Basic Data

Total Current Volume in cubic meters (CBM) 190,000

Direct Ship Percentage 89%

Direct Ship Volume (CBM) 169,100

Consolidation Ship Percentage 11%

Consolidation Center Volume20,900

Part A. Assume a current total volume of 190,000 CBM and the 89% is shipped direct from the supplier plants in containers. Use the data from the case and assume that the supplier loaded containers are 85% full. Assume that consolidation centers are run at each of the four port locations. The consolidation centers only use 40' containers and fill them to 96% capacity. Assume that it costs $480 to ship a 20' container and $600 to ship a 40' container.

Q- Determinethe total costto get the containers to the United States? Do not include United States port costs in this part of the analysis. Show combined annual costsfor direct ship and consolidated center shipments for 20' and 40' containers.

PartB. repeatthe analysisfrom Q1 Part A(Show combined annual costsfor direct ship and consolidated center shipments for 20' and 40' containers), except this time use updated, pandemic era,container shipping costs; $3,500 to ship a 20' container and $4,500 to ship a 40' container.

Q- What is the combined annual costs for direct ship and consolidated center shipments for 20' and 40' containersusing the current shipping rates.

2. Using the basic data below, evaluate an alternativethat involves consolidating all 20' volume and using only a single consolidation center in Shanghai/Ningbo. Assume that all the existing20' volumeand the existing consolidation center volumewere sent to this single consolidation center by suppliers.

This new consolidation center volume would be packed into 40' containers filled to 96% and shipped to the United States. The existing 40' volume would still be shipped direct from the suppliers at 85% capacity utilization.Use the shipping rates from Q1 Part B.

Q- What is the combined annual costsfor direct ship includinga singleconsolidated center shipments in 40' containersusing the current shipping rates.

Basic Data

Total Current Volume (CBM)190,000

Direct Ship Percentage (hint: 79% of 89% of total) 70.3%

Direct Ship Volume (CBM) 133,589

Consolidation Ship Percentage (hint: 21% of 89% of total + 11% of total)29.7%

Consolidation Ship Volume (CBM)56,411

3. Based on your analysis, what should Grainger do? (No changes or consolidate all shipments in a single port using only 40'containers.) Explain your answer.

Q - What other costs not included in thisanalysis should be considered?[Points: 10]

4.Extra credit.

Q- In whichfinancial statementsshould Grainger recognizetheirhigher pandemic era shipping costs? (Identify the specific financial statements to reflect these higher costs)[5 Points]

Grainger. The China / U.S. Supply Chain mini case

W.W. Grainger, Inc., with 2020 sales of $11.8 billion, is North America's leading broad line supplier of maintenance, repair and operating (MRO) products, with operations primarily in North America (N.A.), Japan and the United Kingdom. [www.grainger.com] The company works with more than 3,000 suppliers and stocks nearly 900,000 products ranging from industrial adhesives, hand tools, janitorial supplies, lighting equipment and power tools.

This assignment involves a specific part of Grainger's supply chain. Grainger works with > 250 suppliers in China and Taiwan. Products are shipped to the U.S. via ocean freight carriers from four major ports. From these ports, products are shipped to U.S. entry ports in either Seattle Washington or Los Angeles California.

After clearing customs, containers are shipped by rail to Grainger's central distribution center in Kansa City, Kansas. From there individual items are sent to regional warehouses in nine U.S. locations, or Canada or Mexico sites.

Supplier contracts specify that the supplier owns the product and is responsible for all costs until the product is delivered to the shipping ports. [commonly referred to as free on board (FOB) shipping port.]

Currently, suppliers have the option of either shipping product on pallets to consolidation centers at the port locations or packing the product in 20-and 40-foot containers that are loaded directly onto container ships bound for the U.S. In many cases product volumes sent from suppliers are relatively small and will not sufficiently fill a container. The consolidation centers combine product on pallets to fill up containers.

A freight forwarding company coordinates shipping of 20-and 40-foot containers. Product remains in these containers until delivered by rail to Kansas City.

About 190,000 cubic meters (CBM) of product are shipped to the U.S. from the China and Taiwan ports. This is expected to increase by 15% over the next five years. About 89% of the product volume shipped is packed in containers by the suppliers (21% in 20-foot containers and 79% in 40-foot containers) and the remaining 11% are consolidated in containers at the ports. Grainger estimates the supplier-packed containers average 85% full.

20-foot containers can hold 34 cubic meters (CBM) and 40-foot containers can hold 67 CBM. The average cost to transport between any port is $480 for a 20-foot container and $600 for a 40-foot container. [Please note in Q1 Part B, you are to use updated pandemic era shipping costs of $3,500 for a 20-foot container and $4,500 for a 40-foot container.]

Of the 11% supplier product not supplier-packed in containers, is put in containers at the consolidation centers run by a freight forwarding company and have a fixed cost of about $75,000 per year each to operate. The consolidation variable cost is $4.90 per CBM.

The freight forwarder claims this variable cost could be reduced to $1.40 per CBM if the volume could be increased to at least 50,000 CBM per year. Current consolidation volumes are quite a bit below this amount and average about 5,000 CBM per site.

At each port, the consolidation centers collect product on an ongoing basis and load into 40-foot containers. Grainger has found these containersare well packed and utilize 96% of the container capacity.

Shipping ports and average volumes:

PortvolumeQingdao (north China) 10%

Shanghai/ Ningbo (central China)42%

Kaohsiung (Taiwan)10%

Yantain (Hong Kong)38%

That's all. I need excel file.

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