Is Grainger’s supply chain structure still relevant and flexible enough to meet the demands of today’s complex and fast-paced business environment?

1. W.W.GRAINGER – CASE
STUDY
Aaron Cook

2. QUESTION – Is Grainger’s supply chain
structure still relevant and flexible enough to
meet the demands of today’s complex and
fast-paced business environment.

3. OUTLINE
• Company Background
• Definition of Terms
• Significance of the Study
• Current State of Grainger’s Supply Chain
• Recommendations
• Biblical Integration
• Concluding Statements

4. COMPANY BACKGROUND
 W. Grainger, Inc. is a business-to-business distributor of products used
to maintain, repair and operate facilities. Millions of businesses and
institutions worldwide rely on Grainger for products like safety gloves,
ladders, motors and janitorial supplies, and for services like inventory
management and technical expertise. These customers represent a
broad collection of industries including healthcare, manufacturing,
government and hospitality. They place orders over the phone, at
local branches, online and using mobile devices. More than 4,500
key manufacturers supply Grainger with 1.4 million products made
available to customers through Grainger’s branches and distribution
centers or sourced through a network of suppliers (W.W. Grainger,
2015, p. 1).

5. TERMS
 “Supply chain management
consists of developing a strategy to
organize, control, and motivate the
resources involved in the flow of
services and materials within the
supply chain. A supply chain
strategy, an essential aspect of
supply chain management, seeks to
design a firm’s supply chain to meet
the competitive priorities of the firm’
operations strategy” (Krajewski,
Malhotra, & Ritzman, 2009, p. 52).
 “Supply chain management
encompasses the planning and
management of all activities involved in
sourcing, procurement, conversion, and
all logistics management. Importantly, it
also includes coordination and
collaboration with channel partners. Here
the channel partners can be suppliers,
intermediaries, third-party service
providers, and customers. In essence,
supply chain management integrates
supply and demand management within
and across companies” (Shuvro, 2011, p.
2).

6. TERMS
 “A supply chain is the sequence of
organizations ± their facilities,
functions, and activities ± that are
involved in producing and delivering
a product of service. The sequence
begins with basic suppliers of raw
materials and extends all the way to
the final customer. Facilities include
warehouses, factories, processing
centers, distribution centers, retail
outlets, and offices” (Stevenson, 2011,
p. 5).
 In short, supply chain management is
buying product from a supplier,
making sure that product gets into
your network properly and getting
that product to your customer within
the specific terms of their contract.
There is a lot of hard work that goes
into managing the supply chain
effectively but successful companies
must do this to operate at profit.

7. SIGNIFICANCE OF THE STUDY

8. SIGNIFICANCE OF THE STUDY
Blockbuster Video
 If a company is not willing to adapt its
business model with the change in
behavior from their customers then that
business will fail. A good example of this
principle is Blockbuster video. Blockbuster
did not think that Netflix and Redbox were
going to be able to compete with them.
Blockbuster was the top dog of the movie
rental industry, and they did not take the
new ideas that were presented by Netflix
and Redbox seriously. This unwillingness to
change ultimately led to their downfall.
Blockbuster Continued
 “Blockbuster's long-anticipated bankruptcy
filing is clear proof that the company clung
far too long to an outdated strategy and
failed to understand changes that others
eagerly exploited. Blockbuster plans to
reorganize and continue to operate its online
rental service and its 3,000 retail stores while it
comes up with a new strategy. But even
writing off $1 billion in debt won't make
Blockbuster competitive, and the chain's
downfall reflects the huge risk any firm faces
today by just standing still… Blockbuster got
stuck in the box. They never changed their
business model" (Rick Newman, 2010, p. 2).

9. SIGNIFICANCE OF THE STUDY
Performance indicators of a healthy supply chain:
 “Target service levels – Target
service levels measure the
performance of your inventory
system. Certain order fill rate goals
are defined and the service level
gives the percentage to which
those goals should be achieved.
 Capital tied up in stock – Be sure to
always have a pulse on how much
capital you have tied up in stock by
running ABC analysis. You should
always have a healthy balance
across your A classified products
because they are your high volume,
fast moving products. With B and C
classified products, companies have
more wiggle room to experiment with
lower volumes of stock to reduce
overall capital investment.

