Dive Brief:
- Fastener distributor Fastenal made headway on its goal of expanding its digital-related sales, which made up 54% of total sales in Q1 2023, President and CEO Dan Florness said on an earnings call earlier this month. The company hopes to reach 65% of sales later this year.
- The sales push is part of the company's broader strategy to grow its digital footprint market share and enhance its technology deployment.
- Despite slower growth over the past quarter, Florness credited normalizing supply chains with helping the company get back to near pre-Covid levels of productivity. "We have done a nice job of digitizing our business to bring efficiencies to it and you see that shining through," the CEO said.
Dive Insight:
With global supply chains improving, Fastenal has been able to lower its on-hand inventory compared to a year ago, taking approximately three weeks' worth of inventory out of its network, Florness told investors.
"We believe technology investments and structural shifts in our go-to market approach has improved our business' long-term operating leverage and asset intensity," the company said in its Q2 earnings presentation.
Fastenal has spent the past year pushing its digital sales operations, including its e-commerce, inventory management services and other tech solutions. The strategy has included using data to improve its fulfillment efficiency and supply chain visibility.
Although fulfillment rates are falling back down from pandemic highs, "there is still a lot more room to go,” CFO and Senior Executive Vice President Holden Lewis said on the call.
"When we think about how far in the future we had to think about our purchasing behavior during the pandemic when constraints were there, we probably doubled our window for ordering," Lewis said. "There is still more room to go to get closer to where we were pre-pandemic. I don’t know that we will get all the way there."
On the capital side, the company is also spending more on its owned plant operations, allowing Fastenal to take greater ownership of its logistics and lessen its reliance on third-party firms.
"We did or at least are in the process of executing some route consolidation and some rescheduling of routes, which I think will bring some efficiencies into the business," Lewis said.
