Fastenal Case Essay Example for Free

Fastenal Case Essay The comprehensive document is an overview of Fastenal Canada LTD and how it relates to sales management. The document first provides an introduction to the problem and company background of Fastenal, which includes a description of various views of Fastenal. It further goes into detail about the recommendations that relates to the two main parties involved, which are the customers and the company itself. The document also includes an in-depth implementation plan, which is broken down into short, medium, and long-term tasks to accomplish. Through out the document there is a mention of the vendor managed inventory model (VMI). By using VMI, we were able to use a different approach to avoid risks associated with the â€Å"bricks and mortar† approach. Fastenal should choose to implement the following business plan because a well thought out analysis went into determining the problem and coming up with a solution for the future growth of the company. All decisions were made with the company in mind and focusing on the strong relationship between the costumer and Fastenal. Introduction Fastenal Canada LTD is a subsidiary of Fastenal Company, which was founded in 1967. Fastenal Canada LTD operates as a wholesaler and retailer of industrial and construction supplies in Canada. They have over 200 stores across Canada, 66 of which are in the western region. Fastenal’s growth strategy has always relied heavily on new store opening because the high demand for its products and services across Canada (Fastenal, 2012). It tends to be risky as well as costly when opening stores using the â€Å"bricks and mortar† approach. The introduction of the vendor managed inventory model (VMI) has been advantageous. Fastenal receives an electronic data via email, informing them of its distributor sales and inventory stock level. This system makes it fast and efficient for the customers and sales associates. Fastenal interprets the electronic data and there is an automatic responsibility of maintaining the inventory level for the customer. Fastenal is looking for a different expansion model approach to be used as a growth driver in Western Canada. Our new proposed strategy gives Fastenal the ability not only maintains its desired identity but it gives them the ability to increase the market share and tap into a fresh new market. Our goal is to assess the situation in hand and work in the given environment to keep the strong customer relationships since it is an important component in the company. Problem Definition How can Fastenal use its new vendor managed inventory model to increase its market share? End market sales during the months of 2012 grew 19.8% from the manufacturing customers while the residential construction customers grew 17.9% (Fastenal, 2012). The advantage to VMI is that it releases the customer of having to worry about the level of their inventories. Fastenal interpret the electronic data and automatic take control of the responsibility of maintaining the inventory level for the customer. How can Fastenal reduce financial risk? Every scenario where there is a change in the way things are done or achieved there is always risks to failure or loss. In many cases where there is loss or failure, there is often a way that it could have been avoided or done differently to avoid the negative outcome. Fastenal needs to avoid these situations by planning ahead and finding ways to avoid the risks that may pose problems or loss in the near future. â€Å"Bricks and Mortar† approach induces many financial risks so another approach is necessary to prevent them. Situation Analysis Customers and the sales force are the stakeholders who are most affected. Strong customer relationships are the essence of Fastenal’s success and form an important component of their competitive advantage. The problem arises due the to lack of education the customer has about ordering online which deceases the efficiency PartStore has to offer. Ordering online reduces rushing the parts to the counter or waiting on the phone. Customers are also able to check parts availability and prices, as well as place an order. However when PartStore was introduced there was some confusion with it. Creating a frustrating relationship between the customer and sales person. Recommendations Consignment Inventory Consignment inventory usually involves the supplier, placing inventory at a customer’s location without getting rid of its ownership of the inventory. Since the owner retains the ownership of its products the customer does not pay until it is sold or used. However, before we examine how Fastenal can benefit from our proposed consignment program it is important to first examine some potential market of interest. The City of Edmonton According Edmonton’s 2012 budget report, almost all municipalities across Canada face a significant infrastructure deficit. Neighborhood renewal occurred periodically with funding from other orders of government, yet it failed to address the full life-cycle requirements of preventative maintenance, rehabilitation, and reconstruction. Over time, the condition of roads, sidewalks and sewers deteriorated, resulting in more frequent collapsed sewers, increased sidewalk hazards, and dramatically increased maintenance like pothole repairs. The Office of Infrastructure and Funding Strategy highlighted the need for ongoing funding for neighborhood infrastructure to overcome an anticipated $2.2 billion funding gap in neighborhood roads and related infrastructure. This situation provides a tremendous opportunity for Fastenal to penetrate and serve this market. Market potential The total number of potential infrastructure that needs to be fixed in any given time is the market. The market potential for Fastenal products in units would be equal to the number of potential infrastructure that require repairing, assuming that each infrastructure repair would use Fastenal product. Fastenal can benefit for inventory consignment within the city of Edmonton, however administration is important to understand how the current business model can be used to Fastenal’s advantage in delivering the services. FAST 5000 is a vending machine that provides workers