June 17, 2008
Grainger will drive the future of material requirement for operations (MRO) purchases through strategic operations by focusing on growing current customers and embracing new technologies that will strengthen the company’s current capabilities. Over the last three years Grainger has made significant investments into emerging technologies that allow for more efficient workflow and faster turnaround times on sourcing quotes for those hard to find items or “one-offs”.
An internal audit of Grainger shows that of a stable, forward thinking and very strategically planned company that looks for top quality people who will provide world class service to its customers. Grainger has two very strong key initiatives that they are focusing on. The first is market expansion - a multi-year program to gain share by improving customer coverage and overall positioning of its product and service offering in the top metropolitan markets in the U.S. The second is product line expansion - in 2006, Grainger begin introducing a broader and deeper product offering that will help them better serve customers across more unplanned purchasing situations. In order to achieve those goals, we need to assess there current and past performance, including there internal strengths and weaknesses.
In comparison with the previous five years, Grainger’s financial strength is having an upward trend in the following areas: Net Sales, Net Earnings, Total Assets, and Cash Dividends paid per share. In addition to Grainger’s financial strengths the company overall has low debt and strong cash flow. Below is a detailed analysis of there financial position as of February 2008: •Net sales have increased from $4.6 billion in 2002 to over $6.4 billion in 2007
•Net earnings have increased from $226 million in 2002 to over $420 million on 2007
•Total Assets have increased from $2.6 billion in 2002 to over $3.0 billion in 2007
•Increased cash dividends from $0.73 per share in 2002 to $1.34 per share in 2007
•Stock price has increased from $56 in 2004 to $87.20 per share as of today
•Return on Equity has increased from 12.9% in 2003 to 19.7 in 2007
•Return on invested capital has increased from 20.6% in 2003 to 28.5% in 2007
•Gross profits in comparison to 2006 have risen over 10%
•During 2007 Grainger repurchases 7.1 million shares of there common stock
One area of weakness, yet also opportunity and a strategic plan at Grainger in the long term- it to buy back stock options. In fact, on April 30, 2008, Grainger announced that its board of directors has authorized the repurchase of up to an additional 10 million shares of the company's outstanding common stock. Since 1984, Grainger has returned more than $2.7 billion to shareholders by repurchasing more than 59 million shares of stock on a split-adjusted basis, reducing the number of shares outstanding by more than 31 percent. Repurchases under the new program are expected to be made from time to time in the open market and/or privately negotiated transactions. The repurchased shares will be available for general corporate purposes. As of March 31, 2008, the company had approximately 77 million shares of common stock outstanding (grainger.com, 2008).
Grainger creates lasting value by engaging in the following activities: providing maintenance, repair, and operating (MRO) supplies to people who maintain facilities. Grainger is a logistical operations company that does this quickly, effectively, consistency and profitably with a human touch by utilizing sophisticated information technology and being a supply-chain expert (Keyser, 2008).
In 1999 Grainger launched a phone based service department called “FindMRO” with the soul purpose of finding those one-products or spot buys that customers could not locate or price effectively. The service, now today know as “sourcing” has an extensive database of...