BUS20180 Global Supply Chain Management

W. W. Grainger : maintenance, repair and

operations(MRO)products

GROUP C Fei Yang Zhi (Addision)

Fu Min Da (Jerry)
He Wan Fang (Yolanda)
Lee Man Yu(Tiffany)
Li Zi Xi(Gin)
Agenda

▶ Introduction and background

▶ Top Competitor
▶ Keys to success
▶ Comparison of Grainger and Mcmaster Carr
▶ Case questions
▶ Conclusion
Introduction of MRO
Challenge and Development
Grainger-Introduction

▶ Leading-edge industrial distributor (powerful B2B)

- maintenance, repair and operating(MRO) products
▶ Founded in 1927 (William Grainger)

▶ Operate in China, Latin America and Europe

▶ 2015 sales volume: $10 billion
-2,000,000 customers
-product: eg. safety gloves and motors
-a broad collection of industries healthcare
and hospitality
Top 3 competitor of W. W. Grainger

Competitor

Applied Industrial
Graybar Electric Company Wesco International
Technologies
McMaster-carr
▶ Founded in 1901( 100 year ) 

▶ industrial distributor

▶ supplier to industrial and commercial facilities

▶ top 40 Industrial distributor and largest competitors in the MRO space

▶ Worldwide distribution branches - New Jersey, Ohio

▶ Provide over 555,000 MRO products

Top 3 competitor
of McMaster-carr supply company

Competitor

Applied Industrial
MSC Industrial Direct W.W. GRAINGER
Technologies
Background

Similar points: Different points:

▶ maintenance, repair and ▶ W. W. Grainger:
operations(MRO)products ▶ 9 DCs
▶ Shipped to the customer /retail store
▶ Order: Catalogs and Web pages ▶ More than 100 stores (USA)
▶ Sever the role of a distributor or
retailer
▶ McMaster-Carr:
▶ Success link to their supply chain
management ability ▶ 5 DCs
▶ several hundred thousand product ▶ No retail shop
▶ ships almost all order
Competitive advantages
W. W. Grainger

Competitive strategy: Responsiveness

▶ Strengthening its maintenance, repair, and operations industry
▶ Development of a synthetic transport system
ensure the safety of employees loading and unloading platform in the trailer
▶ Strengthen the supervision function.
Encourage employees to actively participate in the company's safety
management

▶ Since the supply and demand are uncertainty

Effectively with both to offer customers different MRO products within 24
hours
Competitive advantages

McMaster-Carr

▶ Competitive strategy: offering the customer with convenience,

availability, and responsiveness.

▶ Customer care about the product variety and response time than cost.
Case questions
1. How many DCs should be built and where should
they be located?

Grainger:
▶ → >1 DDecentralize
▶ Goal: More responsive to customer (closer)

▶ 9 DCs in U.S.A
▶ The company is generally from business-to-business sales rather than
retail sales. So there are more goods, distribution center should be opened
in the commercial area of convenient traffic away from downtown.
1. How many DCs should be built and where should they be
located?

Grainger: Responsive supply chain

▶ Number of facilities in a supply chain↑

▶ Inventory and inventory cost ↑
▶ holds fast -moving items with low implied
uncertainty in its decentralized locations close to
the customer.
▶ holds slow -moving items with higher implied
demand uncertainty in a centralized warehouse
1. How many DCs should be built and where should they be
located?

▶ McMaster-carr:
▶ 5 DCs in USA.
▶ mostly uses website
▶ Good design and clear user interface on website
▶ Because the sales on the site is very high
▶ generally the distribution center which is relatively small open in the
downtown area of more people.
1. How many DCs should be built and where should they be
located?

McMaster-carr:
→1
✓ Gain economies of scale when goods store in few Centralization
location
✓ ↑ efficiency
✓ Cost ↓
Long responsiveness time

✓ Number of facilities in a supply chain ↓

✓ inventory and inventory cost ↓

✓ Ships nearly all its order

Take a few days to deliver a good to customer

5 DCs -all orders are filled
2. How should product stocking be managed at the
DCs? Should all DCs carry all products?
ABC analysis
Product characteristics
▶ high-demand of goods - high turnover
Eg. Hand tools
(Three times a week to supplement the goods.)

▶ Price
Inexpensive goods :place in a ventilated and dry environment
Expensive good : high risk require more safety measures
How should product stocking be managed at the DCs? Should all
DCs carry all products?
ABC analysis

▶ Size
Large size: the goods may account for 20%-30%
Shipments are relatively small commodities
Once a month, once in two months supplement the goods in DCs
eg ： Structures and shed
Put in a centralized warehouse ( require large place).

Small size: the goods may be accounted for 60%

Shipments are relatively big commodities
Once a week or two a week supplement the goods in DCs.
eg ： Hand tools
???

Promotional items stocking

▶ Refer to previous sales, sales forecast, according to the pre measurement
of 80% distribution to the store, the logistics center to leave about 20% of
the goods
Should all DCs carry all products?
It’s not necessary of all DCs carry all products.

