This is a transcript from a session recorded at PI Apparel Supply Chain Forum 2022 in New York. The session can be watched in full here.
All right. So quick introduction about myself. Alex Thomas, the vice president of Global Quality and Manufacturing Engineering, based out of our supply chain hub in Hong Kong. And I must say the first time that I’ve been out for the past three years, out of the country with I’m sure you’ve heard of the messiness and has been fantastic to see people in person, people who we’ve been talking to have meetings weekly meetings, monthly updates, quarterly updates all on Zoom.
And the first thing that strikes you, as one of my colleagues, is how tall a shot they are, completely unexpected. Did you know after after three years of looking at a two inch zoom window, the first thing is like, wow, did not expect that. So fascinating. I’m really glad to be able to be here in person. All right.
So a gap, as you may know, is a $16 billion holding umbrella for the full brands that we own. First and foremost is Old Navy, $8 billion in revenue and are the target market. Is democracy your style? It’s our value brand. Second is our Gap brand, our namesake American heritage and the classic Americana that that we serve our customers with Banana Republic, outdoor travel inspired, higher priced, casual, formal wear.
And last but not least, Athleta is our is our women’s and girls brand that’s with the power of Xi. So between these four brands we serve 50,000,055 million customers across Asia, Europe and the US. All right. So this is a quick highlight about the company and with with the customers. We serve it. This is this is our scale.
So on an annual basis, we have we saw sort of 25 countries or more, 156 million teas, 73 million units of denim bottoms, 21 million woven shirts, footwear and 35 million units of sweaters. Right. So this is our upscale and supply chain and getting for pulling this together is from 600 million yards of knits, denim woven and about quarter of a million yards of of blended fabric.
So this is our this is our our supply chain from fabric accessories all the way to garments and then selling our products.
Fashion and the disruptions. Many of you have lived this over the last three years. No obvious surprises. First and foremost, factory port disruptions, goods stuck in Long Beach, California for eight, ten, 12 weeks. Delays when you find shipping to shipping date to be confirmed, know most of you have seen that geopolitical trade factors countries getting banned, countries getting on a watch list.
And the impact is that rapidly moving to new sources of supply of raw material cost massive yo yo know cotton prices up 300%, then down 50%, then up again. Petrol prices from polyester up 200%, then down 100%. The pace and the frequency of these changes has been unprecedented in the last few years. Right? You’ve seen typically there’d be one or two events that happen every few years.
You know, you take it, you plan and then you reconfigure. This has been pretty much two or three events every single year. What that led to is a total lack of predictability. The more black swan events, the more issues, the less we’re able to say, Hey, what do we do going forward? How soon do we have to reconfigure fire drills every week?
And the obvious issue is supply chain constraints. You know, when you’re moving thousands of containers of goods every day, the the lack of predictability is a massive issue with fashion. The first and foremost is the recalibration of the supply chain. Our supply chain is contingent on buying materials, fabrics from one area, moving to a different area, getting it to a third area, and shipping it to a fourth area.
Massive logistical, just in time movement. All the disruptions have led to the first big change, which is regionalization and verticalization. So the more vertical we’re able to keep our supply chain, the less variance that we see in the final shipping. So that was our first first learning and moving in the space to omnichannel. So you’ve seen this again.
You’ve had when the pandemic was on stores shut, e-commerce was on a rocket, everybody was buying things online, the stores opened, e-commerce went down and everyone was moving to brick and mortar sustainability. This is where we a lot of questions from a lot of comments, sort of feedback from our customers where goods are being made. Are they in regions where they’re not supposed to be made, which is linked to transparency and traceability?
What, when, how and where? Very, very critical factors in getting goods into the US, getting you’re getting them into Europe and the customer centricity is all the feedback we’re getting. Again, this is with all the social media that the amount of the data points to, the number of feedback and the and the quantum has again, it’s been a huge, huge shift in what we’re getting and what we do about it.
So all these had a massive impact on our ability to have speed and agility, which is what our supply chain drives every year. So the last piece is the industry 4.0. Again, in the middle of all this, all this disruption, the ability to move at scale has been massively brought forward by Iot devices and automation. Any So this is a garment factory.
Any guesses which year this is from 30 plus. I’m not quite 17, 20, 20, 19, 20 so it’s 120 years. So it’s a close. So this is 120 years old, right? So the apparel industry has not moved that much. There’s been some changes, but the whole sequential movement of eight to be handing over one part to the next, it’s largely unchanged.
