#607 W. Grainger and McMaster-Carr sell maintenance

W. Grainger and McMaster-Carr sell maintenance - Operation Management

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w.w. Grainger and McMaster-Carr: MRO Suppliers

W. Grainger and McMaster-Carr sell maintenance, repair, and operations (MRO) products Both companies have catalogs and web pages through which orders can be placed. W.W. Grainger has several hundred stores throughout the United States. Customers can walk into a store, call in an order, or place it via the website. W.W. Grainger orders are either shipped to the cu tomer or picked up by th almost all its orders (although a few customers near its DCs do pick up their Grainger has nine DCs that both replenish stores and fill customer orders. McMaster has five DCs from which all orders are filled. Neither McMaster nor W.W. Grainger manufactures any product. They both primarily serve the role of a distributor or retailer. Their success is largely linked to their supply chain management ability

Both firms offer several hundred thousand products to their customers. Grainger stocks about 300,000 stock-keeping units (SKUs), whereas McMaster carries about 500,000. Grainger also provides many other products that it does not stock directly from its suppliers. Both firms face the following strategic and operational issues:

1. How many DCs should be built, and where should they be located?

2. How should product stocking be managed at the DCs? Should all DCs carry all products?

3. What products should be carried in inventory and what products should be left with the supplier to be shipped directly in response to a customer order?

4. What products should W.W. Grainger carry at a store?

5 How should markets be allocated to DCs in terms of order fulfillment? What should be done if an order cannot be completely filled from a DC? Should there be specified backup locations? How should they be selected?

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1. How many DCs should be built and where should they be located?

This can be solved using a linear programming problem that we can prepare in MS Excel. The solver can help us in solving this query. The details that would be needed to solve this problem are:-
a) demand across different store locations
b) customer service level that should be maintained
c) production locations for these SKUs
d) Transportation cost & time for each node (production to DC, Dc to stores)
e) Contraints on the lower & upper limit of each DC
f) constraints on the fixed & variable cost of each DC
g) capacity of each DC
h) Inventory carrying cost at each DC

2.
a) product stocking should be managed by calculating the safety stock, cycle stock, pipeline inventory, etc. for each DC. This can be calculated using the demand pattern, inventory carrying cost, EOQ, etc.
b) all Dcs should not carry all products. we will only be wasting the working capital of the company. Based on 2a, we can identify the correct SKUs and the stock at each DC. we can even crate Hubs to support small DCs. This will lead to aggregation of inventory and less inventory costs.

3. This is also dependent on the service level, supplier location, customer location, transportation costs, inventory carrying costs, and handling costs. The model prepared in answer 1 can take care of this issue.

4. Can be answered by Answer 1

5. This depends on the service level that we are guaranteeing to our customers. The backup location should be selected based on the optimization model (2nd lowest cost keeping in mind all the constraints can be selected)