated to stock storage, and GAP began selling Levi's for women. By the end of the year, the GAP had opened another half-dozen stores. The company's advertising tried to speak the language of young, rebellious people, quickly creating the company’s strong brand identity.

With its third anniversary approaching, GAP has grown from one to 25 stores. The founders launched a second retail venture selling discounted jeans, called Pants%ff!. The business had 36 locations in four years, generating $14.7 million of sales (more than $85 million today), and GAP began to set up its own brand and products.

The first GAP products and going public

In 1974, the first GAP-produced apparel was sold in the stores, which created the perfect momentum to go public. As part of the offering, 1.2 million shares of stock at $18 each were issued by The Gap Stores, Inc. The Gap Stores, Inc. launched two new stores in 1977: Brands, a value-priced chain to target more mature clients, and Logo, aimed at the fashion-conscious consumer.

The Banana Republic, GAP’s first acquisition

Mel and Patricia Ziegler founded Banana Republic Travel & Safari Clothing Company in 1978. Safari-themed items were originally the company's concept.

Because of their travel jobs, the couple was known to acquire interesting clothing items. With hand-drawn catalogs of items and safari-themed stores, they were known for their tales of fictional travelers/explorers. Gap purchased the company in 1983 and renamed it the Banana Republic while rebranding its stores to appear more upscale.

The 1980s were an exciting time for GAP, not only because of the first mergers and acquisitions but also because the company presented its own product on the big screen for the first time (the star of "Back to the Future," Michael J. Fox, wore the jeans in the movie) and introduced the blue GAP logo with white lettering in 1989, which was used until 2016.

Gap announced in 1991 that Levi's products would no longer be available in its stores. In the early 90s, the company experienced its height of success, as, in honor of Vogue Magazine's 100th-anniversary issue, Gap woven shirts and white denim jeans were on the cover, and Gap stock reached a record high of $59.

In 1994, a new brand joined the company group: Based on the prototype store of Gap Warehouse, Old Navy's first store opened in Colma, California. The brand's new name is a reference to a Parisian bar. The brand immediately became a hit, as only 4 years after its founding, it generated $1 billion in annual sales.

Under the direction of Millard Drexler , Gap took on an upscale identity and revamped its inventory in the 1990s. A 29-month sales slump, over-expansion, and tension with the Fisher family resulted in Drexler's dismissal from his position after 19 years in 2002. A non-compete agreement was refused by Drexler, and he subsequently became the CEO of “J. Crew”. The merchandise he ordered before he left was responsible for a large rebound in sales one month later. The new leadership’s focus was to close under-performing overseas locations, while also decreasing the company’s liabilities. By that time, GAP completely lost its market-leading position.

GAP's expansion moves

Between 2011 and 2013, Gap Inc. closed 189 US stores (21 percent of all US locations), however, it expanded in China. The company opened its first store in Brazil in the fall of 2013 . Launched in October 2018, Hill City was Gap Inc.'s new brand of athletic apparel for men.

As a result of the COVID-19 pandemic, the company closed more than 225 locations during 2020. The company originally planned to close only 90 stores, but due to the financial effects of the pandemic, they expanded the number.

As a result of forecasting that its online business will double over the next two years, Gap Inc. announced a $140 million investment for a distribution center in Texas . Upon completion in 2022, one million packages will be processed daily at the center.

Key takeaways

We can learn many lessons from the history of GAP. Countless business ideas have come from the founders' own solutions to problems, and GAP was no different. The Fisher family's apparel issues lead to a business idea, and almost immediately mobilized their network. As a result, not only did they quickly raise the funding to open their first store, but they also found supporters in the Levi's team, which provided the stock and helped with advertising.

The first store was an almost instant success and provided a great platform for expansion. GAP scaled up its network very quickly, at that time thinking exclusively in terms of company-owned stores. Later, a franchising system was introduced, which not only accelerated the expansion abroad but also other entrepreneurs the opportunity to grow the business.

However, the momentum of the 1970-90 period was interrupted by the emergence of new brands, and GAP lost its leading position on the market. As a result, the owners changed management several times - not only for the flagship but also for the other brands. The gradual phasing out of physical stores began, and the loss of sales was not truly reversed until the advent of the Internet.

However, the COVID pandemic hit the company particularly hard, causing huge losses for the holding company, which still relied heavily on physical sales in 2019-20. However, the quarantine caused the company to change course and shift its resources to online sales - and the result is reflected in its performance.

How the GAP Inc. group was formed

In an attempt to grow its market share, take out some of its competition, and increase its revenue, GAP acquired a list of apparel companies that were getting some serious traction at the time.

GAP, the core brand

Over the years, GAP has evolved into a brand that appeals to all target consumer groups. With its slogans and values, it positions itself as a culture-shaping, age-independent brand that appeals to strong personalities.

When the first stores opened, they sold only Levi's products, which were later replaced by private labels. Today, the portfolio includes hundreds of products ranging from face masks to jeans. Surprisingly, the best-known product of the brand is a t-shirt, instead of a denim product.

GAP opened different physical stores around the world focusing on a narrowed-down target audience, including:

• Pants%ff!: a shop for discount products, which was later discontinued.
• Logo: for an older, fashion-conscious clientele.
• Brands: replacing Pants%ff! with a broadened product portfolio.
• SuperGAP: This store format was two times larger than a standard GAP shop.
• GAP kids: This store type focuses on children’s apparel.
• Gap Factory Outlet: This store again offered value-priced products in a different setting and model.

