On-Site Helping Fastenal 'Think Big' - Modern Distribution Management

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On-Site Helping Fastenal ‘Think Big’

Sales and service locations offset branch closures, drive 2Q sales growth.

Fastenal's strong second quarter – the Winona, MN-based distributor's best sales and earnings growth since the end of 2014 ­– was driven by improved market demand, growth in industrial vending business and, most notably, a boost in on-site locations.

"The second quarter of 2017 felt more like Fastenal," Dan Florness, president and CEO, said on this week's earnings call with analysts. "We have grown well over the last year, but market headwinds have masked this growth."

On-site locations, which aim to increase cost savings and productivity gains by including dedicated sales and service within a customer's facility, are one of the key factors driving Fastenal's strong sales. The company signed 68 new on-site locations in the second quarter, compared to 44 in the same period in 2016. These locations now total 486 with a goal of signing 275 to 300 new locations this year.

New on-site locations, along with continued growth in vending, offset the closing of 31 Fastenal branches in 2Q (it opened five) as the company works to meet customers' changing demands.

"On-site is an example of us thinking big over the last five years of how we can grow the business faster," Florness said. "Vending is another of the last 10. And the challenge we put forth to our self is always looking for what's next in that think big category about growing the business, growing our service to our customers and growing the opportunities for our employees and our shareholders long term."

On-site growth is affecting more than just the numbers. The rise in locations is also changing the company's internal language to better reflect their role – and their purpose – in the supply chain. Instead of "stores," Fastenal now uses "branches" or "in-market network" to represent how the company wants to be seen – as a service organization.

"Our branches and on-sites are an extension of our distribution network," Florness said. "We're not a store, we're not a retailer. We're a service organization that's part of our customers' supply chain."


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