"Imagineering" a supply chain

If you've spent any time at Walt Disney World's Magic Kingdom, you may have been struck by the total absence of trucks, vans, or other delivery conveyances traversing the grounds.

There's a reason for that. As a filmmaker, Walt Disney knew movie audiences had no interest in seeing on screen the klieg lights, boom mikes, and other unglamorous equipment necessary to support the film's production. When his company built a theme park out of Central Florida's orange groves in the early '70s, it decided to follow the same principle when it came to its supply chain. To make material handling and movement invisible to the parkgoer, Disney constructed a "Utilidor"—short for "Utility Door"—a one-square-mile wide labyrinth one level below the park's main streets.

The Utilidor feeds goods—sans conveyances—to the park's attractions and plays a pivotal role in ensuring that merchandise is available when the customer wants it. Disney's goal is to keep three days of inventory on hand at the Magic Kingdom's stores as a hedge against stock-outs.

To Disney's supply chain executives, who were out in force at Tompkins Associates' Supply Chain Leadership Forum in Orlando in late August, the Utilidor basically exemplifies the company's logistics model at work. While the supply chain may be a critical contributor to the "story telling" that's at the heart of Disney's value proposition, it remains firmly in the background, never interfering with the "magical" aura that Disney cultivates. Disney's supply chain folks even coined the term "imagineering" to describe the convergence of precise engineering and execution with the imagination and "magic" that makes the company one of the world's cultural icons.

Disney's supply chain folks believe the work they do and the brand they support are tightly intertwined, and they leave nothing to chance in both strategy and execution. "The brand is priceless to us," Lynn Barratt, director of supply chain management for Walt Disney Parks and Resorts, said at a lunch presentation in Orlando. "You can have one small thing happen in your supply chain, and you could be paying for it for years to come."

With about 90 percent of Disney's immense market capitalization tied up in so-called intangible assets like reputation management and intellectual property, Barratt's comments are hardly lip service. Indeed, the biggest challenge facing Disney's supply chain gurus is to convince top management that the supply chain is not just a vehicle for cost savings but an invaluable tool for building and nurturing the brand. To that end, Disney has developed an "Acceptable Presentation Index," which measures among other things, how consistently the company has the right product in stock at the right store.

For the Disney supply chain folks, the biggest opportunity—and the biggest challenge—may lie ahead. Within the next three to five years, Disney will open a $4.4 billion theme park in Shanghai, China. The projected attendance numbers for the new park are staggering. John Lund, senior vice president, Disney Parks supply chain management, estimated that 300 million people—roughly equal to the U.S. population—live within two hours of Shanghai and are, in his words, "income-qualified" to fork over the yuan required for admission to the park.

The scale of the Shanghai park may be unprecedented. However, it is unlikely Disney will alter its fundamental operating model to fit the new location. Its goal is to leverage flawless supply chain execution to create "tangible memories" for its customers. Whether in the United States or China, if a seven-year-old girl has her heart set on a pink dress like the one worn by Belle in "Beauty and the Beast," its goal is to make sure that dress, in her size, and in that color will be there when she is.