By Tony Bennett

Big Idea, Big Business

Fastenal Grows to Become North America’s Largest Fastener Distributor

Long before this company became a publicly-traded behemoth with billions of dollars in net sales, Fastenal was just an idea bouncing around in the head of cofounder Bob Kierlin, a young man from Winona, Minn.

His big idea was to invent a vending machine that would dispense nuts and bolts, and it was this idea that helped win over investors and enabled Kierlin and four of his friends to open the first Fastenal location in 1967. But as is often the case with start-ups, plans subsequently changed, and the vending machine idea was tabled in favor of launching traditional stores with a person behind the counter.

As the years went by, Fastenal steadily grew more successful. The storefronts multiplied, as did the employees. The company went public and earned some press in the Wall Street Journal. By 1993, it was making $100 million in annual sales. And in 2008, Fastenal was finally able to begin introducing the concept that started the whole ball rolling: providing industrial vending machines, an outstanding idea that has only allowed this company to keep growing.

Today, Fastenal is North America’s largest fastener distributor. In 2012, Bloomberg Businessweek  noted it as the top-performing stock in the Russell 1000 index over a recent 25-year period. In 2015, Forbes ranked it No. 44 on its “100 Most Innovative Companies” listing, just ahead of Starbucks. In a study, the Harvard Business Review and the Reputation Institute called it one of the world’s 10 best companies in terms of the company/CEO reputation. And by 2016, it had more than 2,500 stores, had expanded to serve 21 countries and had racked up a hefty $4 billion in net sales.

“When you have a local store like Superior, you stock product specifically for [local] customers.”
– District Sales Manager Sam Puza, Fastenal

Superior’s Fastenal location is currently in the Mariner Mall (now known as the Mariner Retail Business Center), but that will change with a move later this year to the site of the former Erlanson Lumber and Millwork Co. at 310 Belknap St. While the Superior business is part of a much larger corporate structure, the staff who work there will attest to the fact that they’re also able to work with independence in serving the needs of their local customers. And they know their customers well.

Sam Puza is the district sales manager for the Superior store and has been with the company for nearly 14 years, since he was in college. These days, he’s based out of Minneapolis, but his coverage region still includes the Twin Ports area.

“My main focus is key account sales, whether that be a customer that we’re currently doing large-volume business with or a potential customer that we’d be working at getting,” Puza says. “I also do personnel [matters] for 13 different branches that come with hiring, retention and making sure that each of those branches are staffed properly, so we can provide a high level of service to our customers and run the branch efficiently.” He’s also involved with financial decisions of the business.

“Our company’s backed with a large corporate headquarters in Winona and about 21,000 employees,” Puza explained. “But we’re a really decentralized company, and we like to become part of the community and part of building partnerships and relationships in each area. The biggest thing about that decentralization is they let the branches and myself cater to the market.”

Puza says the key customer segment he strives to serve in Superior is the equipment manufacturing market – but all other customers are very important to the business. “In order for us to be a good supplier, we have to provide an extremely high level of service, quality products and a competitive price,” he said.

“You definitely want to be proactive instead of reactive.”
– General Manager Steven Olson, Fastenal

Browse the Fastenal website, and what this company’s main product is becomes clear. It’s fasteners, of course (it’s right there in the “fasten all” name) – bolts, screws, washers, anchors and many other types. But fasteners aren’t the company’s only product. In fact, Fastenal has an extensive number of different categories people can shop, from safety products, tools, paints and janitorial and plumbing supplies to lighting, metalworking and cutting tools, electrical tools and equipment, automotive products (even fleet vehicles), office products and furniture – and more.

“Fasteners are what our company was built on; nuts and bolts and widgets that put things together are what the company was founded on 50 years ago,” Puza said, noting that today, fasteners make up about 40 percent of the company’s earnings, while the other 60 percent comprises a portion from each of the other product categories.

“When you have a local store like Superior, you stock product specifically for [local] customers,” Puza said. “If we know we have a customer who’s going to use something monthly, weekly or every day, we can stock it. But we also have 14 distribution centers throughout the U.S. that we pull product from.”

This leads back to the “decentralization” concept. Even though it’s a large corporation with strict standards to uphold and products to feature, each individual Fastenal location is able to address the particular needs of customers in a region.

Some of Fastenal’s products are made in the United States, while others are imported. “We have a manufacturing facility in Winona, and we also have 11 other manufacturing facilities throughout the U.S.,” said Puza. He added that these facilities produce what he refers to as “specialty fasteners and components” comprising about 5 to 6 percent of the fastener business. The rest of the fastener products are largely imported from Taiwan and China.

“Fastenal is an elite supplier because of their customer service.”
– Operations Manager Matt Klein, Barko Hydraulics

Steven Olsen is the general manager of the Superior Fastenal location and took on the job that Puza used to do, in fact. “I’ve been with the company for nine years,” Olsen said. “I started as an outside sales rep.” He says his current duties are to “oversee the branch and make sure it runs efficiently as far as inventory, developing personnel and growing relationships with customers. I do spend about 60 percent of the time out visiting customers as well.

“One of the best things about Fastenal is that we can customize our inventory for our customers to keep in stock a lot of items that they use a lot of,” Olsen explained, when asked about what makes the company unique. “Basically, we build our store around our customers, is what we do.

“You definitely want to be proactive instead of reactive,” Olsen noted. “That’s why we try to hit our customers on a regular basis. We’re more of a business-to-business company, so we’re going to a lot of these companies anywhere from one to five days a week. We have a strong relationship, and if problems do arise, we can be on top of it to solve it before there is a big issue.”