with immediate access to materials and equipment’s. The FAST 5000 machine is installed at customer sites and Fastenal keeps them filled with needed products ranging from safety equipment’s, cutting tools supplies to office supplies. Fastenal handles everything from the delivery of the machines to the installation and restocking of the machine whenever the inventory level becomes low. Through the flexible web reporting system Fastenal customers are able to view and manage the machine’s inventory usage. Cory Jansen, Fastenal’s Vice President of Internal Operation have claims that having the FAST 5000 have reduced production consumption in many cases by more than 30 percent (City of Edmonton, 2012). In the midst of 2.2 billion dollar worth of infrastructure repairs that the city of Edmonton needs, someone will have to supplies this market with their required materials and tools to complete the repair work. Fastenal should approach the city of Edmonton with a proposal outlining how the FAST 5000 can be beneficial to the construction site and within the city offices. The city of Edmonton as a corporation serves a population of more than 750,000 residents; the corporation is segmented into seven different departments each department is responsible for providing a particular service to Edmonton residents. We suggest that Fastenal concentrate on the four main departments within the corporation that is more likely to benefit from the FAST 5000 or the FAST 3000 services, which are the: Office of the City Manager, Sustainable Development, Transportation Services and Infrastructure Services. Office of the City Manager will benefit from the FAST 5000 if Fastenal stocks them with office supplies, such as pens, pencils, papers, etc. Since each development must akin to a strict budget the FAST 5000 can provide the solutions to maintaining those budget, by reducing product consumption, having on-hand inventory, and administration costs, while providing new insight into usage and spending habit that can be used toward next years City budget. Fastenal can implement the same strategy within other municipalities across Canada. Implementation Fastenal needs to place a unit in each site under the City of Edmonton. We believe it to be reasonable to set one to three year goal to place a FAST 5000 machine in each site over the next three years. First step is to write up a proposal to bring to the Simon Farbrother, who must approve it. He is the city manager and makes the major decisions in these cases. This process can take up to three months to be able to present the proposal. This also creates awareness of the product to the potential client. The proposal must go through other levels of approval and be voted on by the city council, therefore this may take another three months. Once the plan is approved the production and distribution can be put into motion. The city of Edmonton has many different branches and sites in the Edmonton area. The marketing department in Fastenal will start to put together the proposal and presentation. The marketing department will create a miniature FAST 5000 as part of a press kit along with a formal written proposal. The press kit will also open up and contain testimonials from previous clients Fastenal has worked with. It will also have a brief description of the key factors and attributes of the FAST 5000 and what sets it apart from prior units. Once the plan is approved, Fastenal will be required to submit the bet to the city manager. Since Fastenal is the sole provider of the vendor managed inventory systems (FAST 5000, FAST 3000). This implies that there is only one supplier that can fulfill the requirement and that any attempt to obtain bids would only result in one supplies being able to bid on the contract which is Fastenal. The bid will contain the benefits and costs of going through with the deal and the estimated completion date of placing the units in different sites throughout Edmonton. Once the city has awarded them the contract they will immediately move forward, and Fastenal will provide the services as stated in the proposal. Fastenal will place the minimum required machines in each site as outlined by the contract. Time Line Immediately| Delivering units| Week 1| Submitting a bid| Week 2| Proposal| 3 months| Meeting with Simon Farbrother | 3 months| Vote by city council| 6 months| Full Approval| TBA| Expansion into further sites and markets| Budget Since we do not have any costs that are being associated with this project our cost is zero, therefore the budget is not present. Risk and mitigation Risk| Mitigation| Underperformance of sales force | * Bring on a skilled team * Have the team mentor new people * Make teamwork part of the culture * Hire skillful and enthusiastic employees | Sales loss on FAST machines| * Proper training * Information to customer about store * Finding good location| Unrealistic customer and schedule expectations| * Make the customer feel comfortable and at ease * Set schedule goals around frequent deliveries | Conclusion The problems we wanted to address were â€Å"How can Fastenal use its new vendor managed inventory model to increase its market share?† and â€Å"How can Fastenal reduce financial risk?†   Our new proposed strategy gives Fastenal the ability to not only maintains its desired identity but it gives them the ability to increase its market share and tap into a fresh new market. Strong customer relationships are the essence of Fastenal’s success and have formed an important part of their competitive advantage. Our business purposed plan intended to keep the strong customer relationships. Through our implementation approach we have demonstrated how Fastenal can transform it’s current solution into a continued transparent business model. Fastenal’s opportunities will be awarded by the skill and creativity they have to meet the customer demands. Reference City of Edmonton. (2012). Budget. Retrieved April 2012, from http://www.edmonton.ca/city_government/budget_taxes/budget-2012.aspx Fastenal. (2012). Fastenal . Retrieved April 2012, from http://www.fastenal.com Mackenzie, H. (. (2008). Sales Managment in Canada (1st Edition ed.). (D. Thompson, Ed.) Toronto, Ontario, Canada: Person Prentice Hall.