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 that the port processing fee for federal processing at both locations is $$5\mathrm{.}00$ per CBM$.$ Assume that everything is transferred to the Kansas City distribution center by rail, where it is unloaded and qualitychecked. Assume that all volume is then transferred by truck to the nine existing warehouses in the United States.

Consider the idea of upgrading the Los Angeles warehouse to include a distribution center capable of processing all the

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volume coming into the United States. Assume that containers coming into Seattle would be inspected by federal officials $($this needs to be done at all port locations$)$ and then immediately shipped by rail in their original containers to Los Angeles. All volume would be unloaded and quality checked in Los Angeles $($the quality check cost $$5\mathrm{.}00$ per CBM when done in Los Angeles$).$ Eighteen percent of the volume would then be kept in Los Angeles for distribution through that warehouse and the rest transshipped by rail to the Kansas City warehouse. Assume the cost to transship by rail is $$0\mathrm{.}0018$ per CBM per mile. 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 eight remaining warehouses in the United States at a cost of $$0\mathrm{.}0220$ per CBM per mile.

What should be done based on your analytics analysis of the U$.$S$.$ distribution system? Should the new Los Angeles distribution center be added? Is there any obvious change that Grainger might make to have this option be more attractive?

Is this strategically something that Grainger should do$?$ What has the company not considered that may be important?