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Good morning, everyone.
Next, mark your calendar.
We will have a review for the first exam next Tuesday.
So please be sure to come here next Tuesday.
It is my great pleasure to invite Mr. Bo Harris and Mr.
John Cherry to come to our class.
Mr. Harris is the Director of Sales, right?
A district manager for North Texas.
Oh, wow.
John Cherry is our Director of Sales.
In construction.
For our construction division.
It is my great pleasure to invite them.
I want them to talk about the importance of supply chain
management and business process management and even
the sales management.
Today, you will learn how the IT field
can use the most recent technology or the leadership
to manage a team, provide a better
service to the customers.
Please welcome Mr. Harris to our class.
The warm ovation is appreciated.
Thank you.
[APPLAUSE]
Goodness.
Thank you, Bo.
Good morning, folks.
My name is Bo Harris.
As Doctor Han mentioned, I am a district manager here
in North Texas.
How many of you, by a raise of hands,
have seen us in class before?
Really?
[INAUDIBLE]
1, 2, 3, 4, 5, 6 of you, 7 maybe.
OK.
Well, I'm glad that I prepared the slide the way
I did, then, because today what I've done
is I've kind of given you a little bit of an insight
into what Fastenal is before I just jump knee-deep into what
our supply chain is comprised of.
So to start-- for those of you that have been in our classes
before, you should be able to answer this question.
What is Fastenal?
You raised your hand.
What was your name?
It was back in 2005-- Julio.
Julio.
What do you know about Fastenal, Julio?
They buy-- they'll make stuff like saws, air nail guns,
[INAUDIBLE].
I don't know.
It was a marketing class in 2005.
All right.
Y'all supply the manufacturing industry with maintenance
and supply issues for their [INAUDIBLE].
And such.
Your primary opponent is Grainger,
if I remember correctly.
Wow, you have been in one of our classes before, haven't you?
That's good.
Fastenal is a store-based, full-line industrial supplier.
To break that down, what I mean by industrial supplier--
we sell to manufacturers and contractors.
People that build things, people that make stuff.
Right?
We offer diverse product offering.
So when I say "full-line," we don't just try to sell someone
the nuts and bolts that they use to assemble something.
We try to sell someone the hammer that they
used to hammer in the nails, the gloves
that they wear to keep blisters off their fingers.
Trying to create a one-stop shop to where someone doesn't have
to go to ten different places to get everything they need.
We offer also on-site delivery and vendor-managed inventory
solutions.
The reason we're able to do this is we
can actually support the programs
with local people and local stores.
And that's where we're really getting
into the heart of what Fastenal is.
Our motto is "Growth through customer service."
The way that we go to market is we open up
stores in more than just your urban areas, in more than just
your big cities.
We'll open a store where we find a market that can support it.
Fastenal brings the store to that market.
We believe, and we've been building our North American
store network on the principle, that by bringing
the store closer to the customer,
we'll provide better service and grow our business.
What you're offering when you have
a store in your local market, ten minutes away
from your operation, is same-day, in-stock products.
That's what Fastenal can do.
We build our inventories to mimic what the market needs.
If we're in Dallas servicing Mount Pleasant,
that's difficult to do.
Do you agree?
But when we put a store in Mount Pleasant,
we have the eyes and the ears, the real people,
the accountability, and now the knowledge
to know what we need to put on our shelves
to feed that market.
Has anyone ever heard the term "just in time inventory"?
What does that mean?
"Just in time"?
Well, it's a full system where the calls up
for an order instead of having an [INAUDIBLE] on hand
all the time.
They place an order when the customer really needs it.
Perfect.
Exactly.
It's not having excess inventory that you don't need.
I've been working with Fastenal and going in and seeing
industrial complexes, industrial operations, for years,
and it always blows my mind how many times you
walk past this big cage that has these boxes covered
in dust and dirt.
And you ask the manager, what's all this stuff?
Is this stuff you use?
Aw, that's stuff we used to use, but we actually
started using this widget, or we stop using this paint.
But they ordered all this inventory.
That is the antithesis of "just in time inventory."
That's keeping six months worth of inventory
so you don't run out.
And in a lean operation, that's the exact opposite
of what you want to try to do.
