ASSIGNMENT 1-SUPPLY CHAIN OF W.W.GRAINGER AND MCMASTER
W.W. Grainger and McMaster-Carr: MRO Suppliers
W.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 also has several hundred stores throughout the United
States. Customers can walk into a store, call in an order, or place it via the Web.
W.W. Grainger orders are either shipped to the customer or picked up by the
customer at one of its stores. McMaster-Carr, on the other hand, ships almost all its
orders (though a few customers near its DCs do pick up their own orders). W.W.
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 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
200,000 stock-keeping units (SKU), whereas McMaster carries about 500,000.
Grainger also provides many other products that it does not stock direct from its
suppliers. Both firms face the following strategic and operational issues.
Upon examining the supply chains of W.W. Grainger, it was found that they source
their products from a supplier in China. The manager of the firm has become overly
concerned with the environmental impact of the supply chain and has therefore,
contracted life cycle assessment expert to analyse the various impact of the supply
chain. The supplier orders from three different material sources and the materials are
transported via road to the supplier’s warehouse in China. The manufacturing takes
place in the manufacturing facility of the supplier. The products are shipped to
America, to the distribution centers of W.W. Grainger where customers can purchase
the products. It was concluded that the products are transported via road to the endof-life facility in America.
In analysing the demand of the W.W. Grainger, the following information in Table 1
was obtained. W.W. Grainger decides to extend their product line by selling phones.
They decided to experiment with inventory-control methods, such as using a fixedorder quantity (FQS) system. The phones produce high margin and are profitable, it is
becoming one of the best sellers, but it stocks out frequently. The following data in
Table 1 with respect to this phones’ sales are collected.
TABLE 1: THE INVENTORY INFORMATION
z = 1.65 for 95% service level.
Answer the following making references to the context of the case:
1. 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?
How should product stocking be managed at the DCs? Should all DCs carry
2. With reference to the supply chain of W.W Grainger and as supply chain
student, develop a system boundary that can help the firm to easily determine
its supply chain impact on the environment. Explain the significance of system
Which form of Life Cycle would be appropriate for assessing the
environmental impact of the firm? Briefly justify your response.
3. Answer the following questions using the information provided in Table 1 in
1. What is the economic order quantity (EOQ)?
2. What is the average number of orders per year using the EOQ?
3. What is the reorder point with safety stock?
4. Based on the FQS information calculated previously, should an order be
placed and if so, for how many cell phones?
5. What is the total annual cost savings using the EOQ you computed
previously versus the current ordering policy of Q = 250 cell phones?