What Is an Industrial Vending Machine and Why Are Sales on Fire?

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NEW YORK ( TheStreet) -- What has been the one constant in the post-recession U.S. economy? Yes, silly goose, beyond a government agency with no real checks and balances system pumping zillions of digital dollars into digital bank vaults, the one constant is restructurings. The voracious appetite of companies to extract efficiencies in their business, whether through layoffs (which frighten those remaining employees into working harder) or fine-tuning a production process, to more than compensate for sluggish sales has continued virtually unabated. Sure, there are mass layoff announcements, recently from Hewlett-Packard  (seeking to slash 16,000 more employees on top of 34,000 previously announced), Siemens (analyzing a possible 12,000 mass layoff plan), and Caterpillar  that garner significant attention as human lives are prepared to be upended even as the stock market surges and employment reports leap over 200,000 on the headline. General Electric , too, could be viewed as a company in perpetual restructuring mode.

However, at the core, I feel that many large companies are beyond mass layoffs and have their thinking caps on as to how to shave costs further among their remaining operations. It's your job as an investor not to be necessarily panicked by ongoing corporate restructurings as in the near-term they could bolster earnings, but rather to develop an attack plan to profit from this embedded theme inside of companies.

As an exampleon what to be searching for, enter the industrial vending machine, which is increasingly being installed on the work floors of major manufacturers. Here is what these machines are designed to do:

  1. Make employees aware, and accountable for, the amount of corporate resources consumed.
  2. Keep track of wasteful employees on the job.
  3. Limit the amount of capital tied up in worker-related inventory.

To discuss this further, I talked with Dan Florness, chief financial officer of industrial vending machine maker, Fastenal .

What Is an Industrial Vending Machine?

No, this isn't a machine that spits out a Costco-sized mustard jar for a cool $1.50! As Florness summarized, the industrial vending machine tracks a company's "nuances in life," or the products that are vital to delivering expectations to customers. The machine has risen in popularity as it's not financially sound to pay an individual $15 an hour to oversee a stockroom of safety goggles, hammers and aerosol cans.

Here is the essence of the industrial vending machine:

  1. The machine takes product out of the stock room and brings it over to the employee. Quicker into the place of employment, quicker onto the job site.
  2. Through the machine's software functions, a manager is able to track who is removing a first-aid kit at 2 a.m., for example. If that transaction seems weird, the manager can reach out to the employee to investigate the matter. Did a worker get hurt on the job? Should that answer prove to be a "yes," it has worker's compensation implications. In this regard, the machine improves worker safety and health. Or maybe the worker grabbed the first-aid kit to take home to tend to an injured puppy. If so, that employee needs to be reprimanded for improper use of a company's resources.
  3. According to Florness,  a company, on average, that installs its vending machines reduces supply consumption by 40% to 50%.

The capability to track and measure is an important tool for managers to help fight hidden costs that eat into profits.