10. SIGNIFICANCE OF THE STUDY
Performance indicators of a healthy supply chain:
 Back order recovery – Having an
automated system in place with fail
safe reorder points and
replenishment processes, can save
a company opportunity cost of lost
sales.
 Supplier performance – A failure to
manage and monitor supplier
performance can lead to major
supply chain disruptions, delivery
problems, poor quality, and other
issues that damage a company’s
credibility, as well as their bottom
line” (Dowling, 2014, p. 1).

11. SIGNIFICANCE OF THE STUDY
 Grainger has metrics in place to measure performance at each level
of the organization. Employees are held accountable to these
metrics and their grades on mid and end of year reviews are directly
impacted by their adherence to these policies. Grainger does
review their balance of product across the network on a quarterly
basis. They have fail-safe points with the stocking levels of most
products. Once a product is depleted down to the fail-safe point the
system will automatically trigger a reorder from the manufacture. This
process helps avoid stock outs and ensures even coverage for their
customers. Grainger also does periodic assessments of their many
suppliers. This enables them to correct any negative patterns that
have emerged with a particular supplier.

12. CURRENT STATE OF GRAINGER’S SUPPLY
CHAIN

13. CURRENT STATE
 “Grainger is uniquely positioned, with best-in-class inventory
management practices, to help our customers save time, money
and space, while keeping them safe. Getting our customers what
they need, when they need it means less time spent looking for
and ordering products, less inventory for them to buy and store,
and more time spent on the task at hand” (Press Room - W.W.
Grainger, 2015, p. 1)

14. CURRENT STATE
 Grainger uses a centralized supply chain
model that is extremely effective in
allowing Grainger to offer 1.4 million
products to their customers from a
network of 4500 manufactures and
suppliers.
 Because of the strength of Grainger’s
supply chain they can confidently offer
Vendor Managed Inventory (VMI)
solutions to their customers. Grainger helps
take the cost out customers businesses by
taking on the cost of stocking product
and ensuring it gets to the customers plant
in time.
 Grainger has a healthy internal
environment in its supply chain; they are a
model organization for what a successful
centralized supply chain looks like.
 Grainger structures its organization in such
a way that each area of the country is
broken down into market segments. Each
individual market has access to one of the
regional inventory analysts. These
inventory analysts are the point of contact
when business needs dictate getting a
particular product line into the local
market for a customer project.

15. GRAINGER’S SUPPLY CHAIN FLEXIBILITY

16. GRAINGER'S FLEXIBILITY
 Flexibility in the supply chain largely comes down to
responsiveness to your customers and the way they do business.
Grainger has done a good job of responding to the changes in
the MRO industry over the years.

17. GRAINGER'S FLEXIBILITY
 Grainger has positioned themselves well
by investing millions of dollars into their
ecommerce offering and setting the
standard for the entire industrial supply
industry
 They have truly position themselves as the
Amazon of the industrial supply, as they
can get their full line of products to 95% of
the country with next day ground
transportation. This strategy fits the culture
of today’s MRO industry and has kept
Grainger in its position as the industry
leader despite it being highly fragmented
industry..
 Grainger launched the corporate Web
site in 1995 and began taking orders
online in 1996. Over the last 20 years they
have developed their website into a must-
have tool for both their customers and
their employees.
 Grainger finished at No. 13 in the Internet
Retailer 2014 top 500 list. They also
launched the Grainger app in 2012 which
is available in the ITunes store as well as
Google Play store.

18. GRAINGER'S FLEXIBILITY
 Grainger offers a print and online version of their world famous
catalog.
 Grainger is very good at implementing vendor managed
inventory projects at customer’s facilities
 Grainger also can do business with a customer who uses EDI
systems.
 In North America, the company can reach more than 95 percent
of customers via next day ground transportation.

19. RECOMMENDATION

20. RECOMMENDATION
 Grainger has seen a shift in the
purchasing habits of their customers.
Foot traffic to the local branches has
decreased dramatically in the last ten
years as more customers have moved
their purchasing to more efficient
ecommerce platforms. Grainger
needs to continue capturing this data
and make a determination as to
which branches are still profitable
based on this shift in foot traffic into
the branches. They need to shut
down the branches that are not
profitable and reassign those
resources elsewhere.
 Grainger needs to use the cost
savings that are realized from these
branch closures and invest more into
their distribution network and
ecommerce platforms. Distribution is
the backbone of the company, and
it is becoming more and more clear
that the strong infrastructure Grainger
enjoys give them a leg up over their
competitors. However it is also clear
that ecommerce platforms are here
to stay, and Grainger must also stay
ahead of the competition with its
ecommerce offerings.

