Fastenal’s CEO credited digital investments and new efficiencies from automation as the industrial products distributor announced that sales grew 15.5% year over year in its fiscal third quarter ended Sept. 30.
In addition, the company cited large customers, pricing actions and “broad-based demand across core end markets” in its Q3 earnings announcement.
Its net sales totaled $2.46 billion, up from $2.13 billion a year ago. As that happened, Fastenal’s operating margin increased by 90 basis points, reaching 21.5% for the quarter, with operating income up by $90 million year over year.
Jeffery Watts, the president and CEO at Fastenal, called operating income growth “the largest year-over-year increase in a single quarter in Fastenal’s history,” during an Oct. 14 earnings call with investors.
Fastenal’s growth and digital footprint in Q3
Assessing the most important drivers behind Fastenal’s business in Q3, Watts first noted accelerated growth in his presentation.
“Second, we converted that growth into higher operating margin and faster earnings growth,” he explained. “And third, the quarter was driven mainly by market share gains through our key account strategy and new contract wins.”
As sales improved, Fastenal’s digital footprint, which includes its inventory management systems FASTBin and FASTVend, accounted for 61.4% of total sales, according to Watts. He noted that digital sales grew 16% during Q3, “faster than the company overall.”
“When customers transact digitally, orders are more accurate, there’s less manual work on both sides, and the relationship becomes much more integrated,” Watts stated.
He added that sales through FASTBin and FASTVend alone were up by “approximately 18%.”
Fastenal’s approach to automation and replenishment
Watts used the Q3 earnings call to highlight a specific case where his company used its Fastenal Managed Inventory (FMI) system to improve automation and replenishment outcomes for a customer, which his case study characterized as a manufacturer with a 20-year-old supply model.
“In this example, we had a new customer that is experiencing direct material stockouts, supply chain shortages and limited control over product consumption,” Watts said. “As their business grew, those challenges became even more significant.”
After assessing the customer’s problems, which Watts described as “a manual, inconsistent system with limited automation, limited digital visibility and physical organization,” Fastenal deployed its set of solutions and reorganized the manufacturer’s crib and storage areas.
“We installed clearly labeled barcoded bins, deployed our FMI technology, established planograms and connected the customer to FAST360 to really provide greater visibility across their facility,” he stated. “We also established KPIs to measure ongoing performance.”
Ultimately, he said Fastenal was able to increase the customer’s digital visibility “from 0% to 99%,” automating replenishment and eliminating stockouts, saving employees time in the process.
“Over time, we expect the solution to generate anywhere between 25% to 30% in overall cost savings,” he added.
Percentage changes may not align exactly with dollar figures due to rounding. Check back for more earnings reports. Here’s last quarter’s update about Fastenal digital sales.
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