By having the stores in the local market,
we can keep inventory for them to where
they don't have to wait a delivery next week from Dallas
or a shipment to come in from Rhode Island.
They're running up the street to their Fastenal store
or allowing their Fastenal representative
to come in and monitor those stock levels for them.
I've been using this map right here for probably about a year
now.
What this map is-- it's just US urban locations
with at least 100,000 people living
in that general location.
It's kind of a sparse map because it's
only very big cities.
It's kind of funny, but our two biggest nationwide competitors,
their location map very heavily resembles this map here.
Because to service this area right here,
they're shipping out of Dallas.
To show you a little bit of a contrast to that,
this is the way Fastenal goes to market.
When we see that there's a need for stuff
out in this general location, we put a store there.
Make sense?
So let's get into speaking about the supply chain part of it
now that you've all heard a little bit about what
we are all about and what we're trying to accomplish.
It's all about supporting the store, right?
It's all about trying to make sure the parts are there
so we can supply the customer service that we need to.
We have nearly 2,700 store locations--
it's actually 2,660, I think, is the latest count.
They're supported by 15 regional distribution centers.
These distribution centers are responsible for taking
care of large regional mass areas,
sometimes ranging up to 250 to 300 stores for responsibility.
They run delivery trucks out to those areas,
and those delivery trucks are actually
Fastenal owned fleet-- what we call
our "Blue Global internal transportation."
So we own and operate our own internal fleet department.
Another big part-- in fact, what I would say probably
makes Fastenal different and probably, in my opinion,
better than our competition, is a decentralized decision
making at the local store level.
We have the distribution centers,
and we have the transportation to take care of the stores.
But at the same time, we also offer the store the autonomy
to go make decisions that best suit their customers' needs,
very important as far as taking care of the customer.
So let's talk about the hub-to-store logistics.
What does that look like?
Our distribution centers process requests all day,
every hour, on ten after the hour,
all the way up until 5:00 o'clock
in the evening, processing requests that
come from the store.
Now, they're not just responsible for pulling orders
that are sold requests, sold products to the customers,
but the hubs are also responsible for generating
auto-fill requests in support of our customer service project.
To give you a little bit of background
on where our customer service project is, is in 1988
we became open to the public.
In other words, we opened our stores
to allow customers to walk in and purchase stuff
off the street with cash, as opposed
to strictly business-to-business net sales.
We called this our customer service project, where
we actually created a storefront,
put product, a retail sort of scenario
where people could walk in, peruse the aisles,
and just come pay for what they need.
In doing this, we also set stock levels in this storefront,
and the distribution centers are responsible for auto-filling
those requests.
So you have 20 on the shelf.
Once you get to 10 of them, that's our min,
and the distribution center sends you 10 more
to get you back to 20.
Does that make sense?
Let's talk about Blue Global efficiency and how this works.
How our internal freight system works for us,
and how we use it to be more efficient in moving product
from one location to another.
Not only does our Blue Global transportation network
drop off deliveries for sold and stock product for the stores,
it also acts to return transfers from the store
to take to another store.
So if you think about it, a truck
leaves out from our DC to drop off product for a store.
There's stuff at this store that has to go to another store.
So our distribution center pulls those product requests
back with accurate shipping labels down
to skew and lot number, brings it back to the distribution
center to ship back out to the right branch.
Just using what we're already doing to move product
without incurring any additional expense.
Also, our 2,700 locations, we actually use that to leverage,
decreasing our expense associated with picking up
from North American suppliers.
You think about it, our 2,700 stores actually
double as 2,700 different dock locations.
So let's say we have a store in Paris, Texas.
There's a manufacturer in Paris of which we resell their goods.
The store in Pairs can go grab, just with their regular fleet
truck, any product from that vendor,
bring it back to the store.
So when their nightly truck comes by to pick up,
they pick up that product that's going back
to the distribution center.
Just another way that we take advantage
of the amount of stores we have on the street and the system
that we have in place.
Also our fleet the delivers to the stores,
moves product from stores to stores,
also goes around and has a track where it picks up product
from these North American vendors.
Sometimes we pick up as many as three-to-four days a week.
I actually pulled this.
This is our latest distribution breakdown and schedule
running from hub-to-hub.
All these purple triangles that you see
are distribution centers, North American distribution centers.