Operations Manager Matt Klein of Barko Hydraulics is one of those customers. “I oversee production, quality, safety and maintenance at our location in Superior,” he said. “I have been with the company for almost five years and in my current position for over two. I have over 11 years of experience in heavy equipment manufacturing and have worked with Fastenal at three different locations throughout the United States.

“Fastenal is one of our major suppliers for Barko. The majority of their business with us is supplying fasteners, hydraulic fittings and electrical supplies,” said Klein. “They are described as a vendor-managed supplier, meaning that they are ordering and delivering inventory right to the assembly line. This service provides value to us in that they are managing thousands of skews on a daily basis. Operationally, we also purchase tools, safety and maintenance supplies. It makes it easy on our operations to have a single supplier for most of our tools and consumables. Fastenal has been working with Barko since 2003, so it’s probably pretty close to 15 years. I can’t complain. It has been a great relationship.”

Barko Hydraulics’ longtime relationship with Fastenal is also due to more than the quality and variety of its products.

“In the case of Fastenal, they are the No. 1 supplier to our local industries.”
– Vice President-Operations Jim Campbell, Exodus Machines

“Fastenal is an elite supplier because of their customer service. I never have a problem getting ahold of someone and they go out of their way to help us out, especially if we are in a sticky situation,” Klein said. “They have also grown with us over the last few years by continuing to offer additional products and services at a great price.
You can tell that Fastenal services a lot of the local manufacturing and maintenance companies in the area. You see their trucks everywhere – not only Barko, but names like Exodus, Genesis, Graymont, Charter NEX and others prove that they are the supplier of choice for this area.”

Klein also noted examples of situations in which Fastenal has gone above and beyond for him. “I know that on a couple of occasions, they actually sent their own pickup to a supplier to pick up some parts for delivery the next day,” he said. “One specific moment is that a plating company was late completing some steel spacers for us. We needed the spacers the next day, so Fastenal sent an employee in a pickup truck to pick them up. In my opinion, that is going the distance for your customer.

“I have had the privilege to work with Fastenal at three different locations and have received the same great service at all three locations,” said Klein. “While they are a huge international company, their service feels very small town. I think this philosophy has made them very successful.”

Jim Campbell, the vice president of operations and co-founder of Exodus Machines, concurs. He’s in a position that depends heavily on Fastenal’s support, and he’s more than satisfied with their service. “I have 30 years’ experience in the industry of manufacturing hydraulic attachments,” he said. “I am responsible for all material coming into the facility as well as finished product going out on time.

“Fastenal is one of our main suppliers,” said Campbell. “They supply us critical components that go into our product as well as certain consumables for daily operations. They provide weekly stocking of critical components, keeping in line with our specific inventory levels.” And he noted this has been the case for about nine years.

“We actually have vending machines that dispense product like safety glasses or gloves or tools.”
– Outside Sales Representative Dylan Erickson, Fastenal

“Their communication is exceptional and they also have experts relative to their products that can provide a more in-depth background to what they are selling,” Campbell says. “At the end of the day, it’s all about their service, high-quality products and competitive pricing. It’s easy to measure the status of a company by simply looking at who and how many companies have a working relationship with them. In the case of Fastenal, they are the No. 1 supplier to our local industries.”

Campbell also mentioned that Fastenal impressed him because of how the company treats its employees and customers. Great customer service is what clients want and expect, of course. But when customers can see that you treat your own employees with respect and consideration, that, too, strengthens the bonds between buyer and seller.

Now, back to Fastenal founder Bob Kierlin’s big idea: the fastener vending machine. It’s truly remarkable that the company was basically formed around it, but had to put his idea on the back burner, went on to great success nationally and worldwide – and then only a few years ago, picked it back up and launched a hugely popular service.

The concept, as it turns out, was always sound. But the technology and the times just had to catch up with Kierlin’s prescience.

“We actually have vending machines that dispense product like safety glasses or gloves or tools,” said Outside Sales Representative Dylan Erickson of the machines, which are deployed at many different kinds of workplaces. “It’s really for consumption reduction; you can see where your product’s going. In the past, you never had that control. We brought it to market so that customers can save money.”

Furthermore, Erickson noted, the vending machine stock can be checked
remotely, and he can then go out in the field to restock before anything runs out. “While I’m out there checking those, I’ll meet with any purchasing staff that I deal with and see if there’s anything else I can help them out with,” he explained.

“We usually either have it on the shelf, or we can order it.”
– Store Operations Manager Lauren Mehtala

“All my customers deal with different products,” Erickson said. “Some people prefer certain brands over other brands. Each customer’s different – you have to get to know what they like and what works for them.”

Of course, Fastenal’s customers aren’t all of the industrial variety. Because it’s open to the public, this company serves people who just need one item as well. “We get a lot of walk-in customers who are looking for that weird-sized bolt,” said Store Operations Manager Lauren Mehtala. “We usually either have it on the shelf, or we can order it from one of our distribution centers.”

The story of Fastenal is one of growth, and the Superior store’s upcoming move to the former Erlanson Lumber building reflects this. “We’re excited about the move,” Puza said. And Olsen said that he sees the company adding “two or three” new employees after the transition is complete.

While the company may have started out (literally) to focus on nuts and bolts, it’s clearly savvy about the crucial nuts and bolts of business itself: Listen to your customers, know their needs and preferences and provide top-notch service. And Fastenal does so very well.  P.S. 

Tony Bennett is a freelance writer based in the Twin Ports.

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