1. Relative to the United States distribution network, calculate the cost associated with running the existing system. Assume that 40% of the volume arrives in Seattle and 60% in Los Angeles and the port processing fee at both locations is $5.00 per CBM. Assume that everything is transferred to the Kansas City distribution center by rail where it is unloaded and quality checked. Assume that all volume is then transferred by truck to the 9 existing warehouses in the United States.
2. Consider the idea of upgrading the Los Angeles warehouse to include a distribution center capable of processing all the volume coming into the United States. Assume that containers coming into Seattle would be shipped by rail in their original containers to Los Angeles. All volume would be unloaded and quality checked in Los Angeles. 18% of the volume would then be kept in Los Angeles for distribution through that warehouse and the rest transshipped by rail to the Kansas City warehouse. The cost to transship to Kansas City would be $0.0018 per CBM. The material sent to Kansas City would not need to go through the “unload and quality check process,” and would be stored directly in the Kansas City distribution center. Assume that the remaining volume would be transferred by truck to the 8 remaining warehouses in the United States at a cost of $0.0220 per CBM.
3. What should be done based on your analytics analysis of the United State distribution system? Should the new Los Angeles distribution center be added? Is there any obvious change that Grainger might do to make this option more attractive?
4. Is this strategically something that Grainger should do? What have they not considered that may be important?