Rise of the Machines
Fastenal is predictably one of the first public companies to issue its annual financials at the beginning of each new year, almost immediately after their fiscal year ends on December 31. This year the company issued its initial annual financial statement on January 15. As usual, the document’s superb organization made for a typically, thoroughly insightful, yet efficient read. This type of comprehensive transparency is characteristic of a solidly managed, highly successful and driven company.
Fastenal’s new year is being ushered in with notable changes in the company’s sturdy executive management roster, along with typically positive annual financials. While this well-managed company leads followers to expect positive economic results, this year’s results are all the more incredible as total sales rose significantly even as the company reported a decrease in its total locations count.
While annual net sales jumped by over twelve percent to $3.7 billion, total store count decreased by exactly 50, to a total of 2,637. This is a decrease of about two percent. What made up for this net decrease in store count, in terms of annual sales? The company increased its count of FAST Solutions® industrial vending machines 14.9 %, to a total of 46,855 from the previous year’s count of 40,775.
The FAST Solutions® program was initiated just a few years ago to supplement Fastenal store locations, as the vending machines are available to supply product 24/7 and are located at the convenience of clientele. Fastenal refers to these machines as automated stores.
FAST Solutions® vending machines are designed to Fastenal’s detailed specifications, then installed and maintained by Fastenal at client facilities. As part of the package, customers also receive the necessary comprehensive training on-site.
Fastenal also boasts of its proprietary vending channel concept: The Machine Behind the Machine. This includes unique software which customizes each machine to meet each client’s specific and changing needs. Fastenal then features a distribution center designed specifically for its vending program, with personnel dedicated to maintaining this efficiently supported supply chain. The DC communicates directly with vending machines to proactively ship vend-ready and packaged product to each machine, anticipating individual needs.
Fastenal supports the efforts of its FAST Solutions® vending machines locally through its network of over 2,600 locations, supported by 9,000 local Fastenal representatives. Restocking is locally based and is initiated as each vending machine constantly updates product purchases and withdrawals and automatically anticipates restocking needs. When machines are about to run low on product, local reps receive automated alerts to visit and resupply machines. This provides clients a great efficiency in cost and time, as well as avoiding shortages or delays in obtaining product.
FAST Solutions® vending machines offer customers inventory control and accountability as every transaction is completely reported on a dedicated website. Customers can determine, and if necessary limit, inventory purchases by individuals, departments, jobs or product. All transactions are monitored, thus all individuals are held accountable. This is seen as a simple tool designed to reduce waste.
As employees need just a quick walk to a machine to restock their project, loss of time and fuel are significantly reduced, as are costs, as actual store visits decrease. This is seen as a way to increase productivity, while reducing consumption and waste. This certainly accounts for Fastenal’s notable customer loyalty.
The only cost for customers is a monthly software licensing fee of $40 per month per machine. To qualify for the use of machines, companies must spend at least $2,000 per month per machine with Fastenal, including non-vending purchases. Based on the considerable annual growth of the number of FAST Solutions® vending machines in use, customers seem to endorse the program whole heartedly. Fastenal’s annual financials are almost assured success with guaranteed minimum revenues coming from its rapidly expanding FAST Solutions® program.
The new year also brought in executive changes at the very top of the company hierarchy. Late last year, Willard D. Oberton announced that he was relinquishing his position as corporate CEO. It was then determined that company President, Leland J. Hein, would add the CEO position to his presidency. Not surprisingly, the company also stated that Mr. Oberton will continue to serve as Chairman of the Board, will continue to maintain an office, will continue to be actively involved in strategic planning and performance measurements for the company, and will continue to serve as a mentor to Mr. Hein. Mentoring of senior executives by senior executives-yet another indication of the high degree of teamwork for which truly great organizations strive.
Over the past two decades, the company has reported a reduction in annual sales just once, during recession-struck, 2009. Of course, 2009 reflects the first full year of the recession. At that time few companies in this industry reported positive results, with relatively flat sales generally thought to be a success. In fact, the overwhelming trend in this industry for years, was a recovery which took Fastenal just one annual report to again announce significant growth.
Transparent and rapid reporting of ever-growing financials, backed by a solidly evolving executive team and dynamic innovations in the supply chain, have long resulted in Fastenal stock flying, though somewhat under the radar. Yet the company continues to be in a position as one of the most solid growth offerings on Wall Street since the collapse of 1987.