Fastenal (NASDAQ: FAST), founded in 1967 and incorporated in 1968, is a wholesaler and distributor that sells industrial and construction supplies to end-users. The company’s offerings fall into two categories: threaded fasteners, such as nuts and bolts, and miscellaneous supplies and hardware. The company operates over 2,600 stores and 14 distribution centers across 50 states and 20 countries.  From 1987-2012, Fastenal was the highest-performing stock in the Russell 1000 index, growing 38,565 percent (not including dividends), and outgaining stalwarts such as Microsoft and Apple. 
Fastenal began as a modest, 1,000 square foot shop in Winona, MN. Over time, the company found its niche and competitive advantage – an obsessive customer focus that would keep its customers coming back. This approach was later distilled in founder Bob Kierlin’s ethos “Growth Through Customer Service.” 
This model, underpinned by opening stores as close to the customer as possible, staffing them with great people, and exceeding customers’ expectations, has guided the company as they’ve grown from a small regional supplier to a dynamic, high-growth wholesaler and distributor.
“What sets us apart is our locality to the customers,” says Cory Jansen, executive vice president of operations for Fastenal. “We open local stores and service local customers with local expertise. At the same time, we’re a national company with national buying power that happens to operate in a local fashion.” 
Fastenal’s business model is supported in large part by an operating model focused on three things:
- Decentralized Structure. Fastenal places a premium on ensuring its stores, products, and people are embedded in the communities they serve. Employees are empowered to take a flexible approach to serving customers – from creative sourcing of products to making emergency deliveries. In fact, store managers are encouraged to do their own purchasing and set their own pricing based on local market needs.  This principle of “local product and local people” ensures that the right product is on the shelf and employees are well equipped to meet customers’ needs.  Further, the combination of a wide array of products, and a technically
savvy and ultra-responsive workforce, leads to unprecedented entrepreneurial empowerment that is a natural extension of the company’s emphasis on a decentralized organizational structure. 
- Scale. While Fastenal has the look and feel of a local business, its operations are backed up by massive scale. This is evident in the company’s robust sourcing, quality, and logistics programs. Through relationships with thousands of supplier-partners and a massive distribution network, Fastenal can ensure customers receive quality parts locally and at low prices. Additionally, because of Fastenal’s scale, the customer can enjoy significant vendor consolidation opportunities and rapid (often same-day) product solutions. 
- Vertically-Integrated Supply Chain. Compounding Fastener’s myriad competitive advantages is the vertical integration of its supply chain. The company owns manufacturing facilities, a 6,000-vehicle transportation fleet, 14 distribution centers, inventory supply systems, and retailing and sales service facilities.  A cadre of supply chain professionals monitor retail inventory levels hourly to ensure product availability and can dispatch delivery trucks at a moment’s notice to any of the 2,600 retail locations.  All this adds up to a steady flow of material from the factory to the retail site.
Fastenal has performed remarkably well in building an operating model based on decentralization, scale, and a vertically-integrated supply chain, among other things. Further, each of these areas is tightly aligned with Bob Kierlin’s “Growth Through Customer Service” business model. Not surprisingly, the operating model traits are difficult to emulate and act as formidable barriers to entry for new competitors. Clearly, Fastenal’s tight alignment between business and operational models is driving strong performance.