Chapter 14 Case: Distribution Center Location page 482 operations and supply chain management

ALL 4 questions please

this is all the data in the book about the question

question 1 & part of 2

second part of question 2 and 3 and 4.

beginning background info

more info and data

ending info and data

Grainger: Reengineering the China/U.S. 250 suppliers in the China and Taiwan region. These suppliSupply Chain ers produce products to Grainger's specifications and ship W. W. Grainger, lnc, is a leading supplier of maintenanee, to the United States using ocean freight carriers from four repair, and operating (MRO) products to businesses and major ports in China and Taiwan. From these ports, product. institutions in the United States, Canada, and Mexico with is shipped to U.S. entry ports in either Seattle. Washington, an expanding presence in Europe, Japan, India, China, and or Los Angeles. California. After passing through cusPanama. The company works with more than 4,500 suppliers toms, the 20- and 40 -foot containers are shipped by rail and runs an extensive website (www.grainger.com) where to Grainger's central distribution center in Kansas City, Grainger offers nearly 26 million products. The products Kansas. The containers are unloaded and quality is checked range from industrial adhesives used in manufacturing, to in Kansas City. From there, individual items are sent to hand tools, janitorial supplies, lighting equipment, and power regional warehouses in nine U.S. locations, a Canadian site. tools. When something is needed by one of its customers, it and Mexico. is often needed quickly, so quick service and product availability are key drivers to Grainger's success. Grainger: U.S. Distribution Your assignment involves studying U.S. distribu- In the United States, approximately 40 percent of the contion in Grainger's supply chain. Grainger works with over tainers enter in Seattle. Washington, and 60 percent at the Los Angeles, California, port. Containers on arrival at the Items are stored in the Kansas City distribution center, port cities are inspected by federal agents and then loaded which serves nine warehouses in the United States. Items are onto rail cars for movement to the Kansas City distribution also sent to warehouses in Canada and Mexico, but for the center. Variable costs for processing at the port are $5.00 per purposes of this study we focus on the United States. The cubic meter (CBM) in both Los Angeles and Seattle. The nine warehouses each place orders at the distribution center nte for shipping the containers to Kansas City is $0.0018 per that contains all the items to be replenished. Kansas City CBM per mile. In Kansas City, the containers are unloaded and processed lets, and ships the items on 53-foot trucks destined to each through a quality assurance check. This costs $3.00 per CMB warehouse. Truck freight costs $0.0220 per CBM per mile. processed. A very small percentage of the material is actually The demand forecasts for the items purchased from China/ sent back to the supplier, but errors in quantity and package Taiwan for next year in cubic meters and shipping distances size are often found that require accounting adjustments. are given in the following table: Although a high percentage of demand was from ware- warehouses. Grainger expects that very little would need to bouses either south or east of Kansas City, the question has be shipped back to the Los Angeles warehouse after the new surfaced concerning the 18 percent that will be shipped to system was operating for about six months. Kansas City and then shipped back to the Los Angeles ware-_Grainger management feels that it may be possible to house. This double-transportation could potentially be elimi- make this change, but it is not sure if it would actually save nated if a new distribution center were built in Los Angeles. any money and whether it would be a good strategic change. The idea might be to ship material arriving at the Seattle port by rail to a new Los Angeles distribution center (at a cost of Specific Questions to Address in S0.0018 per CBM per mile), which would be located at the Your Analysis current location of the Los Angeles warehouse. It is estimated that the Los Angeles facility could be 1. Relative to the U.S. distribution network, calculate upgraded at a one-time cost of $1,500,000 and then operated for $350,000 per year. In the new Los Angeles distribution the cost associated with running the existing system. Assume that 40 percent of the volume arrives a quality assuraine would be unloaded and processed through The variable cos _ is $5.00 per CBM. Assume processing at both locations processed, which for doing this would be $5.00 per CBM ferred to the Kansas City distribution center by rail. from the Los An includes the cost to move the containere it is unloaded and qua After the mates port to the distribution center. that volume is then transferred by truck to the nine amountneededtoexistingwarehousesintheUnitedStates. (approximately 18 percent) would be kept and the rest sent by rail to K. 18 percent) would be kept be directly stocked in the Kansas City distribution center and used to replenish the Assume that containers coming into Seattle would be distribution center. Assume that the remaining volume inspected by federal officials (this needs to be done would be transferred by truek to the eight remaining at all port locations) and then immediately shipped warehouses in the United States at a cost of $0.0220 by rail in their original containers to Los Angeles. All per CBM per mile. volume would be unloaded and quality-checked in 3. What should be done based on your analytics analysis Los Angeles (the quality check cost $5.00 per CBM of the U.S. distribution system? Should the new Los when done in Los Angeles). Eighteen percent of the volume would then be kept in Los Angeles for disAngeles distribution center be added? Is there any tribution through that warehouse and the rest transobvious change that Grainger might make to have this shipped by rail to the Kansas City warehouse. Assume option be more attractive? the cost to transship by rail is $0.0018 per CBM per 4. Is this strategically something that Grainger should mile. The