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Fastenal adds inventory to stores, enhances service

Staff -- Purchasing, 9/2/2004 2:00:00 AM

As a major growth initiative, Fastenal opened 151 n ew 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 distribut or of fasteners, cutting tools, hydraulics and pneu matics, 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., Canad a, Puerto Rico, Mexico and Singapore. In response t o

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 ad dition to delivering orders to plant floors and receiving docks at customer locations, Fastenal employ ees 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, Fas tenal has a strong and growing walk-up business. Ea rly 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 5 00 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 sto res. 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 fo r 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 inve ntory. The distributor added some $28 million to in ventory in 2003. "We are constantly upgrading inven tory on a local

level based on items customers are using," says Don ahue. "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 t he 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, pull s 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 a lso may pick up the orders from their local store. Fastenal enhances the site four times a year, conti nuing to

make it more user friendly.

School of Business

To ensure that store managers are up to speed on th e products they sell, the distributor added a one-week advanced selling course and operational develop ment

training to its curriculum at the Fastenal School o f Business, which provides training to about 2,000 employees every year. Through its School of Busines s, the

distributor also offers its manufacturer suppliers a certification program. "There's a specific proces s that we require them to follow in order to make s ure the training

is as efficient as possible and provides the techno logy and technical aspects of products in ways that our employees understand and can also teach to our

customers," Donahue explains.