These red lines are tracks where they go from hub to hub.
You can't read these little white boxes here,
but what they are indicating is how many times
we make this trip or this trip.
Almost all these white boxes say five days a week.
So when somebody that has a store right here
needs a product that is only in stock in this distribution
center, five days a week we have a truck
that will pull that request and run it
down to their local service and distribution center,
which is also responsible for sending in their stock
and sold request truck.
I thought this was really good to show you
because it shows you exactly how we look at it.
And these black ones are actually
where we take advantage of railways,
but I won't get too far into that and convolude the matter,
but you get the point.
Here's the part that I really think
is impressive about our network, and that
is the branch autonomy.
A lot of times, as a wholesaler, I
think that people think that anywhere you go into,
you can just go in and negotiate a price and tell them
you want to pay this or that.
But I think it's important to read a little bit deeper
in to that.
The stores are not just closed in to sell you items
that they have on their shelves or items
they have in their distribution centers.
But our stores have the autonomy to reach out and purchase
an item from a North American supplier,
or, shoot, call in and set up their own carrier
or call and set up their own contract with a local supplier
to pull in a product that they need.
They're armed with their own UPS and FedEx account numbers,
so they can pull this item in without using
our internal transportation if the truck route doesn't
fit their time and their need.
And the stores have the right to cost the product what they need
to take care of the customer, something
I believe is very important for the way
that we do business at the branch level.
The way that the distributions or centers operate
and the way that they stay stocked
is also really important to understand.
The DC inventory levels are calculated and forecasted
based off actual store data.
All of our stores have a point of sale system
where they use actual skew numbers, part numbers,
standard stock-keeping numbers, to sell every product that
comes through the store.
Our analysts in Winona, Minnesota,
at our corporate office, go through this data
to forecast what they need to bring in for the coming year
or for the coming quarter.
There are three distinct categories of product
in which the distribution centers bring in.
There's North American products, products
that may not necessarily be manufactured in the United
States but they are purchased in the United States,
products that we import only, IO items,
items that are brands specific to an import,
and then items that we prefer to import
but we can substitute domestically.
Another really interesting point is that in 2003, Fastenal
established FASTCO, which is our Asia-based division
for sourcing and quality controlling all imported
product.
One thing that's important about managing items through the hubs
is that there is traceability.
As an ISO supplier, we have to track every part that
comes in by a control number or a lot number.
So not only is every part that flows
through our stores and our distribution centers tracked
by the skew number of what it is,
but it also has a lot number so we can trace it back,
even if it was an imported product.
All standard stock items at the distribution centers
are assigned a reorder point.
All of these are forecasted based on usage,
and sometimes the distribution centers
will even call individual stores that have high usage
to see if there's a contract on hand
where they expect to continue going
through an item at a very rapid rate.
This is called a reorder point.
So if we want to keep 2,000 of an item in the distribution
center, and 1,000 is the reorder point,
everything under that item of 1,000
is considered safety stock.
That is what we can survive off of supplying the demand
with until we run out of supply altogether.
This here indicates our inventory value increases
over the past eight years.
And it's actually in millions, so 784 million.
And you can see how that correlates with our net sales.
We continue to boost up our North American supplies
and our inventory as our sales have increased.
As I said, there's three different types of product
acquisition, or three different categories of ways
the distribution centers get products.
There's North American suppliers.
These are items like DeWALT or Metabo or Makita, name brands
that you're specific with seeing.
Once again, not necessarily items
that are manufactured in the United States but items where
we actually make the purchase here in the United States.
And we can't substitute that product
with an imported product.
Import only-- a really good example of import
only is our private label brands,
where we've taken an imported product
and put a name on it that is exclusive to our company.
And when we go to run out of that inventory,
we cannot substitute that with something that has a different
brand.
So those first two there, they can't
be substituted whatsoever.
The third distinct type of category of product
that we bring into the distribution centers
is something that is preferred to be import
but can be substituted domestically.
A good example of this would be fasteners or fittings,
items where there's very little consequence to changing out
the brand of it.
Obviously we would get a better price
on these when we can bulk import and bring them
in with our private label on it, but there are also
distributors here in the US who sell the exact same product.
To discuss FASTCO's operation-- we've actually as a company
been direct importing product since 1989.