Banana Republic

Surprisingly, Banana Republic is now a much more developed brand than GAP. From the beginning, BR was a brand for the adventurous traveler, with the founders repositioning clothing collected from their own travels and selling it to a domestic audience. The company sells tops, sweaters, jackets, pants, shoes, and accessories through its network of over 600 stores (500 of which are in the US) .

The brand has modernized well, not only with a strong online presence but also with its own app (which offers discounted access to the company's entire line and points) and a clothing rental service that lets consumers swap out their entire wardrobe every three months.

To establish a separate image from its parent company Gap Inc., Gap Warehouse was renamed Old Navy Clothing Co. The new stores occupy about 15,000 square feet (1,400 m2), which is slightly more than the existing stores.

With flowing aisles, shopping carts, and little impulse items near the checkout counter, Old Navy stores were intentionally designed like grocery stores. With cement floors, metal shelves, and checkout counters made of polished pressed board and galvanized metal, the stores had the feel of industrial warehouses while the colorful arrangements and a large employee base made it stand out from other discount clothing stores. In the following year, 42 more Old Navy stores opened. The Gap Warehouse stores were mostly renamed Old Navy stores as well.

Over the next four years, Old Navy grew rapidly, becoming the first retailer in history to surpass $1 billion in sales and open 500 stores before the year 2000 . With the opening of 12 stores in Ontario, Canada in 2001, Old Navy expanded into the international market.

The Old Navy brand also experimented with a dedicated children's store and a café in its flagship stores - but these ideas proved unsuccessful and were discontinued. In the 2000s, unlike GAP, Old Navy was keen to stay ahead of the competition. In response to changes in fashion, many stores were remodeled and the brand repositioned toward high-end fashion. However, the new direction was primarily aimed at women as opposed to the previous universal consumer group, which limited the brand's options. In addition, the rebranding of the stores was not a real success, and the top management was replaced.

In the years that followed, sales continued to decline, halted by Old Navy poaching leading designers from competitors such as Nike and H&M. Greater consumer appeal also boosted demand, and Old Navy generated $6 billion in sales - more than its sister brands combined.

GAP Inc. began restructuring the brand into a stand-alone company shortly before the coronavirus outbreak, which it said was necessary to consolidate underperforming businesses. However, the pandemic caused a general decline in demand, which was a very serious blow to the group. As a result, the process was postponed.

Forth & Towne

The Forth & Towne brand is GAP's boutique brand focused on women over the age of 35 who were previously GAP customers but have since moved on to other manufacturers. Founded in 2005, the brand also operated 35 stores for a number of years, but these were closed and converted entirely to online sales. Today, only Forth & Towne accounts for a small part of the group's sales.

The main reason for F&T's failure is the diversity of its target audience. While GAP's other brands appealed to everyone from children to adults, women and men, there were few women over 35 who retained the rebellious spirit that GAP continued to offer them. Despite this, the brand was not discontinued by the holding company, but online sales are now minimal.

Athleta was founded in 1998 to meet the unique needs of athletic women. Acquired by Gap, Inc. in 2008, it opened the first store in Mill Valley, California in 2011. 2016 saw the launch of the community-driven Power of She campaign and the debut of Athleta Girl. By 2020, Athleta already had 200 stores around the world and double-digit year-to-year growth .

The brand pursues a very deliberate growth strategy: it does not want to compete primarily with Puma or Nike, but always offers the most in-demand products, based on continuous market research. Currently, in addition to masks, the company also produces clothing aimed at young girls in sports.

The reason for Athleta's strong presence lies in its resources, which are focused on the online space. Not only is the company strong on social media, but it can also stay in touch with customers through its own app and email marketing tools.

Other brands

• Approximately $130 million was paid in cash to acquire Intermix in 2012.
• In April 2020, GAP sold Janie and Jack, a high-end children’s clothing brand it acquired from Gymboree, to Go Global Retail.
• In May 2021, GAP announced the plan to sell Intermix to a private equity firm.

Over the years, the GAP group has built up several brands in addition to its core brand. These have included acquisitions, but also a clothing line that grew out of a particular type of GAP business.

Overall, GAP has had mixed success in building brands. While Old Navy has been a resounding success, going from just selling cheap products to generating billions in sales, Forth & Towne remains an unfulfilled promise and fails to attract women over 35 back to the company.

However, the company owes a lot to the sub-brands under its umbrella, as it has been able to try all the experiments that would have been too risky on GAP. What is certain is that the incredible expansion of physical stores today is a matter of prestige at best, because it is not necessary to open new stores to increase sales. The successes of Old Navy, Banana Republic, and Athleta show that online sales still have enormous potential (the company expects to double its sales in the next few years).

The Fall of GAP And The Strategy To Regain Market

Company issues.

GAP enjoyed tremendous success throughout the 1970s and 1980s. After the invention of shuttleless looms in the late 1970s, the quality and price of denim increased, and the overseas denim trade became much more expensive. Demand for denim began to decline and prices began to skyrocket. GAP eventually ceased selling Levi's and began producing its own denim under a new label, "Gap Fashion Pioneers".

