Business transformation has been one of MDM’s content pillars for decades, and on the very large end of the distribution demographic landscape, perhaps no company exemplifies long-term, wholesale change than Fastenal.

This past November, we published a three-part article series from John Gunderson, who leads Channel Sales and Market Strategy at Dorn Group, a consulting firm helping distribution and manufacturing leadership develop and activate transformational growth strategies. Gunderson’s series was predicated on what he called Fastenal’s “Big Pivot”, which referred to the distributor’s decade-long transformation from a company largely reliant on a nationwide network of branch locations — still the business model for many top distributors — to a company driven by embedding inventory and supply chain solutions within customer facilities.

See that series here: Part 1, Part 2, Part 3

Gunderson was MDM’s Senior Vice President of Analytics and E-Business from 2018-2021. His career also included roles at major distributors Anixter International, EIS Inc., Crescent Electric and White Cap.

Each part of Gunderson’s series was amongst MDM’s 10 most-read free blogs of 2023. That made it well worth further discussion, so we invited Gunderson onto the MDM Podcast for a deeper dive.

Every distributor is going through or has gone through business transformation over the past decade — and accelerated since COVID-19 arrived. But as Gale noted during the podcast conversation, while much of the industry was focused on standing up and scaling their eCommerce, Fastenal was focused on giving their customers tools to better manage their inventory as a means of strengthening relationships.

Gunderson’s “Pivot” series viewed Fastenal’s through a detective lens and as a case study, examining what happened over the past decade that led to the company’s current state as a company that had 2023 sales of $7.35 billion in 2023 sales (up 5.2% vs. 2022) and net profit of $1.16 billion (up 6.3%).

“I just think it’s a fascinating story,” Gunderson told MDM’s Tom Gale in the podcast. “Their financial performance is exemplary, and the way Fastenal has done it is kind of revolutionary in a lot of ways.”

Gunderson elaborated that Fastenal has nearly doubled its total sales over the past 10 years, and while its gross margin has declined overall in that time, the company has grown its towel EBITDA and net profits significantly, despite closing about 1,000 branches and without relying on acquisitive growth.

“They did it organically, and it’s almost unthinkable,” Gunderson emphasized in retrospect. “And when you dive into it, they moved from a branch-base distributor to what I call a customer-focused distributor.”

Fastenal CFO Holden Lewis did a fireside chat with Gale during MDM’s virtual Data Analytics Summit on Dec. 6, where he shared his insights on the distributor’s success formula nd the metrics/analytics culture required to out-perform the market. That session and all the summit’s content can still be viewed on-demand here.

Gunderson went on to explain how automation has been key to Fastenal’s decade of transformation — both in terms of its tech stack processes to embedding vending solutions or Fastenal employees on the plant floor of manufacturers.

“Once they put the human assets at the physical location, they also backed it up with an incredible tech stack,” he added, noting that Fastenal’s latest forward-looking statements share that the company expects to get 66% of their total sales volume through digital channels. 

Achieving two-thirds of your business volume via digital takes considerable costs out of the selling equation, while also creating an exemplary customer experience, says Gunderson.

He and Gale went deep into the different pieces that have driven Fastenal’s success, from technology investment to supplier relations, and much more.

Stay tuned for an MDM special report that packages Gunderson’s three-part “Fastenal Big Pivot” series alongside updates from the company’s 2023 annual report.

In the meantime, listen to the podcast via the embedded audio above, and you can check out all of our past episodes via our MDM Podcast page here.