You know, we’ve got production lines, we’ve got hanger lines, lean lines, but product flows roughly and change in the last hundred and two years. What has changed? Is this the what in the hell? We’ve improved on fabrics. We’ve improved on materials, we’ve improved on trims, and the how is with our suppliers, our factories, our manufacturing processes. And all this has been governed by a set of key performance indicators.
So I’ll keep you guys are getting more and more nuanced. We’re getting a lot more data points, dashboards about what the how and how that’s impacting our business. For those of us who’ve been working in supply chain for the past past decade, couple of decades, this is something which most of you would know as the the three legged stool know getting goods from A to B, they basically have to meet quality, cost and delivery.
ight? These are three big, three big elements that we have to meet and exceed it for supply chain. Fast forward 20, 20, 20, 20, 21, 22, that’s no longer enough. So great product is still at the apex and the great product is four for one. It’s beyond equal for the quality professionals in the room. You’re all aware of equal acceptable quality.
That means you have one out of five as a defect, one witness, a defect and percent, 20%. That’s the accepted way of production. But that’s that’s not good enough anymore. Even the customer feedback we get on one defective garment has an impact and continuous improvement. So product quality has to improve year on year. What we did the last year has to be what we do this year has to be better than what we did the last year.
Agility and resilience, right? So lean manufacturing excellence. So the lean is a huge push on getting lines configured fast lines, responsive lines, and getting innovation to scale quick changeover. And together with that you have the nodes, the network where we get our fabrics, raw materials into linings, linings, all that goes into a product. So massive impact on on how the agility of the product is governed by these elements.
And cost is not just F or B, it’s tariff engineering. This little tweak on the garment will give you X percent duty saving. You have smart solutions like Shapeshifter with market optimization, and in some elements the cost goes down to the fourth decimal point. Then there’s cost engineering as well, where we make what we make. I last but not least, suspense, transparency leading to sustainable growth and sustainable growth is not just moving from A to B, a country to country.
As one of my previous colleagues used to call the garment business more ordering garments going from one place to the next. That’s that’s that’s completely that’s done. You know, we’re in all the places we can be. So what’s important now is automation getting sustainable costs and reducing your costs through these technologies. The final piece is the ecosystem. So when the past we had our suppliers brands, it was a give and take relationship, right?
I’m a brand, you’re a customer, you’re us, you’re a supplier. That’s that’s pretty much out of the window. And suppliers and brands are our partners in this know it has to be it is rather it’s mutually assured destruction. One can’t live without the other and that’s in service of the customer. The feedback we get, the input we get all goes in this virtuous cycle towards what we supply, how we connect and back to the customer.
So with all this complexity, what’s changed from the the the three legged stool is five big elements of the thread that weaves this together. Top left is our control tower. Next is analytics, predictive analytics. Bottom left is innovation, which is a baseline for entry. It’s not just a nice to have and the voice of the customer. What we get back and linking all these elements together is the culture, possibly the hottest part in this in this piece, the control tower is, is a really big element on on how we manage our supply chain.
The first and the biggest impact is, of course, business continuity. So we get signals about where the goods are being made, how the goods are being made, which impacts speed and agility. Is that a macro event? Is that a flood, is an earthquake somewhere? How is that going to affect our shipping lines? Is something not able to get to a factory on time?
What do we reconfigure the the production lines with? So these are all dynamic changes that that happened and that has a massive impact on speed. You know, if we do this, then you get faster and the agility towards quick run changes, quick movements. The second part is the analytics and the data that we get. Most of us in supply chain know that a lot of the data is is lagging indicators, meaning we know that a garment is defective after you see the defect, you know, when something is shipped, after it’s shipped, it’s all looking at the rearview mirror.
So what we’re trying to do more and more is what can we do to see in the future? You know, how do we get more predictive about this and plan better? So this is fundamentally linked to all the data points we get. So on the data, which is part of the a big element of getting supply chain done is the first off, you have our science based and data driven approach towards all our KPIs and the three big elements we look at product performance and process.
Your product element could be how the product is attributed. It could be a defect rate, it could be a ship on time element, it could be a full point four fabric, it could be fabric. Moving from A to B performance is how the product performs. So it could be a test data, could be a fabric package test, a chemical compliance test.