From this point onwards, the Group's results improved steadily until the mid-2010s as more stores were opened abroad and in the US, and the franchise system also drove expansion. GAP's in-store revenue fell by 4% in 2015, while its online revenue grew by just 1%. GAP acquired Athleta and Intermix as part of its survival strategy - the latter of which offered a more luxurious experience. However, foot traffic in GAP stores was continuously decreasing, as the generational gap, which the name was a nod towards, became a reality.

The COVID-19 challenge

Throughout the US, the overall apparel category dramatically declined, with sales down over 50% .

As a result of the pandemic crisis, brick-and-mortar retailers were experiencing a never-before-seen decrease in demand. Although it was already in the making, the slow attrition has been boosted by COVID-19 and the related quarantines. There were around 9,000 closures of traditional retail stores in 2019 , and some well-known brands have filed for bankruptcy.

Over the years, the GAP group has built up a substantial cash reserve, typical of this type of situation, but more than half of it had to be spent in 2020 - mainly on rent, staff retention, overheads, and franchise partner support. This was reflected in the company's stock market value.

GAP's strategy to recover

At an investor conference in October 2020, GAP Group outlined its plans, which it calls Power Plan 2023, to recover and regain its market position. The holding company relies heavily on its four key brands, GAP, Banana Republic, Athleta, and most notably Old Navy.

It was clear from the presentation that the Group still generates significant sales from its stores in shopping centers, but that e-commerce is growing strongly and will be a focus in the future. GAP is also taking advantage of the fact that while it reaches customers with several different brands (producing more than 1 billion items per year), it can achieve significant cost savings in its underlying processes through centralization. Two key areas for this are logistics and production/supply chain automation.

Company values

The development of a strong corporate culture has been part of GAP's plans in the past, but Power Plan 2023 places a strong emphasis on communicating the company's values. The main reason for this is that market research shows that 50% of customers explicitly look at whether they embrace the values a company stands for when making a decision.

GAP operates according to the following company values:

• Equality : The first Equality and Belonging Group (EBG) was formed in the early 2000s to foster a sense of belonging among employees. As part of the commitment to Create for All, with All, the EBGs play a crucial role. By investing in these organizations, the company continues to grow its community of allies, create a meaningful workplace experience, and increase diversity in business practices and decision-making processes. The Equality and Belonging Groups include Parents @ GAP, Pride @ GAP, Women @ GAP. 
• Amplify Black Voices: GAP intentionally tries to find ways to amplify diverse voices, especially in creative and marketing departments. The GAP brands are open to everyone, and they will continue to find ways to serve customers and communities more authentically. The company provides anti-racism training to its employees and customers.
• Environmental awareness: GAP places a strong emphasis on the environmental sustainability of its production and supply chain processes. As a result, in 2019 alone, more than 11.2B liters of water were saved in manufacturing .
• PACE (Personal Advancement & Career Enhancement): It was initially created to support women in the global apparel industry in 2007, but since then the company has expanded it to empower adolescent girls and women in community settings around the world. Workplace, Community, and Academia are the three pillars of P.A.C.E. today. In partnership with local NGOs, governments, brands, and schools, GAP delivers P.A.C.E. community programs around the world. Through supply chain vendor and community partnerships, 1 million women and girls are projected to be reached by 2022.
• Sustainability: The GAP Group not only strives for environmental sustainability in its manufacturing technologies, but sustainability also plays an important role in the design of its products. Not only are the best raw materials held to the same high standards as GAP and its partner brands, but they are also sourced from sustainable sources, which is paramount throughout the supply chain.

Although GAP's history is similar to that of most apparel brands, the company differs significantly from its successful competitors in one respect: The lack of adaptation has been a major factor in the company's performance in recent years.

For a long time, the group placed too much emphasis on GAP as its core brand, even though Old Navy outperformed it for years. The main reason is that GAP failed to maintain its trendiness of the 1970s and early 2000s and has now lost its former recognition. No wonder the corporation wanted to separate Old Navy from the other brands, as it probably would have had more success as a standalone company. However, this plan was thwarted for the time being by the COVID -19 pandemic.

As a result, the company's financial results were significantly impacted as the Group, which still relies on physical sales for nearly 70% of its business, was severely affected by store closures and customer quarantines.

The company has adopted a two-pronged strategy for recovery, shifting its focus to online sales and closing underperforming physical stores. It is strengthening the online presence of each brand. The company is also placing more emphasis on communicating its values, which is important for both new employees and customers.

GAP's business model

Steps of the product cycle.

Most of GAP's products are manufactured in Asian countries, mainly in China, Vietnam, and India. Most garment companies follow a similar strategy, driven by cheap labor. The production and life cycle of the products are as follows.

