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Vending Becomes a Key Component of Growth for MSC, Fastenal
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Two major industrial distributors – MSC Industrial Supply and The Fastenal Company – expect vending to play a key role in their growth this year and going forward.

As Associate Editor Jenel Stelton-Holtmeier outlined in her blog post on MSC Industrial Supply’s plans for $4 billion in sales by 2016, a part of MSC's strategy is to expand its vending programs. “Vending is exploding as a program, and it’s not just one customer,” President and COO Erik Gershwind said.

Fastenal, which just reported a sales increase for its first quarter of 20 percent, attributed a portion of that growth to its vending program, FAST Solutions. The distributor said in a news release: “We believe our FAST Solutions (industrial vending) have the potential to be transformative in industrial distribution.”

In mid-2011, Fastenal revealed it wanted to sign up 2,500+ machines per quarter (10,000 machines annually). Fastenal seems to have met and even exceeded that goal. In the first quarter, it signed up 4,568 vending machines. In total, as of the first quarter 2012, Fastenal had 9,798 machines installed. Fastenal increased its installed machine base by 2,345 machines in the first quarter of 2012.

Fastenal said that 17.8 percent of total sales in the first quarter were with customers using a vending solution. A year ago, just 8.9 percent of total sales could be attributed to these customers; in 2010, 3.4 percent of sales were attributed to customers using a vending solution. That’s a significant increase.

While public distributors have been touting the potential of vending programs for several years now, the contribution vending is making to the bottom line for some of these distributors has reached a tipping point – vending has become a significant part of these distributors’ strategies.

According to an article I wrote on VMI back in 2006 – Automated VMI Grows Up  - once you implement such a system at a customer’s location, it’s harder for that customer to walk away from that account. It’s also a tool that distributors can offer to gain new accounts.

Offering vending is not a perfect fit for all distributors, as we outlined in the 2011 Distribution Landscape Report in Inventory Management a Top Priority. But customers will continue to demand more services that help them operate more efficiently, and distributors of all sizes will have to continue to find ways to tie themselves to their customers. Jonathan Byrnes talked about taking a more integrated approach in a recent MDM Webcast on Operating for Profit. Read the summary of that webcast here: How to Build a More Profitable Supply Chain. Or order it on DVD here.

What are you seeing? Are customers demanding more inventory management services post-recession? Comment below.

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