Grainger Details Technology Investments

W.W. Grainger, Chicago,
IL, expects to continue installing SAP across the
U.S.
branch-based organization by the middle of 2005. To date, the company has
completed the design and is currently refining the system to maximize
capabilities. One third of the development effort is devoted to such testing and
refinement. For 2004, the company continues to forecast $45 million to $55
million in operating expense and $50 to $55 million in capital expenditures
related to the SAP program.

"For us, technology is not a
mere indulgence or a nice to have. It is at the very heart of our business and
helps us drive our multi-channel strategy," said Keyser. "Providing customers
access to our broad product line through several channels has been a competitive
weapon for us because it spells speed and convenience for our
customers."

Keyser also detailed Grainger's
telephony program designed to improve communication among Grainger's 400

U.S. branches by providing customers
with just one local number to access everything the company offers. "About 60
percent of our orders come in on the telephone," he said. "Given our focus on
service, we are updating our telecommunication systems to provide a seamless
customer experience."

To date, more than 100 branches
have transitioned to the new communication system. Grainger is stepping up its
conversion plan and intends to complete the remaining branches by the end of
this year. The company estimates $15 to $20 million in capital expenditures this
year for the project. That still keeps Grainger within its range of $150 to $175
million for 2004 total company capital expenditures announced in July
2004.

Supply chain
update

Senior Vice President, Supply
Chain, Y.C. Chen, delivered an update on supply chain operations, detailing the
results of the recently completed logistics network program. Under the program,
the company added more than one million additional square feet in capacity and
new automation to increase accuracy, speed and efficiency through the supply
chain. Grainger's nine distribution centers replenish branches daily and ship
product to customers same day for next-day
delivery.

"The service and productivity
improvements we've gained throughout our program are an important factor in our
strong year-to-date results," said Chen, who noted that overall cycle time has
improved by nearly 20 percent due to these enhancements. "Going forward we have
a state-of-the-art distribution system that can serve as a strong foundation for
growth. We've already seen a $115 million reduction in inventory and more than a
25 percent improvement in productivity. We expect to see a 50 percent total
improvement for the project overall. Cumulative cash flows from the project are
expected to be positive in 2005 and our redesigned logistics network is on
schedule to contribute $10 million to operating earnings this year."

Here is a September 28 href="http://phx.corporate-ir.net/phoenix.zhtml?c=76754& p=irol-presentations" target=_blank>full
presentation and detailed remarks on the expansion plan.