What Should be Done Based on your Analysis? What Have you Not Considered that Might 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 centre (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, the cost incurred for the suppliers is 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 centre that will be used for the shipping purpose is relatively far from the destination than the other centres. Therefore containers delivery cost will increase when the distance is increased.
Grainger management should consider all costs. Only fixed cost is not a factor that influences the delivery or shipping process. Consolidated centres are suitable 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 four centres). Thus Grainger manager should select the cost-effective option and generate benefit in all ways.