• Design: During the concept phase of a product, most of a product's environmental impacts can be determined. This fact means that GAP's creative vision can have a significant impact on people and the environment. Production and sourcing teams have an important role when they place orders through independent suppliers to bring this vision to life.
• Raw Materials and Processing: Fabric products include natural fibers, such as cotton and linen, synthetic fibers, such as polyester and spandex, as well as manufactured fibers, such as rayon and modal. Each fiber has a unique impact on society and the environment. Given cotton's importance for many products and its water-intensive production process, there is a special focus on this raw material.
• Textile Manufacturing: In addition to consuming large amounts of water, fabrics are often dyed and finished with chemicals that may pose a risk to local waterways if not handled properly. The company’s environmental standards are specified in the GAP Mill Sustainability Program.
• Vendor management: Using facility monitoring and capacity-building programs, Gap strives to continuously improve supplier conditions by combining a comprehensive approach to improving conditions in the supply chain. The environmental impact of the vendors is also measured and addressed by the supplier monitoring team.
• Logistics + Distribution
• From supplier facilities, the Group ships products via land, sea, air, and truck, then forwarding them to stores and customers directly. As part of its commitment to energy conservation and reducing waste at distribution centers, the company uses the best mix of shipping options based on speed, cost, and sustainability.
• Retail Stores: The Group's sales still account for a significant portion of its more than 3,100 stores and leave a substantial environmental footprint. The company is constantly working to reduce this - not only by closing superfluous stores but also by increasing efficiency. In its stores, the company also runs a program to help young adults with barriers to employment secure their first job.
• Consumer Use and Circularity: GAP places special emphasis on educating the consumer, the end-user, to become more consciously involved in the product cycle. Recycling, donating old clothes, and selling second-hand clothes are part of this process. In addition to clothing labels, the Group also uses social media platforms to communicate with its customers.

Data-driven marketing

In the decades since its founding, GAP has always placed great emphasis on marketing and creating a unique customer experience, using TV commercials featuring supermodels, appearances in movies and TV series, and countless newspaper ads as important tools for positioning its brands. Young Cindy Crawford was one of the most iconic supermodels participating in GAP’s advertisements and catalogs.

Today, however, trends have changed, and while it is still necessary to advertise on these platforms, GAP has adopted a different strategy in the online space. The focus is on data-driven marketing, as experts in the company believe that the only way to regain old glory is to offer customers the most personalized experience possible.

GAP Inc built a sophisticated digital marketing technology stack to power its data-driven approach to personalization. The basis of these efforts is their proprietary customer data platform, which helps them develop an integrated view of the customer that they can use for marketing. Within its CDP, Gap Inc targets customers across multiple digital channels, blending first-party and third-party data. Ads are tailored to each audience segment based on data about the viewer at the time of ad serving, using a technology called dynamic content optimization.

According to Noam Paransky , Senior Vice President of Digital, GAP maintains tens of millions of records in its CDP, which would make manual segmentation difficult. The marketing team utilizes AI to assist with customer resolution, clustering, and segmentation. Additionally, they utilize AI and automation to manage advertising bids and optimize content.

The company's strategies are reflected throughout the supply chain. Importantly, the focus is not only on continuous cost reduction but also on the customer experience. Market research conducted by the company also confirms that environmental awareness plays a major role among customers, so rather than being hidden in processes, it is brought to the forefront of communications. Sustainability as a guiding principle is also present in all areas, from design and production to logistics and product distribution.

In marketing, GAP has always been strong, and with the opening to online, this corporate function has also made great strides. Today, data about customers' habits is collected in countless places to map the buyer persona as accurately as possible. These profiles make it possible to target potential customers very precisely and also allow personalized advertising and discounts.

Why is GAP so successful?

Growth by numbers.

In its more than half-century of existence, GAP has experienced two crises: a gradual one that had little impact on its figures, and the pandemic COVID -19. The latter not only forced the company to rethink its operating model but also had a serious impact on its share price and revenue.

GAP's current annual revenue of over $16 billion is made up of production from its four main brands: Old Navy, which evolved from a discount store, is first, followed by GAP, and only then the Banana Republic and Athleta.

Since the 2000s, the group has managed to keep costs down by closing hundreds of stores and reversing its previously aggressive expansion strategy, but the pandemic has eaten up more than half the company's cash during at least 6 months of stopped business.

Key takeaways from GAP's story:

• Collecting brands that resonate with different audiences: GAP has expanded its product line from the beginning, constantly testing what its target audience needs. In recent decades, most of its experience has been in launching new brands in the shortest possible time, with the Banana Republic and Old Navy having unprecedented careers under the leadership of GAP.
• Centralizing: Apparel brands targeting different customer groups are very similar in terms of production and supply chain. Recognizing this, GAP has gradually centralized its internal processes and designed the entire value chain so that it is not only efficient but also serves the company's respective values and culture.
• Not adapting soon enough: The Group has made several serious mistakes over the decades, one of which continues to resonate today because of its slow adaptation. GAP did not realize quickly enough that customers were turning to e-commerce rather than physical stores, and was forced to follow its competitors into the online space after losing its market leadership.
• Finally acting for a future: After a considerable delay, the website GAP finally responded and made some important changes - for accuracy, it should be added that the actual switch to e-commerce was mainly forced by the pandemic COVID -19. However, with digital marketing tools (AI segmentation, data mining, and customer profiling), the group is already able to sell more effectively.

The future of the GAP group is still completely open. At the moment, no one can say how many more years the founder will outlive his group. There are signs that a serious turnaround program is underway, so there is a chance that GAP can overcome the downward trend of the 2000s and the revenue gap created by the pandemic. The company's values are in place, and the group has all the tools it needs to become a market leader again, but is it sufficiently prepared for another crisis?

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Mind the Gap: Strategy and Execution of Supply Chain Negotiations

The case chronicles the challenges of a consulting team charged with developing and executing a negotiation strategy designed to help a large retailer cut costs by renegotiating their contract with their largest supplier.