But not until 2003 did we actually put together
a program where we in-house do quality assurance, quality
testing, and have a group assigned
to actually going and sourcing and finding better places
or better avenues to get our product.
We're actually up to over 200 employees,
not only just in China proper but in Taiwan and India
and the Czech Republic now.
Their motto since the inception was "Quality is everything."
And down to that, being that we are an ISO supplier,
we do have to make sure that everything
is up to the standards of ISO 2008 9001.
This FASTCO operation actually supplies and controls
80,000 of our skew numbers.
A lot of these are fasteners and fitting parts,
but they are solely responsible for making sure
that they're sourcing and finding
the best price and the best product for us
to fill those requests for those particular skew numbers.
They have access over there to over 680 different suppliers,
and I'm sure that number is growing every day, as we have
an entire department strictly dedicated
to finding better sources.
We do actually have an A2LA lab dedicated to testing.
As far as the fasteners go, they're
actually performing stress tests and heat tests on product.
As far as non-fasteners go, we have a product standards
testing facility where they just make sure
that the product fits exactly what it's supposed to be.
Here's a little bit more information about FASTCO.
You can see that really their primary motivation
is satisfying these four categories.
They have their sourcing intelligence,
like I said before-- finding the best
avenue to procure the product.
They actually have a scorecard, a metric
where they weigh themselves.
Are they providing the best timing, the best service,
and the best quality parts?
There ideal for us is obviously to support our supply chain
and make sure that we don't run out of product
and to maintain a comprehensive supplier database and make sure
that we have adequate cross-references
to go from one to another.
And speaking with our internal planning, our Fastenal supply
chain priorities breaks down to three primary functions.
We're trying to offer the best service
for our stores and our customers.
Running out of product as a distributor
is by far the last thing we ever want to do.
We want to best manage our inventory dollars.
Obviously, buying items is something
that's going to weigh off or off-weigh our sales.
So we want to make sure that we're not just dumping money
in to bringing in inventory that's not going to move.
And lastly, we want to achieve the highest
level of operational efficiency and make sure
that people have the products they need
and our salesman in our stores are armed with the best service
commodity take out to the customer.
That really is the short and long of my presentation today,
but I wanted to allow plenty of time for y'all to ask questions
as you see pertinent to your recent studies.
I know that we're three weeks removed
from discussing supply chain, but I
wanted to hear any questions that the group may
have about our company or our supply chain.
Do y'all run the ERP system?
Like SAP or Oracle?
We do run-- go ahead, John.
Another unique thing about our company
is most of the management software that we use,
we build it in-house.
Almost everything is going to be Microsoft based,
and we use Excel and a lot of their programs.
But the majority of the systems that we use for that,
we build it.
So the benefit of that is we don't
have to rely on another system or somebody else's
design of a system.
We build it for the way that our business works.
So there are multiple systems that they use, but most of them
are built off of the platform of a Microsoft based program,
and then we work with Microsoft to build
our own internal system.
Well, as far as database-wise, are you using Oracle databases,
or are you using--
Yeah, we do have some Oracle stuff
that we use for-- and once again, it's
the same situation there where we'll partner with them
but continue to build on as we want to.
We're big about doing it the way we want to do it, all the way
down to explaining what Will was talking about.
Matter a fact, I actually even think--
I could be wrong on this.
This is a Cooper quote, but I think
that we were the first company to come up with the technology
to be able to look at one store's inventory
to see if they had product at a store that
was in another location.
Right?
So we could check that inventory between stores.
It's common now.
You go to a Best Buy, they don't have your TV.
Well, does the one down the road have it?
Let me go and look.
That's what I'm talking about.
Yeah, yeah.
I think Ashok and those guys developed that,
and actually we were the first company [INAUDIBLE]
to be able to look back and forth between stores'
inventory.
So yes, we do use some of those systems.
It's all going to be based on the platform of us taking it
to the next level, internally for us,
because we want to do things our way.
That's just kind of our culture.
We do use an Oracle based program
to track all personnel information.
I figured as far as when you're doing
[INAUDIBLE], once your inventory levels get down
to a certain level, you have something that would automate
the system. [INAUDIBLE] As soon as it sees that, it kicks it
back to another system, and [INAUDIBLE] order supply,
and ship it out.
