Grainger Management questions & answers

Question: 3

What should be done based on your analysis? What have you not considered that may make your analysis invalid or that may strategically limit success? What do you think Grainger management should do?

According to the analysis, consolidating the 20 volume and only one center (the second option) is more attractive according to the cost. However, the factors that limit the success and generate issues are mentioned below:

·         In the analysis cost incurred for the suppliers are not calculated. Shipping cost and transporting containers from one place to another also increase the overall cost. By ignoring this cost, we cannot get accurate results as the addition of the suppliers' cost, in the long run, may affect the performance of the Grainger Management. 

·         The new center that will be used for the shipping purpose is relatively far from the destination than the other centers. Therefore, containers delivery cost will increase when the distance will be increased.

Grainger management should consider all costs. Only fixed cost is not a factor that influences the delivery or shipping process. consolidated centers are good for the company until they cost including all expense and cost of transportation, suppliers cost and port expense are cheaper than the first option (having 4 centers). Thus, Grainger manager should select the option that is cost effective