The disguised case begins by describing the market conditions that led BizCo, a publicly traded office supply retailer, to invite DMB, a top consulting company, to help them restore their price competitiveness. It then describes the interactions between DMB’s consultants and BizCo’s executives as they developed a joint strategy and prepared together for various negotiations. The case focuses specifically on the processes and outcomes of BizCo’s negotiation with TQS, their largest supplier.

The case is written from the perspective of Elizabeth, a member of the consulting team. The suboptimal outcome in BizCo’s negotiation with TQS led Elizabeth to reflect on several issues related to designing and executing high-stakes negotiations. These issues include setting goals, managing relationships, establishing a division of labor within the negotiation team, choosing communication technologies for negotiation, setting the stage for the negotiation, and coping with time pressure and strategic surprises in high-stakes negotiations. The gaps that the BizCo – TQS negotiation revealed also led Elizabeth to reflect on strategies for influencing organizational leaders from a low power position.

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A more resilient supply chain from optimized operations planning

Across industries, companies that rely on transported materials for their operations have gained hard-earned knowledge from major disruptions over the past couple of decades, most notably the financial crisis of 2008, the COVID-19 pandemic, and geopolitical developments. During times of sudden upheaval, companies must quickly ramp down operations and then ramp up again once demand bounces back, adapt their execution, and revisit long-term plans. The supply chain has a special role to play, as companies rapidly shift their focus from cost-effectiveness to maximized throughput—all with the same assets and infrastructure.

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A poor response can have cascading effects, such as facility shutdowns or missed delivery obligations. In recent years, approaches that use data and analytics to identify answers and make recommendations to specific business problems have proved to be particularly relevant in bringing clarity to operations planning and thus improving supply chain resilience. However, the vast majority of companies have yet to implement such approaches in their supply chain, leaving a serious gap in their planning capabilities.

A recent McKinsey article 1 “ Building value-chain resilience with AI ,” November 26, 2021. examined three value chain approaches that can address this supply chain gap —simulations of reality, optimization of plans, and real-time control-tower monitoring (see sidebar, “How analytics supports different planning approaches”). Here, we examine the second approach in more detail, as it ranks among the most powerful tools businesses can use to navigate complex and changing environments, especially disruptions.

How analytics supports different planning approaches

Supply chain analytics can support planning efforts that broadly fall into three types. While optimization has been at the center of this article, two other tools are simulation and monitoring. All three require expert knowledge of the system, but simulation also relies on large historic data sets (exhibit).

Optimization models are prescriptive analytics tools. The main output is an optimal plan for the current environment. Optimization is most useful when an organization must create an ideal plan from scratch that factors in complex rules and constraints. A typical use case for optimization is building a monthly plan for operational production as part of the sales and operations planning process.

Simulations are descriptive analytics tools. In a simulation, a digital twin is constructed with uncertainty measures and operational inputs. Simulation is more appropriate for comparing or modifying existing plans in the face of uncertainty. Whereas optimization is more of a “black box” process, simulation produces explainable KPI-driven reports. A typical simulation use case involves examining an existing material network with uncertain production quantities, demand, and transit times to identify first- and second-order bottlenecks.

The third analytics approach is real-time monitoring. Most companies have a control tower serving as an operating nerve center. However, fully digital end-to-end control towers can increase resilience by expanding the scope of real-time monitoring to anticipate and respond to upcoming or potential supply chain disruption. Real-time monitoring is the most useful when seamless communication between various functions and integrated decision making are critical.

A combined approach is often best. For example, consider detailed railway scheduling. The complex rules and interactions require optimization methods to create valid plans, while simulation can then validate the performance and robustness of plans and determine the most effective delay-mitigation policies. Real-time monitoring ensures seamless communication between individual hubs in case of unexpected disruptions.

Organizations that want to get the most out of this powerful approach design their associated optimization tools and processes along five best practices: improve information flows between teams, elevate customer centricity, bridge the gap between long-term planning and day-to-day operations, understand true operational constraints, and use scenario analysis to ask critical “what if” questions.

As companies in manufacturing industries have discovered, following these design practices can increase supply chain throughput by 10 to 15 percent in the short term, with no change in assets or overall configuration. Organizations can also reduce costs by 5 to 10 percent and CO 2 emissions by 10 to 15 percent over the long term while increasing operational flexibility and resilience toward disruptions. This article details the design best practices that support this effort and how companies can get started integrating the necessary capabilities into their business.

Optimization in sales and operations planning

Optimization in operations planning involves determining the optimal choices for a set of decisions in a given business environment and business target. This type of optimization generally works best with prescriptive models that provide the ideal set of decisions as an output. The elegance of optimization is its ability to adapt to not only changing business environments but also shifts in the business target—for example, from minimum cost to maximum throughput, highest yield, zero environmental impact, or a combination of multiple factors.

For these reasons, optimization is the ideal approach to readjust a company’s operations as outside factors or strategic priorities change. For example, an agricultural company recently experienced dramatic rises in production costs combined with limited transport capacity, creating significant gaps in its ability to manage existing resource constraints. The company was able to respond by shifting its operations planning to an optimization approach that almost completely closed this gap.

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In essence, organizations can embrace optimization to support better, faster planning and thus increase value capture and resilience. Five best practices can sustainably improve supply chain decision making across the full coordination process (exhibit). To do so, the design of the corresponding optimization tools and processes must address all decision layers—from strategic orientation to operational execution. The best practices for optimization design explicitly address distinct layers and can thus enhance transparency and planning effectiveness.

