Amid the continued rapid rise of e-commerce and recent impacts of the COVID-19 pandemic on distributors and their employees, it’s reasonable to assume that the time is now for some major distributors to consolidate their physical footprint as a means of doing more with less.
But according to Grainger’s CEO, the MRO products giant has no intentions of substantially leaning out its branch network.
In a roundtable interview on Monday with trade publications, including Industrial Distribution, Grainger chairman and chief executive D.G. Macpherson spoke candidly about a variety of company topics for about 45 minutes, fielding questions with plenty of insight ranging from how Grainger has dealt with the pandemic, to the state of recovery in the MRO market, to the threat of Amazon Business.
One question I asked him was about if the company is looking to add any more distribution centers in the near future, and it followed another editor’s question about the size of Grainger’s branch network. Given the company’s major investments in its e-commerce offerings and next-day delivery emphasis, I think there’s been natural curiosity about if Grainger plans on pairing down its network of 354 branches across North America (287 in US) or boosting its network of 24 distribution centers (17 in US).
Earlier in the interview, Macpherson mentioned how approximately 70 percent of Grainger’s revenue comes from the company's digital channels, and that he expects that figure to continue to grow each year until it levels off at around 80 percent.
But even with customer buying habits moving more and more predominantly toward digital methods, Macpherson said the company is pretty set on the size of its physical presence.
“We like our footprint,” he said. “Our branch volume has been fairly stable and growing the last 3 years. We feel like we’re at a place where our branch number will be pretty level as long as we can continue to see modest growth, and we’re asking our branches to do some different things. We want to be local.”
Grainger’s branch count has indeed held very steady since it downsized a considerable number of them — mostly overseas — during from 2014-2017. Worldwide, the company shed 98 branches worldwide in 2017, 69 in 2016, 14 in 2015 and 29 in 2014. That followed a prolonged period of stability from 2011-2013.
Grainger ended 2016 and 2017 with 284 US branches — down from a peak of 390 at the end of 2013 — and that figure has only changed by three as of May of this year.
Meanwhile, the company opened its largest distribution center earlier this year, in the US logistics hub of Louisville, KY. Grainger’s previous DC additions over the past decade include a 1.3 million-square-foot, highly-automated distribution center in New Jersey in 2017; a 1 million-square-foot DC in Minooka, IL in 2013; and DCs in Patterson, CA and Saskatoon, Saskatchewan in 2012.
“We have been on a path these past 12 years to get very large DCs with the ability to stock many items, as much as 700,000, with the ability to have next-day across the country,” Macpherson said Monday. “What we probably don’t need is more buildings like that.”
However, Macpherson said that, over the next 5 years, Grainger will look to add “support” facilities that can extend the next-day delivery capabilities of those larger DCs.
Stay tuned to ID for more analysis that came out of Monday’s roundtable interview.