Because of my experience in this industry, I am aware that many MRO companies that have been in existence for a long time can have a lot of challenges to overcome when it comes to changing business processes to work in today’s world. The MRO industry that Fastenal is a part of seems to have a lot of technical challenges in order to bring the company into today’s technical world. The cost is overwhelming, especially when you still do over a billion dollars of business a year and you can get by with the old systems you’ve had for 20 years. Fastenal has committed to making technology something they can leverage to the benefit of all. The president states:
Having great computer systems continues to be a competitive advantage for Fastenal. Our information technology (IT) team continues to redesign and upgrade our systems. They worked all year on a rewrite of our warehouse management system. Installation of this new system will begin in the first half of 2006. They have also made many improvements to our branch point of sale system and our website, fastenal.com. While many companies are outsourcing their IT functions, Fastenal believes our internal ability to quickly modify our systems to meet customer needs is one of our key competitive advantages.
Many MRO companies are now having to change their sales tactics now that Home Depot and some of the other big box retailers have entered the market. Price is no longer king. The true difference for a company in the MRO market will be the ability to successfully sell value added services. The margin on these services are higher than simply selling product but they also do a good job of making you the single source for a customer. Fastenal has made Growth Through Customer Service a key tenet for their future.
While reading the President’s message, he did not dodge the things they were not doing well and addresses them head on. This bodes well for potential investors because transparency has become key in today’s investing world.
For me personally, Fastenal passes the Meaning test of the 4 M’s because I have a good understanding of how the industry works and where many of the problems in this type of business exist. This company is heading in the right direction as far as technology and infrastructure when its competitors are still trying to figure it all out.
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