Grainger: Reengineering the China$/$U$.$S$.$ Supply Chain

W$.$ W$.$ Grainger, Inc., is a leading supplier of maintenance, repair, and operating $($MRO$)$ products to businesses and institutions in the

United States, Canada, and Mexico, with an expanding presence in Japan, India, China, and Panama. The company works with more

than $5,000$ suppliers and runs an extensive website $($www $.$grainger.com$)$ where Grainger offers nearly $1\mathrm{.}5$ million products. The

products range from industrial adhesives used in manufacturing, to hand tools, janitorial supplies, lighting equipment, and power tools.

When something is needed by one of its customers, it is often needed quickly, so quick service and product availability are key drivers

to Grainger's success.

Your assignment$*$ involves studying U$.$S$.$ distribution in Grainger's supply chain. Grainger works with over $250$ suppliers in the China

and Taiwan region. These suppliers produce products to Grainger's specifications and ship to the United States using ocean freight

carriers from four major ports in China and Taiwan. From these ports, product is shipped to U$.$S$.$ entry ports in either Seattle,

Washington, or Los Angeles, California. After passing through customs, the $20-$ and $40-$foot containers are shipped by rail to Grainger's

central distribution center in Kansas City, Kansas. The containers are unloaded and quality is checked in Kansas City. From there,

individual items are sent to regional warehouses in nine U$.$S$.$ locations, a Canada site, and Mexico.

Grainger: U$.$S$.$ Distribution

In the United States approximately $40$ percent of the containers enter in Seattle, Washington, and $60$ percent at the Los Angeles,

California, port. Containers on arrival at the port cities are inspected by federal agents and then loaded onto rail cars for movement to

the Kansas City distribution center. Variable costs for processing at the port are $$4\mathrm{.}00$ per cubic meter $($CBM$)$ in both Los Angeles and

Seattle. The rate for shipping the containers to Kansas City is $$0\mathrm{.}0017$ per CBM per mile.

In Kansas City the containers are unloaded and processed through a quality assurance check. This costs $$3\mathrm{.}00$ per $CBM$ processed. $A$

very small percentage of the material is actually sent back to the supplier, but errors in quantity and package size are often found that

require accounting adjustments.

Items are stored in the Kansas City distribution center, which serves nine warehouses in the United States. Items are also sent to

warehouses in Canada and Mexico, but for the purposes of this study we focus on the United States. The nine warehouses each place

orders at the distribution center that contains all the items to be replenished. Kansas City picks each item on the order, consolidates

the items onto pallets, and ships the items on $53-$foot trucks destined to each warehouse. Truck freight costs $$0\mathrm{.}0217$ per CBM per

mile. The demand forecasts for the items purchased from China$/$Taiwan for next year in cubic meters and shipping distances are given

in the following table.