21. GRAINGER AND ETHICAL/BIBLICAL
PRINCIPLES

22. ETHICS AND BIBLICAL PRINCIPLES
 Grainger strives to foster working environments that promotes
working hard with integrity and high standards. They are
committed to professionalism in all aspects of their business
operations.

23. ETHICS AND BIBLICAL PRINCIPLES
 Mangers are people focused.
 Each employee has the opportunity
to engage in regular coaching
session with their manager. The
employee can voice any questions,
frustrations, or concerns.
 Employees at every level are
encourage to take the time to do
things correctly, and safely the first
time.
 Organization and standardization
are very important at Grainger.
When you walk into a Grainger
warehouse you will be impressed by
the how neat and clean they are.
This is only achieved because
Grainger has created mentality of
doing quality work, and taking pride
in the work you do.

24. CONCLUSION

25. CONCLUSION
 Grainger is a great example of a best in
class organization inside the MRO
distribution industry. They have been in
business for close to 90 years and have
positioned themselves as a Fortune 500
company that annually appears on the list
of top 100 companies to work for. They
have invested heavily in strengthening
their distribution network which is the
backbone of their company. They have
made the necessary adjustments to their
business model to stay relevant as the
behavior of their customers have
changed over the years.
 They use a centralized supply chain model
that is extremely effective in allowing
Grainger to offer 1.4 million products to
their customers from a network of 4500
manufactures and suppliers. Grainger
structures its organization in such a way
that each area of the country is broken
down into market segments. Each
individual market has access to one of the
regional inventory analysts. These
inventory analysts are the point of contact
when business needs dictate getting a
particular product line into the local
market for a customer project.

26. CONCLUSION
 Grainger consistently attracts the
top talent in the industry to come
work for them because of how well
their supply chain operates.
Grainger operates its own supply
chain so effectively they are able to
use that as part of their core value
proposition when creating new
contracts with their customers.
 Because of the strength of
Grainger’s supply chain they can
confidently offer Vendor Managed
Inventory (VMI) solutions to their
customers. Grainger helps take the
cost out customers businesses by
taking on the cost of stocking
product and ensuring it gets to the
customers plant in time.

27. CONCLUSION
 In short Grainger’s supply chain structure is still relevant and
flexible enough to meet the demands of today’s complex and
fast paced business environment. Grainger has made the
necessary changes and adapted its business model
appropriately as the buying behaviors of their customers have
changed.

28. WORKS CITED
 Brohan, M. (2015, Jan 27). E-Commerce and grainger. Retrieved from Internet Retailer:
https://www.internetretailer.com/2015/01/27/e-commerce-accounts-nearly-all-graingers-growth
 Dowling, D. (2014, 12 8). 4 key performance indicators of a healthy supply chain. Retrieved from eazystock.com:
http://www.eazystock.com/blog/inventory-management/2014/12/08/4-key-performance-indicators-of-a-healthy-
supply-chain/
 Johnson&Flynn. (2015). Purchasing and supply management. New York, New York: Mcgraw-Hill Education.
 Krajewski, L. J., Malhotra, M. K., & Ritzman, L. P. (2009). Operations management 9/E. Upper Saddle River: Prentice Hall.
 Mentzer, J. T. (2011). DEFINING SUPPLY CHAIN MANAGEMENT. Journal of Business Logistics, 1-25.
 Press Room - W.W. Grainger. (2015, 01 05). Pressroom. Retrieved from Grainger.com:
http://pressroom.grainger.com/phoenix.zhtml?c=194987&p=irol-images
 Rick Newman. (2010, September 23). How netflix (and blockbuster) killed blockbuster. Retrieved from US News Money:
http://money.usnews.com/money/blogs/flowchart/2010/09/23/how-netflix-and-blockbuster-killed-blockbuster
 Shuvro, A. (2011, July 11). Term paper of supply chain management. Retrieved from Scribd.com:
http://www.scribd.com/doc/60554705/Term-Paper-of-Supply-Chain-Management#scribd
 Stevenson, W. (2011). Operations management. New York: McGraw-Hill/Irwin.
 W.W. Grainger. (2015, 01 01). Grainger 2015 fact sheet. Retrieved from Grainger.com:
http://invest.grainger.com/phoenix.zhtml?c=76754&p=irol-IRHome