Exec Summary:
W. W. Grainger, Inc. is recently thinking of redesigning the supply chain for shipments from China/Taiwan. The reason being as an obvious to reduce costs, lead times and to improve supply chain efficiency. The major issue identified was the lead time and a huge fixed overhead because of small shipments which then were consolidated by the company to make a full 40-feet container load. Through a thorough cost analysis and weightage of pros and cons of three alternatives, the team recommends to use an NVOCC (Non-Vessel operating common carrier) for small shipments which will lead to a lot lesser lead times and will help reduce costs as well. Along with this, the recommendation is also to increase packing efficiency for company’s already in use 20/40-feet containers. Currently the packing efficiency is 85%, and just by making it 95% the cost saving is $ 253,863.89 annually which will increase as total shipments are forecasted to grow by 15% for the next 5 years.

Issues:
The major issue identified in the case is to reduce the expenses on consolidated shipments from china overall increasing the supply chain efficiency. This issue is in fact more of an opportunity and the opportunity is to reduce the variable cost associated with the consolidated shipments as the estimated growth in shipments from China and Taiwan is 15% per year. This growth rate implies the cost reduction in consolidated shipments which is 11% of total will be contributed to profit margin. Inferred from this issue of consolidated shipments is an issue of increased lead times which in supply chain is very crucial. So the issue is to reduce lead times incurred due to consolidation of small shipments so that supplier to Grainger delivery could get faster and hence faster delivery to customer.

Root Cause Analysis:
The issue arises from suppliers that do not have enough quantity to ship