Sure.
What other questions?
Yes, sir.
Your auto-fill on your shelves and everything,
is that based off of weekly inventory
or is that on point-of-sale?
There's actually a set number, a set level,
of inventory for all standard items that
go into a storefront.
What the catch is, though, is that the store has the ability
to change those levels to whatever fits.
So if they want to get rid of it entirely or double
it or introduce a new item, it's simply
just setting mins and maxes.
But what sets the actual order?
Is it their inventory, or is it their point-of-sale?
Is it registering how many are sold,
or is it registering their weekly inventory
or monthly inventory and then ordering from that?
The point-of-sale system going to trigger to order more of it
once they get down to a certain minimum level.
[INAUDIBLE] So if you're using Bo's analogy earlier,
if I have 20 cans of paint and my minimum's 10, and I sell 11,
and I've got 9 left-- the math's right, isn't it?
Yeah.
So I've got 9 left, that day that's
going to generate the sold request
of the auto-fulfillment back to the distribution
center, the next morning, you will have 11 more.
Our distribution centers do differentiate
between stock orders and sold orders.
And that's just in a case where there was a priority,
they would always put the property of the sold request
item above the stop request item.
But, yes, that is daily.
Thanks, John.
What other questions?
[INAUDIBLE]
I know that this is a senior level course,
and that many of you may already be looking for employment,
so I thought that it would be pertinent to mention
that we do have a posting open for our Paris, Texas, location.
You can always feel free to get ahold of me,
and I'll leave some of my business cards behind here,
but I am also accepting applications or accepting
resumes if you have any with you today.
What else?
Doctor Han.
Well, would you talk about the career development
in your company?
Because some of the students may have a bias about sales.
They think, I'm going to be a salesman,
and I will stay [INAUDIBLE].
Can you talk about how a student can
build a career, not only a job, in your company?
Sure.
I think it's always easier to explain Dr. Han's request
by giving examples, and there's no example
that I'm really more familiar with than my own,
so I'll use that one.
I came to work for the company working part time in Plano,
very similar to the job opportunity
that I had in Paris, where it was a part time
opportunity where we need sales support there.
That was an opportunity to get involved in a company--
a company that promotes from within
and a company that does recognize performance
and awards based upon that.
I worked part-time for that store in Plano
for, gosh, I guess about six months, about five months,
and then a full-time position popped open.
And I already had that opportunity
to prove to my district manager that I
was going to do a good job.
So he considered me, and I ended up getting that full-time job.
Another opportunity came open in Sherman.
Another opportunity came open in Gainesville.
Once again, I was put in a position where
I could show my work for a company that
promotes from within.
What does it mean, a company that
promotes from within, though?
That means that I'm not going to hire
in a guy off the street into a manager's role
above someone that's been working
with the company for a year or two years.
That other person that's in line, they're there first.
They're the person that is going to have that opportunity
to be first and foremost.
As far as career development with Fastenal,
if you don't necessarily love the sales attribute of it,
you're just worried about that.
For starters, Fastenal has a lot of different departments
and a lot of different opportunities.
For example, John's team is not directly selling products out
of a store.
John's team works in many different avenues selling
products outside of the store, selling products directly
to the oil field.
There's obviously a lot that goes
in to organizing and getting the product to the store,
so working in our distribution or our transportation
department.
There's a lot of opportunities there as well.
But an opportunity to go to work in Paris, Texas,
doesn't necessarily mean that it's just an opportunity
to work in Pairs, Texas.
It's an opportunity to get involved with a company that's
going to supply you with an opportunity
to go explore better opportunities.
Does that answer your question, Bo?
Any other questions?
What makes y'all keep y'all's transportation internal instead
of outsourcing it [INAUDIBLE] companies that are able
to provide, without decreased cost,
and then you wouldn't have to have as much reliance
on providing your own fleet and keeping maintenance up
and everything like that?
They way that I look at that is we
are not at the whim of outside carriers.
If UPS and FedEx went on strike tomorrow,
our competitors would be in trouble.
Their price increases and their product margins,
their overall gross margins, are really
going to be affected whenever those prices go up,
whereas ours are much less affected.
So y'all want more stability in your price market,
so that you can control your prices better.
