Fastenal adds inventory to stores, enhances service
Staff -- Purchasing, 9/2/2004 2:00:00 AM
As a major growth initiative, Fastenal opened 151 new stores and spruced up hundreds of others in 2003. This year, it plans to open another 200 more stores. Based in Winona, Minn., Fastenal is a full line distributor of fasteners, cutting tools, hydraulics and pneumatics, plumbing supplies, janitorial supplies, chemicals and paint, electrical supplies, welding supplies and material handling, storage and packaging items.
The stores carry all these products. As of June 30, 2004, Fastenal has 1,441 stores in the U.S., Canada, Puerto Rico, Mexico and Singapore. In response to customer demand, it recently opened an operation in Rotterdam, Amsterdam, and a facility in Shanghai, China. Eventually, Fastenal expects to have 2,000 stores in North America, with a particularly aggressive plan to expand in Mexico. Its sales in 2003 were $994.9 million.
About 30% of the distributor's sales are of direct materials to OEM customers; another 30% represents MRO business; another 30% is construction and 10% is miscellaneous (to the do-it-yourself market). In addition to delivering orders to plant floors and receiving docks at customer locations, Fastenal employees also work onsite filling orders and providing end users with technical assistance. At other customer locations, the distributor maintains stores on plant sites.
Customer Service Project
At its stores located throughout North America, Fastenal has a strong and growing walk-up business. Early in 2002, the distributor embarked upon its Customer Service Project (CSP) enhancing inventory selection, merchandising and, in some cases, the locations of its stores. It invested $40 million in the project over the past year, opening the 151 stores, upgrading more than 500 others and adding a significant number of SKUs (Stock Keeping Units) to local inventories. To date, Fastenal is seeing improvement in the performance of its stores. This year, the distributor expects to do close to $1.2 billion in annual sales.
"What we're doing is making the CSP locations much more user friendly," says Dave Donahue, vice president, national accounts. "Now customers walk into the stores where products are fully displayed and available for them to look at and touch. Plus there's plenty of product literature on hand for customers who wish to serve themselves."
The stores hold the lion's share of Fastenal's inventory. The distributor added some $28 million to inventory in 2003. "We are constantly upgrading inventory on a local level based on items customers are using," says Donahue. "Our system allows us to identify items that are moving multiple times within a certain period. We identify that inventory as standard stock and move it into the store." If a store does not have a part, a distribution center (Fastenal has 12 located throughout the country) fills the order.
In addition to its other sales channels, customers can purchase items through Fastenal's Website. The distributor routes orders to the customer's local store for fulfillment. The local store prints the order, pulls it and delivers the items to a specified location at the customer's plant. Many of these orders are delivered within the same day the customer places the order. Customers also may pick up the orders from their local store. Fastenal enhances the site four times a year, continuing to make it more user friendly.
School of Business
To ensure that store managers are up to speed on the products they sell, the distributor added a one-week advanced selling course and operational development training to its curriculum at the Fastenal School of Business, which provides training to about 2,000 employees every year. Through its School of Business, the distributor also offers its manufacturer suppliers a certification program. "There's a specific process that we require them to follow in order to make sure the training is as efficient as possible and provides the technology and technical aspects of products in ways that our employees understand and can also teach to our customers," Donahue explains.
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