Although W.W. Grainger Inc. made a name for itself in logistics and e-business during the 1990s, Chief Executive Officer and Chairman Richard Keyser said the company plans to refine and bolster its investments in these areas in 2002.
During an address at the 19th Annual Industrial Select Conference, held by Lehman Brothers, Nov. 30, Coral Gables, Fla., Keyser said the company would spend $200 million to overhaul the regional distribution centers in its logistics network and build a 430,000-square-foot facility in New Jersey. The company also opened new distribution centers in Los Angeles and Dallas, and plans to consolidate its national distribution center and zone distribution center in Chicago into a single distribution center.
The overhaul will help the company achieve a 55 percent improvement in the number of product lines picked per hour, he said, and will allow the company to consolidate the shipping of $1 billion in sales from the local branches to the distribution centers.
“We will also see savings in inventory as we eliminate a distribution layer,” he told investment analysts at the conference. “And because the inventory will be in fewer locations, we will use that inventory more productively, improving our service levels. Finally, we expect to see 1,000 fewer jobs, half from the distribution centers as we resize regional centers, and half from the branches as we eliminate shipping.”
Keyser also said after shutting down Material Logic (part of its digital business), and taking charges for investments in its other technology companies in 2001, the company has refocused its remaining Web sites and made them profitable. “Grainger Integrated Supply, and FindMRO are now making money,” he said.
Grainger has 190,000 customers buying products over the Web, and 135 customers with 3,400 locations connecting through e-procurement systems. Sales processed through Grainger.com are expected to hit between $330 million and $350 million for 2001.