While it seems counterintuitive to promote the concept then, vending is smart business, both for the customer and the MRO. It’s a more convenient and efficient way for the customer to order supplies, and by doing right by the customer Fastenal, Grainger, and MSC should reap the rewards down the road in customer loyalty.
I’ll drink to that
It reminds me of a similar mind-set seen in Jim Koch, the founder of Boston Beer Co Inc (NYSE:SAM) . Typically, beer is shipped from the brewer to the distributor, where it sits on the shelves waiting for the retailer to order it. It’s not skunked beer you’re getting, but it’s not as fresh either as when it comes out of the brewer’s tanks. So Koch created the Freshest Beer Program, a system that requires the retailers to submit weekly sales data to Boston Beer, which can then ship the right amount of beer needed at the right time.
By implementing this program, volumes have taken a hit and profits have fallen as a result, but the quality of beer Boston Beer is delivering is higher. The distributors and retailers love the program because it saves them money, and the brewer is building up loyal customers. When the program is fully implemented, Boston Beer expects it to add to earnings significantly over time.
As we saw in the just-released numbers from the Commerce Department, the U.S. economy contracted in the fourth quarter, the first time in three years it’s fallen. That is evident in the slowing sales picture the MROs reported, but they’re laying the groundwork to maintain the share they have and win additional ground later on.
Business could really start to take off if they begin installing soda machines, too, but I suspect the vending program itself will prove to be a disruptive advance enough for the MRO industry.
Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Amazon.com, Boston Beer, and MSC Industrial Direct.
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