material sent to Kansas City would not do? What has the company not considered that may be need to go through the "unload and quality check proimportant? cess," and would be stored directly in the Kansas City Many thanks to Gary Scalzitti of Grainger for help with developing this case. pecific Questions to Address in our Analysis 1. Relative to the U.S. distribution network, calculate the cost associated with running the existing system. Assume that 40 percent of the volume arrives in Seattle and 60 percent in Los Angeles and the port processing fee for federal processing 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 nine 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 distribution center. Assume that the remaining volume inspected by federal officials (this needs to be done would be transferred by truck to the eight remaining at all port locations) and then immediately shipped warehouses in the United States at a cost of $0.0220 by rail in their original containers to Los Angeles. All per CBM per mile. volume would be unloaded and quality-checked in 3. What should be done based on your analytics analysis Los Angeles (the quality check cost $5.00 per CBM of the U.S. distribution system? Should the new Los when done in Los Angeles). Eighteen percent of the Angeles distribution center be added? Is there any volume would then be kept in Los Angeles for disobvious change that Grainger might make to have this tribution through that warchouse and the rest transoption be more attractive? shipped by rail to the Kansas City warehouse. Assume 4. Is this strategically something that Grainger should the cost to transship by rail is $0.0018 per CBM per do? What has the company not considered that may be mile. The material sent to Kansas City would not important? need to go through the "unlond and quality check process," and would be stored directly in the Kansas City Many thanks to Gary Scalzitti of Grainger for help with developing this case. Grainger: Reengineering the China/U.S. 250 suppliers in the China and Taiwan region. These suppliSupply Chain ers produce products to Grainger's specifications and ship W. W. Grainger, Inc. is a leading supplier of maintenance, to the United States using ocean freight carriers from four repair, and operating (MRO) products to businesses and major ports in China and Taiwan. From these ports, product institutions in the United States, Canada, and Mexico with is shipped to U.S. entry ports in either Seattle, Washington, an expanding presence in Europe, Japan, India, China, and or Los Angeles. California. After passing through cusPanama. The company works with more than 4,500 suppliers toms, the 20- and 40-foot containers are shipped by rail and runs an extensive website (www.grainger.com) where to Grainger's central distribution center in Kansas City. Grainger offers nearly 26 million products. The products Kansas. The containers are unloaded and quality is checked range from industrial adhesives used in manufacturing, to in Kansas City. From there, individual items are sent to hand tools, janitorial supplies, lighting equipment, and power regional warehouses in nine U.S. locations, a Canadian site, tools. When something is needed by one of its customers, it and Mexico. is often needed quickly, so quick service and product availability are key drivers to Grainger's success. Grainger: U.S. Distribution Your assignment involves studying U.S. distribu- In the United States, approximately 40 percent of the contion in Grainger's supply chain. Grainger works with over tainers enter in Seattle, Washington, and 60 percent at the Los Angeles, California, port. Containers on arrival at the Items are stored in the Kansas City distribution center, port cities are inspected by federal agents and then loaded which serves nine warehouses in the United States. Items are onto rail cars for movement to the Kansas City distribution also sent to warehouses in Canada and Mexico, but for the center. Variable costs for processing at the port are \$5.00 per purposes of this study we focus on the United States. The cabic meter (CBM) in both Los Angeles and Seattle. The nine warehouses each place orders at the distribution center rate for shipping the containers to Kansas City is $0.0018 per that contains all the items to be replenished. Kansas City CBM per mile. In Kansas City, the containers are unloaded and processed lets, and ships the items on 53-foot trucks destined to each through a quality assurance check. This costs $3.00 per CMB warehouse. Truck freight costs $0.0220 per CBM per mile. processed. A very small percentage of the material is actually The demand forecasts for the items purchased from Chinal sent back to the supplier, but errors in quantity and package Taiwan for next year in cubic meters and shipping distances size are often found that require accounting adjustments. are given in the following table: Although a high percentage of demand was from warehouses either south or east of Kansas City, the question has surfaced concerning the 18 percent that will be shipped to Kansas City and then shipped back to the Los Angeles warehouse. This double-transportation could potentially be eliminated if a new distribution center were built in Los Angeles. The idea might be to ship material arriving at the Seattle port by rail to a new Los Angeles distribution center (at a cost of $0.0018 per CBM per mile), which would be located at the current location of the Los Angeles warehouse. It is estimated that the Los Angeles facility could be upgraded at a one-time cost of $1,500,000 and then operated for $350,000 per year. In the new Los Angeles distribution center, containers would be unloaded and processed through a quality assurance check, just as is now done in Kansas City. The variable cost for doing this would be $5.00 per CBM processed, which includes the cost to move the containers from the Los Angeles port to the distribution center. After the material is processed in Los Angeles, the amount needed to replenish the Los Angeles warehouse (approximately 18 percent) would be kept and the rest sent by rail to Kansas City. It would then be directly stocked in the Kansas City distribution center and used to replenish the