1. Elevate customer centricity by enabling a pull principle for demand-driven operations

Customer-centric thinking is a foundational element for any type of operations planning. Tools and processes must be able to quickly translate demand into sequence and volume of production units and share this information with individual production sites. Optimization tools and processes can make these decisions rapidly and objectively, enabling both automated plan adjustments based on changing customer demand and faster responses by contact center agents to customer requests. Satisfying those requests can have a significant impact on operations. A commodity metals company was able to accelerate its decision-making process and thus more quickly react to urgent customer requests resulting from demand fluctuations caused by rapidly changing spot prices.

2. Bridge the gap between long-term planning and day-to-day operations

Short-term plans are typically shaped by current constraints, while long-term plans depend on outside factors that are likely to change. Effective operations planning addresses the in-between period, in which value can be lost in the gap between tactical vision and concrete implementation. Optimization tools and processes can translate mid- and long-term plans into detailed operational schedules, automatically accounting for dynamic conditions and complex operational constraints while allowing users to refine and explore possibilities. The gap is bridged in the other direction by feeding information on actual operations and deviations from control-tower monitoring back to optimization or simulation tools to continually minimize any loss in value. The agricultural company mentioned above was able to ensure its day-to-day operations remained in line with the long-term strategic goals and tactical monthly plans despite significant changes in the overall business environment.

3. Improve information flows between operations and marketing and sales

Organizations need to enable a consistent flow of information among stakeholders. Integrated supply chain planning tools  already bring together information from multiple systems and business functions, creating transparency and empowering decision makers while enabling analytics tools. Optimization tools and processes can be added to improve decision making. A tangible example of this interplay can be a sudden change in production capacity due to an unforeseen dumper breakdown. Integrated planning tools ensure all relevant stakeholders are aware of this change, but only optimization tools will actively steer and synchronize the decisions of the entire organization toward the ideal target in this new environment. Actions could include modified marketing and pricing of the respective products or the realignment of the supply chain. Comprehensive control-tower dashboards are then used by teams from various functions to support real-time decision making.

For instance, a mining company was able to quickly and regularly make updates to its product portfolio based on recommendations from the marketing and sales team. This coordinated rapid response enabled the company to keep its portfolio closely aligned with market demand at all times.

4. Understand true operational constraints by dissecting the infeasible plans

The exercise of identifying and avoiding infeasible plans often leads planners to review and adjust their operations. This infeasibility can come in the form of forced stoppages when operators are tasked with following an impossible plan or situations in which plans are unable to meet all known operational constraints. Control-tower dashboards can aid in understanding these constraints  and providing feedback. Optimization tools can then progressively integrate all these constraints into actual operations planning, thus providing consistently feasible solutions. In this way, the impact of optimization tools results in higher adoption, as they reduce the overall frustration level across the organization associated with these infeasible solutions. For one automotive company facing a shortage of semiconductor chips, a control-tower tool in combination with optimization-based processes generated more than $100 million in margin improvement.

5. Use scenario analysis to ask critical what-if questions

Planners must have an operational process that can run, understand, and evaluate scenarios for planning and scheduling. This process produces what-if questions that can inform discussions with sales, customers, and third parties and support better decision making. Optimization tools allow decision makers to focus on the “what if?” and receive immediate and risk-free feedback on the consequences, thus streamlining and lowering the barriers to asking insightful questions. Recently, a pharmaceutical company was able to improve overall throughput and on-time delivery by using optimization tools that enabled asking what-if questions regarding rush orders, staffing shortfalls, and capital expenditure investments.

Get started with an appropriate business opportunity

Many companies have yet to make significant investments in optimization for their operations planning. Often, organizations have not even undertaken the analysis to select the business opportunity. In addition, discussions around optimal business targets that cover the most relevant trade-offs are often ignored, as they reside between functions and are thus considered “off limits.” Picking the wrong operations element or business target for optimization diverts finite resources from what truly matters and represents the biggest risk of failure.

The key is to identify a process that satisfies three criteria: first, the overall decision space must be so large that an individual planner can’t explore and understand all the possibilities at once; second, the quality of outcomes must be objectively measured and assessed according to a well-defined and accepted target; and third, the potential for improvement must be measurable and ideally quantifiable—for example, costs, throughput, CO 2 emissions, profit, or a combination of multiple factors. The mining company focused on profit by adjusting the supply chain in line with the optimal product portfolio, and the agriculture company emphasized the marginal costs of incremental production. The metals company selected a combination of throughput and yield while maintaining high customer satisfaction. The automotive company minimized lost revenue coming from supply chain disruptions. And the pharmaceutical maximized on-time, in-full delivery.

Companies must ensure their optimization program identifies business opportunities and associated targets that are not properly covered by the existing manual processes. However, any optimization-based approach must retain an adequate level of human judgment and expertise to account for unexpected situations and outliers. Optimization should aim to augment and empower human decision makers but not replace them.

Common pitfalls in data gathering and infrastructure

Companies should avoid directing time and resources to elements that aren’t necessary for high-functioning operations planning. For example, contrary to conventional wisdom, large longitudinal data sets are not required. Optimization for supply chain planning can typically be built by drawing on knowledge gained through expert interviews as well as snapshots using a small amount of the latest business data. Both elements are present today, as organizations need access to this information to monitor supply chain performance in the first place.