And the process is perhaps the highest weighted element it has the biggest part of the pie. A good process yields a great product. So this is where we spend a lot of our time and so talking about data, what we’re trying and doing is getting towards as much of a big data as possible to get more and more predictive.
And we do this by looking at these five big buckets. First off is a volume of data, which is the number of data points that we get, which is the time that we get data on variety is the different types of data product attributes fit quality impact, inline inline velocity is the speed. The faster we get data points, the faster we can make, we can take action on it.
And these three elements, the top half, are pretty much a baseline towards getting more and more and more predictive with our outputs and getting to an index veracity is truth how accurate the data is. So we have our internal trust and verify models. We have a trust index. So you know, how much do we trust the data that we’re getting that we’re getting from all these different points?
And lastly, the value where most of you have seen, there’s a lot of data coming through. You know, do we really need to see this? Is it making a difference or not? Okay. The next slide, please. Okay. So linking all this is the voice of the customer. So at gapping, we have a we have a pretty good platform.
We get about two and a half million lines of data from all our customers feedback and telling us what they like about a product, what they don’t like about a product. So this is some of the feedback we get. Love the stretch, how to get a smaller size, not grippy enough on my body. So what we found was that there was a little too much brushing going on on the garment.
So increase the brushing or reduce the brushing of the garment and stretch and recovery. What do we do? The fabric properties, You know, based on this feedback, do we do we allow a bigger modulus? This is all the data that goes back into product creation and then back in the back of the cycle about getting better product for our customers.
This is just a quick example about some of the work we do based on our voice of the customer. So we get, for example, pair of jeans. You know, we want we expect an average of four three wear, which means 102 washes. You know, you wash it once a week, twice a week active way when you’re running in something or you have yoga pants, wash it everywhere.
So it’s got to last a minimum hundred washes. So based on the data that we get, something’s working, not working. We then improve and change our product accordingly based on what we need or rather based on what the customer’s telling us. This is a little more of the harder piece, but the more critical piece about getting to a high performing organization.
So there’s two parts here, and this is our company culture. The first part is what we do, and the second part is how we show up. So it sounds like catchphrases, but as time and effort we spend that, the more you repeat it, the more you show actions about how this is coming to life, the more real it becomes.
Try fast, learn fast, fail fast, create with audacity. Think about the customer. You know, not what the department wants, not what this division will. So what a manager wants, but what does the customer want from this? And focus this into getting our actions into making a better product for the customer? I speak with candor. That’s in other places.
It’s it’s psychological safety as a baseline in any high performing, high performing group or entity or firm. And this is the how we show up and what we do. So the talent on people, you know, how do we how do we motivate and get the best people with us, you know, who are able to make and drive the change for the company?
Do the right thing again, It sounds easy enough, but in the apparel space, it’s the values driven company. There’s a lot of things we don’t do as much of what we do. So this is again a constraint on on what we can do and what we shouldn’t do as a company based on our values. Inclusion is how we act the same, whether it’s in New York, San Francisco, China, India, Vietnam, everywhere within our sourcing entities that we have, having the same behaviors, activities so that everyone is part of the same culture.
They feel the culture and the last piece is execution on it. Do it done, Walk the talk. Any guesses where there’s pictures from? You Got it? Yes. Minority Reports 2002. So for those of you who may be familiar, Tom Cruise precogs, they can tell the future. And the exciting thing is we are here today. You know, we have precogs in our system.
You know, we have artificial intelligence. We have predictive capability. We’re able to say, hey, with all these different datasets, we can predict with different levels of certainty what’s going to happen. Right? So this is, again, a big part of where supply chain is moving ahead. So it used to be making garments, making product, but is making garments making product with this, knowing what do we do going forward and how fast can we get there?
And with that, thank you very much. And that’s me here with my microphone. Thank you, Alex. That was I was like ravenously taking notes. I forgot to introduce myself because I was working on Tuck and I also teach at Framingham State University. So I’m looking for many guest speakers as I’m here over the next few days. But this is our opportunity now to ask questions to Alex.
So do we have, I don’t know if anybody here we go. They’ve already started. They started rolling in. So you can use Slido at this point. So our first question is how can vendors play a more strategic and empowered role further up the value stream? Yeah, good question. So this is something we’re actively working on. So in the past, like I mentioned, you have this vendor brand relationship, right?
