Blue Apron Reverses Course on Plant Closure

The beleaguered meal-kit company Blue Apron, which shuttered a Texas production facility earlier this year only to encounter difficulties meeting a surge of pandemic demand out of its other plants, said this week it would move to temporarily reopen the Texas facility.

The fulfillment center in Arlington, Texas, which closed in April, will reopen in January, Blue Apron said in a filing with the Securities and Exchange Commission.

Blue Apron said in February it was closing the Arlington center, which employed 240, in a cost-saving move and would consolidate its volume in its other fulfillment centers in Linden, N.J., and Richmond, Calif. But since then, it has struggled to meet demand for its products leading to curtailed menus, reduced availability and some customers being unable to receive the orders they made. Executives characterized its production troubles as labor shortages affecting existing centers.

The closure was expected to deliver $8 million in annual cost savings for Blue Apron, a pioneer in home meal delivery that has long struggled to make a viable business of it. The episode marks an operational setback for the company as it attempts a turnaround while also seeking a buyer or other financial rescue. The pandemic in the meantime has triggered a rise in demand for meals at home, with revenues at Blue Apron increasing by 13% in the third quarter despite its challenges.

Blue Apron in February said it anticipated closing the facility would cost $1.5 million in cash for severance charges and other exit costs. Reopening the facility will cost another $2 million, it said this week.

“The company decided to temporarily reopen the Arlington fulfillment center to allow it to focus on utilizing existing assets as one of its operating initiatives to help supplement labor quickly, as the company believes that there is a more readily available labor pool in and around the Arlington fulfillment center,” the filing said. “The company believes that this temporary reopening initiative will enable the company to leverage existing assets to meet forecasted demand while it continues to identify and implement other operating efficiencies.”

Officials in a conference call discussing the company’s third-quarter financial results last month acknowledged that labor availability issues had resulted in a 7% decline in customers—or what one analyst estimated was about 235,000 fewer orders and 40,000 fewer customers—than in the second quarter.

Job listings for Blue Apron currently list 61 available positions for fulfillment roles in Linden and Richmond. CEO Linda Findley Kozlowski last month said the labor shortage was due to the pandemic. The company in the meantime was implementing several new operating practices, using Six Sigma, to improve productivity.

“We’re adjusting key factors that, in effect, increase line speed and overall labor utilization,” she said, according to a Sentieo transcript. “These practices include ensuring a better packing process across lines, adjusting distribution of labor and better use of our equipment. As a result, where we have implemented improvements over the last two months, we’ve effectively decreased the labor required per pack line by approximately 18% and labor minutes per box was lowered by nearly 22%.”