Future-proofing the supply chain

Similarly, companies should avoid focusing on building new data-centric infrastructure as an initial enabler for operations planning—either to capture and ingest data more frequently or to host new, complex analytics solutions. Instead, operations planning solutions can run infrequently, use small-scale data, and typically be implemented alongside and connected to existing tools and systems. In this way, these solutions are complementary to common end-to-end planning cloud solutions and maximize the value organizations can extract from existing resources.

In a recent case study, the large mining player developed an optimization-based process to improve the supply chain of its trains, vessels, and mine operations over short- and medium-term horizons. The process was aligned with the company’s strategic target regarding customer specifications and overall production goals. Embedding the optimization process into overall decision making allowed the company to improve operations significantly. This move alone captured many millions of dollars in cost savings.

In a world characterized by increasing volatility and major disruptions, the maturity of operations planning has the potential to increase the performance spread between first movers and laggards. So far, bigger corporations have taken the lead in implementing approaches to optimize their operations planning, given the resources and capabilities required. Whether optimization is within the reach of all companies is still an open question.

Hossein Aghai-Khozani is a consultant in McKinsey’s Munich office, where Sebastian Reiter is a partner; Simon Bull is a consultant in the Copenhagen office; Valerio Dilda is a senior partner in the Paris office; and Lapo Mori is a partner in the Denver office.

The authors wish to thank Eddie Elizondo, Shailesh Lekhwani, and Tarusha Moonsamy for their contributions to this article.

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Home > Case Studies > Retailer Successfully Navigates Supply Chain Gap

Retailer Successfully Navigates Supply Chain Gap

Supply Chain

A regional supermarket chain needed help predicting opportunities when a supply chain shutdown made its leading hummus brand unavailable.

Circana created a plan to mitigate supply chain shortages with customer analysis to predict the top brands consumers would likely switch to. Our analysis also showed that hummus category buyers are loyal to flavor when changing brand.

The retailer’s decision to invest in private label and other targeted brands during the supply chain gap helped the retailer successfully cover lost volume. Our post-analysis work also supported the category manager’s view to redistribute products based on existing sales and customer flavor preferences.

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Advances in Asset Management and Condition Monitoring pp 135–146 Cite as

The Development of a Maintenance Gap Analysis Tool for Use Within the Automotive Supply Chain: A Case Study Perspective

• Derek Dixon   ORCID: orcid.org/0000-0002-9288-5621 6 ,
• Kenneth Robson 6 &
• David Baglee   ORCID: orcid.org/0000-0002-7335-5609 6  
• Conference paper
• First Online: 28 August 2020

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Part of the book series: Smart Innovation, Systems and Technologies ((SIST,volume 166))

Automotive manufacture contributed £82 billion to the UK Economy in 2017. In addition, the production of vehicles within the UK continues to rise, with 1.65 million vehicles produced in 2017. Lean production methods, compounded by synchronous delivery to an Original Equipment Manufacturer (OEM), ensure membership of the automotive supply chain is challenging. To meet this challenge, participants in manufacturing operations within any business must operate both effectively and efficiently. Interestingly, despite the apparent success of the industry, research has revealed that disjointed maintenance practice within the supply chain is evident and augmenting a difficult production environment. This research gathered empirical data from four case study partners who operate at Tier 1 within the automotive supply chain. The findings demonstrate the majority of research participants operate with an underperforming maintenance department due to a number of barriers and constraints. A worrying consequence of poor maintenance execution and an unsupportive maintenance culture has also emerged. To mitigate the risk of poor maintenance performance, manufacturers are retaining excessive safety stock to ensure delivery targets are met. As well as establishing constraints preventing maintenance performance, areas of best practice have been highlighted, with both characteristics integrated into a Gap Analysis Tool. This paper will discuss the development and subsequent testing of the Gap Analysis Tool with one case study participant and the potential impact for a manufacturer within the automotive supply chain.

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Dixon, D., Robson, K., Baglee, D. (2020). The Development of a Maintenance Gap Analysis Tool for Use Within the Automotive Supply Chain: A Case Study Perspective. In: Ball, A., Gelman, L., Rao, B. (eds) Advances in Asset Management and Condition Monitoring. Smart Innovation, Systems and Technologies, vol 166. Springer, Cham. https://doi.org/10.1007/978-3-030-57745-2_12

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The electronics industry is facing steep supply chain challenges, reaching all the way back to the raw materials that make up those tiny components keeping people connected in real time. 

A leading electronics supplier that provides mobile devices to consumers and public entities was experiencing shortfalls due to overreliance on materials and manufacturing in Asia. A perfect storm of factors, including the COVID-19 global pandemic and widespread geopolitical instability, has weakened the global supply chain, and cross-border labor is no longer guaranteed.  

Transportation delays, both in the air and on the water, are extending production lead times. Country-specific tax and trade regulations are also threatening shipping timelines and slowing product delivery dates for customers.   

“Corporate leaders at this electronic device company recognized that supply chain resilience has become an urgent business imperative for their organization,” said Jim Morton, Executive Director for the Ernst & Young LLP Business Consulting supply chain practice. “With most of their customer base in the US, they recognized that they needed to diversify their sourcing and production options as effectively as possible, which meant varying manufacturing locations to complement their global portfolio.” 