Where you have the supply and demand and you produce to a purchase order. That has been changing over the past few years. Now this co-creation, we work with our partners to say, you know, you co-create it from the beginning. What what are your trends? How do we build this together? So when you co-create a product, then a lot of the tactical elements that used to exist where you make the product, you go in QC something you check, something that’s that’s done right.
So we now say, Hey, we as a strategic partner, this is what we expect. And best of all those data to see how we’re doing, right, right. For OC, How are this is the next question. How are you? that one just ran away here. They’re changing as they go on this. Great. I think the next question is, has gap set science based targets for achieving climate goals?
Climate goals? Great question, but I’ll have to defer to my colleagues in sustainability for that. Okay. Yeah. All right. So if someone wants to meet up and find out about this, I can certainly put you in touch with the right department that will give you that information. I will. I would like that information too. So. Okay. The next one is how are you using technology?
Will this also you might need to refer on to your team, but your sustainability team, How are you using technology to improve sustainability in your supply chain? Using technology to improve or sorry lost that using technology to improve your supply chain in regards to sustainability, I think that was the question that just ran away. here it is.
How are you using technology for sustainability in your supply chain? Yeah. Again, I wouldn’t be the expert on that. And if anyone wants to meet me in the next bit today and tomorrow, happy to take your question and come back to you on this. Okay. This one might be easier for you, at least for within your department. How do you feel predictive analytics will be leverage utilized in the day to day decision making?
And what areas of the business do you feel might be affected First? That’s a mouthful. Yeah, there’s a lot there. Predictive analytics. So this is this is a multifaceted question. So we have everything from the three big pillars, right? We have quality cost delivery, your basic fundamentals. So with quality, we work on indexes, you know, so we have the those three buckets, you see, and that gives us an index.
And that would actually predict what would be an output. So if you use this fabric, if you use this leather made at this factory in this country, this is how your output would be. So we’d say, Hey, that’s not for us. You know, so these are the five options. We choose something else. So this is where we’re able to say that if you have this combination of attributes, then you will have a problem.
If you do this, there’s less risk. So that’s the outputs that we have. Okay. So how do you rapidly validate pre cog data against what customers truly want? Yeah. Good one. So this is this is a biggie and it happens on multiple levels. Now our viewers see data this is this a lot of us there’s lot of information that we get from our of to the customer.
So give you an example. So sometimes we get information from our customers saying, hey, this is what this is what was on your website. This is what I got. It’s not what I expected. And then we’d find out that someone had maybe pinned the garment a certain way, you know, So it doesn’t represent what the garment actually looks like.
So we’re able to make a change in minutes. And other times we say, hey, the government, is that as a fit or a lot of fabric that was made, but the customer’s not responding, they don’t like it. And that’s going to take us a longer time to change, you know, whether it’s the next purchase order or the next season, that’s when we make the change.
So the the test and respond is how we’re able to quickly make changes on what feedback we get. It’s pretty amazing. Okay, what are you using to capture and record the video? See feedback you spoke of? Yeah. So technically there’s two platforms. One is power reviews that you may have heard of to get the the actual data on the website.
And we use combinations of Clatterbridge and Medallia Medallia scrapes all the data gives us an indicator of the positive or negative weather and it gives us attribute based data as well. So a combination of these three elements gives us the velocity. And on top of that, we also have a lot of well-intentioned partners, you know, whether it’s our own teams who who come and give us data and maybe they’ll write to an executive directly saying, I don’t like it or I like this.
So I’d say 90% is done systemically and 10% through other channels. Okay. I want to ask a follow up question. How big is this team that’s like monitoring this bossy project category? A lot of it is automated. So we have you know, we get a scrape, we get a flag, so we have customer insights group 20, 30 people, we have corporate quality, we have a few people sitting in San Francisco.
So between them they share data. But a lot of it I said is is automated towards what we get. So it doesn’t need a huge team, right? It takes a huge team of robots. Yeah. How does your team manage or mitigate deadstock and inventory build up? Yeah, Deadstock and inventory again. Good question. I know we have multiple ways of handling this.
One is we work with a lot of, we work a lot of charities, we work a lot of organizations. I think similar to those you might have heard of with I don’t know, bombast is one of those companies that does something similar where they work and have different channels for for redistribution of this. So that’s one option. But again, I’m not my area of expertise, but I can certainly find out right what aspects of industry 4.0 have you found to be the most difficult to implement and GAP warehouses?
