Dive Brief:
- Fastenal says nearly half of its Q3 sales were driven by its digital products and services, as the company utilizes inventory management and online fulfillment to build capacity, President and CEO Dan Florness said on an Oct. 13 earnings call.
- E-commerce, inventory management services and other tech solutions under the parts distributor’s “Digital Footprint” comprised 49.5% of all sales last quarter, up 43.7% YoY.
- The company hopes to reach 52% of total sales from the company's Digital Footprint by the end of the year, Florness told investors.
Dive Insight:
Much of Fastenal’s operational focus in recent months has been on building a more proactive purchasing and inventory system for itself and its customers, Vice President of eCommerce Kirk Talmontas said in a September blog post.
Rather than order on an "ad hoc" basis and risk repetitive purchases, Talmontas noted the company now uses digital tools to more proactively monitor and replenish product levels in a simpler process.
"The result is a consistent, steady stream instead of a never-ending scramble for 24- or 48-hour fulfillment," Talmontas said.
The company’s digital footprint includes its FASTStock program, which works with manufacturers to build custom inventory management solutions.
“We believe the data that is created through our digital capabilities enhances product visibility, traceability, and control that reduces risk in operations and creates ordering and fulfillment efficiencies for both ourselves and our customers,” the company said in its earnings report. “As a result, we believe our opportunity to grow our business will be enhanced through the continued development and expansion of our digital capabilities.”
More efficient fulfillment helped boost the share of Fastenal's sales coming from e-commerce. Daily sales through e-commerce grew 50.2% in the third quarter, making up 18.0% of revenue in the period.
The focus on digital services and e-commerce has helped Fastenal weather economic uncertainties, and the company is focusing more on visibility tech to help its customers.
"[The Digital Footprint is] really about widening the moat, illuminating supply chain for our customer and making supply chain more efficient for both ourselves and our customer," Florness said on the earnings call.
Fastenal competitor ParkOhio, which specializes in industrial manufacturing supply and logistics, is also investing in inventory capabilities. The company acquired Southern Fasteners earlier this year, with VP and CFO Patrick Fogarty highlighting in a Q2 earnings call the company's expertise in the design of customized inventory management programs for customers.