▶ Automated inventory management: keep products stocked to meet

customer demands
Setting max levels ensuring that we don't have to order things

▶ Some goods depends on season

eg: In the winter, the sales of scarf increases
→DCs must stock the scarf in larger quantity

▶ DC should have to carry the product that required by customers and

its varies depends on location .
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?
Hybrid network -match the characteristics of the product and customer’s need

Carried in inventory
Fast-moving and emergency items
stocked locally customers can pick them up within 1-2 days

Shipped directly to customer from supplier

slow-moving items
▶ drop-shipped from the manufacturer and carry a longer lead time.
Eg. easy rusty equipment
▶ large products space is limited

W.W. Grainger
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?

Distribution network design

W. W. Grainger ：

Distributor Storage with Customer Pickup

Factories
• order deliveries to
customers
• chain store to pick up
Retailer Cross-Dock DC delivery

Pickup Sites
Product flow

Customer
Information Flow

Customer flow
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?

Distribution network design

McMaster-carr and W. W. Grainger

Distributor Storage with Carrier Delivery

Factories
order goods directly to the
customer
X shortage and broken
Warehouse Storage By
Distributor/Retailer products

Product
Custom
flow
er
Information
flow
4. What products should W.W. Grainger carry at a store?

Product characteristics

Active demand
▶ products with predictable demand ( eg.batteries, fasteners,hand tools)
▶ People have to buy these routine items
high demand and earn profit easily than uncommon product
▶ demand uncertainty ↓

Size
▶ large size: storage area is limited (eg. hvac and refrigeration) X store
▶ small size :offer larger storage area
Product variety ↑
4. What products should W.W. Grainger carry at a store?

Price
inexpensive product
Small profits and quick returns- less people will buy the expensive product
(eg. fasteners)
The online sales and store scorecard
The hvac and refrigeration

Area Store sales Online sales

Response time to customers 1 0

Returnability 1 0
Product variety 0 1
Product availability 0 1
Time to market 0 1
Customer experience 1 1
Order visibility 1 1

Store sales strongness :

- less opportunity delay in fulfilling request
- easier to return and less time

Online sales strongness :

- product variety is larger
- aggregate inventory and combine the number of the store
- time to enter the market is faster
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?

▶ We decided all products to be stored at each facility

▶ Distance
▶ This DC has to be in a quadrant, or a group of 5 or 10 states.

▶ Customer service -
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?

▶ location
▶ automated inventory management -keep stock programme
▶ setting min/max levels either insuring that we don't have to order things
that we typically would
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?

▶ location
▶ 分派 market
▶ distance
▶ automated inventory management -keep stock programme
▶ setting min/max levels either insuring that we don't have to order things
that we typically would
▶ Different characteristics of he local area
▶ Maro
Conclusion
▶W.W Grainger
Inventory management is very important for the company. Grainger company help the normal
operation of plant equipment and production materials to reduce procurement costs of
indirect customers. Distribution targets have different segments.( Product category, customer
industry, some combination.) Besides, speed and convenience are essential to Grainger.

▶McMaster-carr:
Advanced equipment makes employees to work better. A limited number of categories.
McMaster-Carr’s operating model supports its customer, promise to bring value to end users of
MRO companies. For instance, when a facility breaks down MRO customers will need products
immediately to get their operation restating. Company attract to customers as the goal. Its
reputation for having a wide product offering, exceptionally fast delivery, and solid customer
service suggests that it will continue to attract new customers and retain old ones.

But, the number of MRO manufacturers with their own inventory is low, resulting in some production
enterprises due to shortage, can not be re put into use of damaged equipment.
Challenge and Development
W.W Grainger: Focus on security
W.W Grainger:
•On 14 July, 2015 - experienced a security attack
Focus on
security

•Adopted old Classic ASP and ASPX software on their multiple web
applications
Problem:

• Largest issue:use of corporate credentials (social networks)

Challenge and Development
W.W Grainger: Focus on security
Problem:
▶ On 14 July, 2015 - experienced a security attack
▶ using old Classic ASP and ASPX software on their multiple web applications
▶ Largest issue: use of corporate credentials (social networks)

Development:
▶ keep to review and enhance security measures
assistance of leading security experts
▶ Implement added recommended security enhancements
▶ Eg. credit card payment process:
To ensure customer card data using a tokenization system that restrict the number of
credit and debit card numbers that enter their environment.
Challenge and Development
McMaster-carr: new technology( Partpic)

Problem:
▶ evolved slower in using new technologies problems in distribution process
▶ locating the right parts in large inventory (eg. littler, gears and unnumbered fasteners )

Development:
visual recognition algorithms
recognize every part in a large company's inventory (eg. 500,000-part catalog)
▶ Use Partpic to allow consumers to snap a picture of a replacement part and immediately receive
a part number and order page in return.
▶ better deliver to customers
Thank you