That’s a pretty big question. What part of industry 4.0 fun to be the most difficult. There’s multi elements to this you know right from getting a a a track kind of element on a cart and finding the way through where the risk kept. It’s we’re trying to solve multiple problems in distribution. You know starting from how fast can we get the goods out, how can we replenish the stores versus omni.
So it’s a pretty big space with different problems to solve. So it’s not one piece that I’d say we have a difficulty in implementation. How do you account for assumptions built into your predictive and our analytics? Yeah, this is multiple testing, learn cycles. You know, So again, there’s no magic bullet. It says we’ve had as many, I’d say false starts failures as we have successes.
But the more we kind of test and learn, we say, Hey, we did this didn’t work, and therefore we need a different set of assumptions, you know, So we have So you have 15 attributes mapped against another 20 attributes, right? On a on a, on a on a scale. And then we find out that some attributes going back to value, they’ve got no value to be there.
So it’s giving us a false reading, right? Chris, You’re doing great with the questions, by the way. So many good ones coming through. So the next one is how do you take VRC data to impact continuous improvements on your product? This is a big one. This is where we said we we have a lot of input on on customer feedback.
So how we continuous improvement in product, The first I think the biggest elements are the wedding experience. So whether the customer tells us, hey, it’s either our government is pulling, which means something in a wash or fabrication is a problem, so we change that. Another element is the the fit know. Sometimes we make a boxy fit, which is which.
We had a lot of feedback on saying that’s going to work, but the customer doesn’t respond to that, you know? So depending on what kind of feedback we get, then some changes made and made in minutes and hours, others can take a season. It’s pretty amazing. Okay. I think there’s one question in the middle here we haven’t asked what areas of the legacy, the 1920s image business model do you feel will be the last bastion of analog processes or do you feel all areas are able to be evolved?
It’s a it’s a process. The last area of or the last bastion of an analog process. So the way that we have right now is really interesting meeting that we had with Alibaba. You know, they’ve got a factory in north of China. So we one of our partners, you know, we we we spoke to them to see what they’re doing.
So they’re running apparel like a tech company. Right. And the analog process for, well, one of the most analog processes, sewing sewing operations. So that logic is the harder or stiffer material is the more easy automated, the softer a flimsier, it the less it’s possible to automate. Right. So sewing, I guess, is the one area, if you look at the different garment processes, cutting, sewing, assembly, small parts, inspection audits, shipping, you know, the whole product to market cycle, the cutting inspections are obviously easier to automate.
The sewing part, you know, you have a certain fabrications are easier, certain fabrics are not so that probably be the the least or probably take the longest time to change it. To change it, you have to automate and and evolve right? I think that was our last question. So unless there’s any other pending questions here, that one.
We have one more. Okay. This is the last one. How do you feel? Comprehensive virtualization, digital digitization of business processes will affect interpersonal relationship in business locally and globally. Good end or comprehensive virtualization, digitalization of business processes, interpersonal ships. I’d say on one part it’s almost inevitable that certain changes that have happened with the pandemic that’s irreversible.
There’s been on the part of, I’m sure many of you in the room you’ve had you work with partners, worked overseas, had touch of fabric, had to feel and see how it fit virtualization again the last many years. You can do virtual fitting, you can do virtual garments, virtual photograph, and yes, it does have an impact. You know that there is a relationship.
But if I were to quantify it, tell the one big aspect is there’s been there’s been savings and cost savings and time improvements in quality. So to give you an example, you know, so we used to say that you had to visit a factory to see what’s going on, and yet a lot of people on planes, trains, automobiles, going to every factory looking at stuff.
But we’ve actually set up procedures, you know, where we can do a lot of this virtually. And well, there have been a few a couple of issues. By and large, our CPUs and multitude of data points we look at hasn’t had it hasn’t dropped. You know, it’s it’s in some cases it’s improved. And if you’re doing that digitally, how does that affect your relationship with your factories?
Then? You know, you’re not seeing them in person, you’re seeing them on Zoom. Is that is it the same? Is anything changed? Well, we do still meet and see our partners, but it’s not as often as it was, you know, where maybe in the past it used to be once a month, once, you know, once a quarter. Now it’s, you know, we still have Zoom sessions on a weekly, monthly basis.
Right. But we still have in-person meetings. That was not completely obviated.