Leaders engaged an integrated EY team experienced in   supply chain modeling and optimization , tax and trade. The team developed a comprehensive plan that would diversify manufacturing and alleviate the organization’s long-term supply chain risk. 

EY teams’ extensive tax experience, deep understanding of global incentives and locations, and keen geopolitical business perspective showed the client how it can continue to help consumers access critical mobile devices and carve a sustainable new path forward for its business.

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With its deepest manufacturing roots in Asia, the mobile device provider needed to diversify its production footprint. Supply chain disruptions, longer ocean transport times, region-specific trade restrictions and frequent unexpected delays were pushing leaders to consider adding manufacturing sites closer to the US – the location of their corporate headquarters and most of their customer base. 

Research from EY teams shows that 64% of companies have re-shored some elements to improve sustainability. In addition, 42% of companies said that ensuring sustainable and diverse sourcing was a priority. With data such as these in mind, the company turned to an EY cross-practice team for a strategy to augment core operations in more accessible and stable locations, reducing its overall supply chain risk while maintaining existing operations in Asia and elsewhere. Faced with a daunting and costly business decision, leaders needed assurance they could diversify their manufacturing and still procure the right materials, maintain quality standards, and deliver reliable products to meet urgent user needs.  

The EY team assessed and designed a more diverse supply chain network with the company’s global business in mind.

Supply chain optimization was done based on a computerized model to assess the global supply chain, mapping raw materials to flow of goods, to distribution centers and finally to customer locations. The model evaluated current networks against future state options, assessing millions of site variables rapidly to provide leadership with the informed perspective they needed. The EY digital model brought an integrated view of the tax considerations inherent in ramping up manufacturing in new sites and countries, including customs duties, direct and indirect tax implications and country-specific regulations. The EY Geostrategic Business Group provided clarity around government labor, trade policies and local laws to further optimize recommendations, blending speed and cost to enable on-demand inventory.

"With recent supply chain disruption, trade wars and geopolitical uncertainty, this global electronics leader needed an integrated supply chain model so they could successfully diversify their manufacturing portfolio, avoid production delays, and address country-specific issues,” said Morton. “The EY supply chain optimization model helped them make more informed decisions and select their new manufacturing site in North America.” 

End-to-end supply chain analysis was conducted by tracking the company’s highest-priority devices. Validated data inputs were primed and transitioned from a flow-constrained model to a demand-driven model. The analysis evaluated economic value added with the future state footprint, insourcing vs. outsourcing manufacturing operations, tax considerations, skilled labor availability, geopolitical factors, ESG and carbon footprint impact, and the reduction of supply chain complexity.

A supply chain scorecard was created by the EY team to help leaders evaluate manufacturing sites more critically, assessing six key supply chain factors:

Using the information gathered by the EY scorecard and digital assessment tools, the electronics company was able to ultimately select a new near shore location as its next manufacturing site. With this new location identified, EY teams will now work with the client to build out a roadmap to ramp up operations – including manufacturing providers, tax implications, geopolitical and regulatory guidance.  

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The EY digital supply chain optimization model helped the electronics leader assess site locations across countries, geopolitical factors, trade implications, trade risk and tax regulations. The manufacturing site scorecard helped the company narrow down possible manufacturing sites and identify specific locations within countries that will help the organization further reduce their carbon emissions by 15%. The supply chain solution will also increase the organization’s efficiency by reducing the length of haul from production site to customer by 50%, and by lowering labor costs.  

 “Our integrated supply chain model, which included extensive tax experience and deep geopolitical business perspective across locations, provided this electronics powerhouse a solution that would help them diversify and de-risk their supply chain, allowing important communication devices to continue to be readily available worldwide,” said Morton.  

As the company works to ramp up its newest manufacturing location in North America, EY teams will be on board to help it conduct continued geopolitical and tax analysis, develop end-to-end supply chain analysis, establish timing, and evaluate distribution footprint expansion.

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Watch: Navigating Your Supply Chain Challenges — Help Is on the Way

Uncertainty is the only certainty in supply chain these days, so implementing the right technology in your operations is key, says Benji Fountain, account manager at enVista .

In Fountain’s view, three major areas have captured the attention of warehouse and supply chain operators today: automation and robotics, applications in the cloud, and artificial intelligence.

“A lot of people are looking to combat the challenges of getting people to work in the warehouse or of retaining them,” he says. “So they're looking at automation and robotics to make their operations more efficient.

 “Second,” he says, “I think we've seen a clear shift to the cloud and supply chain applications. A lot of these on-premise solutions are now being hosted in the cloud.

“And the last one that's on everyone's mind is incorporating AI into our supply chain to make it more efficient.”

Fountain believes artificial intelligence may be highly beneficial in inventory management. “Think about where that inventory is sitting, and the analysis you can do when looking at the flow of your inventory,” he says. “Incorporating those metrics that you're pulling from all these different data sources allows you to make the best decisions.”

Sustainability and resilience could easily be two of the most frequently used words by supply chain managers, but “adaptability” is the word Fountain uses to characterize the supply chain space in 2024. When he reviews disruptions in recent years, not least of which is what the pandemic brought on, he says being able to adapt to whatever comes one’s way is essential. COVID-19 revealed the inadequacy of the just-in-time inventory model, he says. Then, in post-pandemic days, too much safety stock was kept on hand.

“I think being able to adapt on your feet and make those decisions to run an optimal supply chain is going to be the key,” Fountain says. 

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