Fastenal's Industrial Vending Competitive Advantage

In Practise Weekly Analysis

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Fastenal continues to get closer and closer to the customer through our branch locations, and even more importantly, through our Onsite and vending programs. We're actually injecting ourselves farther and farther into the customer base where we see a lot of our competition retracting. And it's our ability to continue with that increase in contact time by being closer to customers that more and more solutions come into play. - Jeff Hicks, VP, FAST Solutions at Fastenal

When Bob Kierlin founded Fastenal (FAST) in 1967, the original idea was to dispense fasteners from franchised vending machines lining the walls of retail stores and manufacturing facilities. However, it quickly became apparent that the machine design couldn’t effectively serve the size and volume of inventory customers demanded. Kierlin was forced to pivot to a branch-based model which forms the core distribution infrastructure of the company today.

This pivot 50 years ago has proved critical for the success of industrial vending today. When Fastenal revisited vending in 2008, the company could leverage over 2,000 stores nationwide, a last-mile distribution system, and deep inventory management experience.

Over the last 10 years, the number of FAST vending machines installed has grown from 9,000 to 90,000. In Q3 2021, total FMI device revenue, of which vending is the majority, accounts for over 50% of branch revenue and ~33% of total revenue for Fastenal. The company currently has ~91,000 machine-equivalent vending devices installed and management believe there is a potential market for 1.7m devices globally.

We interviewed a former District Manager at Fastenal to discuss how industrial vending works and why it could be difficult for competitors to replicate Fastenal’s strategy.

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