Well, and also it does allow a greater amount of efficiency
in the fact that we can change the rules,
we can change the schedule of deliveries.
And as I said, we can perform many different functions
with it.
The other thing is, too, I'll just piggyback on that.
So if you order something next-day air with UPS,
when is it guaranteed by?
Does anyone know?
Next business day.
I think it's by 5:00 p.m.?
It's 10:30 in most cases, if it's not at a rural market.
So with that, what time does our store open?
7:00 o'clock.
So if our truck is dropping off at night,
which almost all of them do, and our store opens at 7:00,
the customer needs it as soon as possible.
We can actually beat that delivery time
by greater that three hours.
And when you think about the industry
that you're supporting, manufacturing,
you've got a line down because they're
waiting on a couple of bolts or whatever
it is that costs a couple dollars, at that point
it becomes irrelevant, the cost of the product.
And even the cost of getting it there, it
comes down to, when can you get it here?
So couple that with what Bo was saying.
Once again, we like to do it our own way
because we feel that our system, rather than relying on somebody
else's, is what's going to make us better.
Question?
Sure.
I'm actually following up with that.
Y'all provide the service to make sure the lines keep
revving.
Most manufacturing runs 24 hours.
Do y'all have an emergency call for customers that want to get
something in the middle of the night to get the lines back up
and running?
I think that it would be far fetched to find
a store that our people aren't willing to do what it takes
to take care of the customer.
I don't know that there's necessarily anything solid
as far as 24 hour, 24/7 assistance lines.
[INAUDIBLE]
But I don't know that most successful salesman would
deny that call when they got that call.
What I consider critical, we want
to keep close to the customer, meaning
we'll put them in the customer's facilities.
They don't want to have to make that phone call,
and we don't want to have to answer that phone call.
So how do we put together a solution around
that so that it doesn't happen, and when it does happen,
you've got the product here.
It's part of the beauty of knowing the customer
and being in their town and knowing their operation, what
they use.
And is it just parks, or do y'all do the [INAUDIBLE]
There's not a lot that our salesmen won't try to sell,
but our product depth is very expansive.
We have 19 different distinct product lines now.
With the store being able to make branch purchases
for resale, really it's really unlimited as part
as what they can buy and resell.
OK.
Anything else?
Well, Dr. Han, did you need anything else?
I still have a question about the internship position
you're offering.
So if the student is still in college but they want to work,
[INAUDIBLE] will your company support the student's study
schedule?
Yes.
We have part-time positions for the stores which--
we are notorious for being very flexible with the schedules.
We're open 7:00 to 5:00.
If we can find a way to put a 16, 20, 24 hour work
schedule inside of that weekly schedule of 50 hours
when the store is open, we will do our best to do that.
Given that our business dynamic is thus
that we're going out and taking deliveries to the customers,
that we're going out and managing the customer's
inventory.
A lot of times the stores operate on their own clock,
so to speak.
They'll build when they're going to make
their scheduled deliveries.
That really lends itself to being
flexible with that part-time support because we
can introduce that extra labor when it's
convenient for the store and when
the general manager or the salesman
can work their schedule around that.
You mentioned that your store opened at 7:00.
Is that a [INAUDIBLE] or do you just open because early birds
get worms?
That's early?
A lot of our businesses-- as someone mentioned earlier,
some operations do run 24/7.
Some operations run third shifts well into the night,
and many operations will open up very early in the morning.
I think it's important, especially for our stores where
our contractors are rolling in early in the morning,
that we are open at 7:00.
I think a lot of times, the busiest time you're
going to see in a store is from 8:00 to 10:00, roughly.
So if the store is just getting open at 8:00--
if the store opens at 8:00, a lot of our personnel
are going to show up at what time?
8:00.
And we're not going to be well prepared for the day.
By opening up at 7:00, the guys will get in there at 7:00,
get their stuff received in, start getting orders packed.
And then when the customers and the busy time
starts getting there, we're a little more prepared.
Well, folks, I appreciate you having me today.
It was certainly a pleasure to speak with you.
I hope that I gave you some practical examples of how
supply chain works for our company and some
of the efficiencies that we've incorporated
in our day-to-day operations.
And I thank you for having us.
[APPLAUSE]