Fastened to Supply Chain Innovation

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A look at Fastenal’s lock on simplifying the industrial supply chain

Coined 108 years ago, the expression “think globally, act locally” has come back into business vocabulary in a big way. One of the most recognized names in industrial supply has refined that approach to “think and act locally and globally.” By providing truly local service, the world’s largest industrial vending program, and unmatched inventory management, Fastenal has transformed from a distributor of industrial and construction supplies to a leader in supply chain innovation.

From China to Chino (California) and beyond, the company operates more than 3,300 in-market locations, providing customized inventory and dedicated sales/service teams to support local customers. These locations are supported by Fastenal’s global distribution network, a closely-aligned supplier network, robust sourcing, quality and manufacturing resources, and multiple teams of subject matter experts and support personnel.

By blending local presence with global reach to secure and simplify supply chains, today’s Fastenal creates value for their customers in 25 countries. According to the firm, that value is derived by minimizing supply-related processes, waste, and delays that can distract organizations from their fundamental purpose, whether that’s producing a product, building a bridge, or maintaining a university campus.

Terry Owen

A key leader in this metamorphosis is Terry Owen, Fastenal’s COO. A 24-year veteran of the Winona, Minn.-based enterprise, he recently spoke to BOSS about the company’s moves to be the best in the industry. “The value that our customers expect from us obviously comes in the form of the financial benefits; lowering their working capital, lowering their expenses, improving their P&L,” he said. “But they expect a lot more out of us than that.”

Those expectations include increasing their quality and production, improving their capacity and lead times, and boosting their worker and end user satisfaction. By crafting supply solutions aligned with the customer’s unique needs and goals, they strive to not only meet expectations, but exceed them.

Case in point: With its Onsite service model, Fastenal literally moves in with the customer to have a deeper understanding of their operations, which allows their teams to be more agile, more flexible, and maintain a high level of service. For the customer, it’s an opportunity to offload supply chain tasks and challenges to an expert integrated partner, allowing them to focus on core activities, streamline processes, and ultimately pass along greater value to the market.

Fastenal began their transition to an end-to-end supply chain partner to meet the demands of customers with complex needs and high expectations. As Owen put it, “If we're going to earn and maintain their business, customers are going to expect a lot more from us. So we decided to become the best supply chain partner in the world.”

It was an easy and logical transition for the 56-year-old firm. Owen explained that some of the foundations that allow Fastenal to be a strong supply chain partner today have been in existence for the length of the organization’s history. “We've utilized the structure that has been built over the last five decades,” he said. “It's really an iteration of the original company.”

Constant Evolution

“We've put a lot of resources into managing planned spend for our customers, but when you're managing supply chain for your customer, they also expect you to be really good at the unplanned spend – also known as spot buys or tail spend – because customers always have that,” Owen asserted. With more of these customers wanting to make purchases electronically, the firm has made major investments into digital capabilities, enhancing its ability to fulfill unplanned needs while further leveraging its inventory management strengths.

When customers buy online, the data is analyzed, and when there’s evidence of repetitive unplanned spend, they identify those SKUs. “The spend may be unplanned, but we believe there's some kind of frequency with those SKUs and we present that information to figure out a better fulfillment model for them, usually through one of our FMI technologies,” Owen said. With this approach, ecommerce becomes not only a platform to reactively fulfill orders but also a means to migrate certain needs to a more efficient and proactive fulfillment model when it makes sense for the customer.

Investing in technology has long been part of Fastenal’s strategy, but the supply chain disruptions of 2020 and 2021 uncovered the need for further investments in critical areas, including forecasting, demand planning, and supply chain visibility. “The fact that we had already started evolving our business to be a supply chain partner was beneficial,” Owen said.

A key thread in that evolution has been the ongoing development of the Fastenal Managed Inventory (FMI) program, which includes a suite of point-of-use devices that can be assembled in myriad ways to create truly one-of-a-kind solutions. In addition to providing 24/7 access to needed supplies, the devices provide a digital sightline to customers’ current inventory status and usage patterns, allowing Fastenal teams to be more proactive and strategic in how they source, stage, and transport products.

Another important factor has been the expansion of the company’s Onsite service model, which gives Fastenal personnel direct, daily insight into customers’ changing business needs. “We've had Onsite programs for decades, but it wasn't a targeted strategy for us,” Owen revealed. “It came about because our customers were asking for more support from Fastenal.”

The global disruptions wrought by Covid-19 also moved them to build up their in-house manufacturing operations to meet more customer needs. “We're really investing in our manufacturing capabilities,” said Owen. “If we manufacture a part internally, it mitigates some of the risk for our customers.” He noted that their approaches during the disruptions were on point, confirming that the switch to being an end-to-end supply chain partner would enable them to meet their objectives in any business climate.

The keys: great people and a decentralized culture that empowers them to continuously adapt and improve in the field. Fastenal supports their customers with a global network of specialists in Lean/Six Sigma, engineering, metalworking, and other disciplines. Dedicated operations, sales, manufacturing, and distribution teams also keep Fastenal close to their customers. With sourcing, compliance, quality, and logistics teams spanning the globe, when needs arise Fastenal can quickly find new sources of supply, ensure that they’re delivering a quality (and compliant) product, and get it to their customers on schedule.

“Our people and their ability to make really good decisions for our customers quickly has allowed us to be successful, and that's the culture of Fastenal,” Owen said. “It's that obsession and that relentless desire to bring value to our customers and to be the best supply chain partner for our customers around the globe that drives us.”