Close Connections: Mario Vargas

Big changes were already looming on the horizon for Mario Vargas when he first heard about an opportunity to join Fastenal in Mexico in 2011. Having recently proposed to his now-wife, he was becoming increasingly aware of the costs involved in tying the knot and then setting up house.

Intrigued by the career prospects, and confident he could sell the fasteners, tools and supplies that have cemented Fastenal’s position as an industry leader, he took the plunge. Even though the starting salary was less than he was making in his role working for the state government, he could sense the potential.

"You have to adapt and be willing to change. If you just keep complaining about what’s happening, you’ll get nowhere in the China market."

Vargas started his Fastenal journey as an Account Specialist, and later that year traveled to the company headquarters in Winona, Minnesota.

"I experienced how big of a company we were and all the plans, all the vision, all the projections that we could do worldwide," he tells The CEO Magazine. "My mind was reeling from the possibilities, so I stayed and delivered a good performance in each position I have held."

The journey east

After more than a decade of working his way up through the ranks, in 2023 a new opportunity caught Vargas’ eye – the role of Regional Vice President China. With his application successful, he relocated last September.

"If you asked me a year ago, I would never have imagined myself being in China because it’s just so far away and so different, and so you don’t expect that. I was at a point in my career where I needed to take the next step. I had a very good run in those seven-and-a-half years as district manager. My team had a very good record of performance, and we were getting some awards and some historic wins in the company," he reflects.

"I just felt like this was the moment for me to apply, to take the next step. I still have the energy. I’m still a good age, my kids are a good age, so I saw this as the right moment for me to try something new and get out of my comfort zone a little."

His predecessor in the role was also from Mexico, making Vargas the second Mexican to run Fastenal’s China operations. The two had worked together in the past and then stayed in touch. The information that was shared during those monthly chats prepared Vargas, to some extent, for the challenge ahead.

"It might have been a different country, and I would probably still have applied for that position, but China was a great opportunity for me – the biggest market for manufacturing output," he says. "This was the place to be to really explode our potential."

This year marks the 20th year of Fastenal’s China presence. In that time, the company has established a distribution center in Shanghai, which serves its network of 40 stores across the country. These are split between those that service all customers in their vicinity and others that are located within a customer facility and offer dedicated service.

"We think that by being closer to our customers, we get to know their needs, we get to know each other, and we can work to the specific needs of that customer in that location."

Throughout its Chinese operations, just as elsewhere in the world, Fastenal pursues a strategy of being close to its customers, delivering greater value as supply chain costs spiral post-pandemic.

"We think that by being closer to our customers, we get to know their needs, we get to know each other, and we can work to the specific needs of that customer in that location," Vargas says.

It’s a formula that was working well, delivering constant growth for Fastenal China over the years. However, the arrival of the COVID-19 pandemic flattened this upward trajectory so that now, the China business accounts for less than one percent of Fastenal’s overall sales.

"The last three years, with all that has happened here in this part of the world, have been a bump in the road," he says.

But he is confident a smoother path lies ahead.

Targeting Growth

Now, Vargas is seeking to reinforce Fastenal China’s position by expanding its footprint to tap into the market’s immense potential.

"The manufacturing out of here is the biggest in the world, and I don’t think we have the applications to service all these customer demands and needs on a daily basis," he says.

Adding new locations will give the company inroads into new markets within China, he says, with many to open later this year.

"From a company standpoint, you can expect to see more business units opening in the future," he adds. "That’s going to drive our growth in the coming years.

"It’s a formula that’s been proven to work for our company for the last 50-plus years. The closer we are to our customers, the more we get to learn, the more we can adapt our local business units to the market."

Rather than opening a location and building the inventory to see what the local market might buy, Fastenal instead builds the inventory based on the customers it is servicing – all made easier by the sophistication of the local logistics capabilities.

"China is super easy to distribute material around," Vargas says. "The shipments and the logistics here in China are very well developed, so we can rely on that part. But that face-to-face interaction, the real people-to-people interaction is not there in many locations, so we will be delivering that."

"We have great people with great experience, so it’s just a matter of us finding the right locations for us to open these business units."

This is one of the aspects that sets Fastenal apart from its competition, both in the Chinese market and worldwide, according to Vargas. Another major differentiator, a large part of why he was drawn to the company in the first place all those years ago, is its culture of promotion from within.

"We always promote our people in the branches to take on the next challenge, so we have a very good tenure among our employees, in our current headcount," he expands. "We have people who have been with us for an average of four or five years in those branch positions. They understand completely how we do things. They understand completely how we operate."

With such a well-qualified team in place, Vargas feels confident that the time is right to expand Fastenal’s Chinese operations. "We have great people with great experience, so it’s just a matter of us finding the right locations for us to open these business units," he says.

Knowledge is Power

Data is another crucial tool for Fastenal, with its customers able access its products through a range of ‘fast solutions’ that incorporate vital data, Vargas explains. These include FAST 360, which gives customers insights into their interactions with Fastenal, enabling them to better manage their supply chain while giving them direct access to the company’s ecommerce platform.

Then there is FASTVend, an industrial vending program that helps organizations control and track the products they use. The inventory management tool aims to empower teams by improving access, reducing consumption and driving productivity.

Meanwhile, customers can also remove blind spots from their supply chains by using a radio frequency identification solution called FASTBin – devices that monitor bin stock locations around the clock, alerting Fastenal when stock replenishment is required.

"As a company, we have probably around 65 percent of our revenue going through any of these solutions. With that digital footprint on what’s happening in each customer location, we can tell the customer where the part is being used and how often, who’s using it, and what’s the trend of usage for that part or commodity over a period of time. So, we are allowing our customers to have all that information for them to make decisions," Vargas says.

"We always promote those type of solutions if it makes sense for our customer to have that visibility and traceability of materials."

This constant innovation is essential for the company to flourish in the Chinese market, a reality that was driven home during the supply chain disruptions triggered by the pandemic – which Vargas describes as an eye-opener.

"You have to adapt and be willing to change. If you just keep complaining about what’s happening, you’ll get nowhere in the China market," he stresses. "We need to be finding those solutions for China to continue being the number one location for supply chain."