W. W. Grainger’s Distribution Center Location Analysis

W. W. Grainger’s Distribution Center Location Analysis

Abstract

W.W. Grainger Inc. is considering an expansion of its Los Angeles facility to handle 18% of product demand that is currently double shipped from Los Angeles to another distribution facility in Kansas City, then back to Los Angeles. The cost of the shipping is the primary reason to upgrade, but the uncertainty of how much would actually be saved by changing the system is of grave concern. This stems from the fact that the expansion project contains a $1.5 million dollar one-time cost, an increased operational cost, and a higher processing expense. Calculations of the cost of the current system are done first to ensure a proper analysis. Then a calculation of the possible new system is completed to show the savings that could occur. Identification of other possible problems not already considered in the case is necessary to determine the risk factors and the impact of the change. Finally, a SWOT analysis is used to determine the best approach to the problem. The cumulative results speak to a need for efficiency improvements in shipping and product chain management. Once analyzed, the results present a larger opportunity framework. The opportunities and ideas are included to make even greater improvements. The solution to the problem of excess shipping cost is complicated, but could present important strategy decisions. It becomes very obvious that Grainger should upgrade the Los Angeles facility and make use of the opportunities that the upgrade presents. Grainger could create a significant difference in their costs by implementing some other changes to go along with the upgrade or following the upgrade. The solution to the problem of excess shipping cost is complicated, but could present important strategy decisions.

W. W. Grainger’s Distribution Center Location Analysis

        W. W. Grainger Inc. is a $5.5 billion company with over 400 branches and 10 distribution centers throughout the United States. (Maynard, 2006). It has more than 3,000 suppliers, more than 1.8 million customers and offers more than 900,000 products. (Jacobs & Chase, 2014). In the China and Taiwan region, Grainger has more than 250 suppliers shipping products to the US via Seattle, or Los Angeles. (Jacobs & Chase, 2014). These products are then sent to Kansas City, Kansas, where the central distribution center is located. It has been noted that approximately 18% of Grainger’s demand is double shipped from Los Angeles to Kansas City, and then back to Los Angeles. The cost of shipping from Kansas City is actually higher than the cost of shipping from the West coast. Grainger has considered upgrading the Los Angeles warehouse, but there are still questions concerning the cost of the upgrade. Primarily, would the cost be worth it? Grainger is concerned that upgrading the Los Angeles facility may not have a significant impact on costs. Using these conditions the evaluation of Grainger’s distribution center locations follows.