Daniel L. Florness
President and Chief Executive Officer at Fastenal
Thank you and good morning, everybody and thank you for joining us for our Q3 2021 earnings call. And I'm going to start on Page 3 of Holden's flipbook and and run through some thoughts on the quarter and similar to prior quarters, Holden will share his thoughts on the latter half of the flipbook and then we'll do some Q&A at the tail end of this call.
So for the quarter, we grew our sales 10%. We ended the quarter with the business a bit stronger, up 11%. And of equal or perhaps more importance when I think of our sequential patterns and we highlight that and Holden will touch on that, but we highlighted that in our September Information web release, we're in a good spot as far as where we were in January and where we are in September and how that positions us for going into 2022 from the standpoint of the strength of the business, the gains in the business etc.
If I set aside the noise of comparisons for a second and comparisons to 2020 and I take a longer peer back and Holden on Page 5 of the flipbook, similar to we did last quarter, is we did a comparison to 2019. And we did that because it allows us to just not have to explain all the conditionality of the comparisons and look at and say here's what's the business looked like before the pandemic started and here's what our business looks like today. And everybody on this call knows what happened in the last 24 months as it relates to Fastenal's business. The success we enjoyed, the help to society we were able to provide last year in the products that we were bringing to bear and the impact we saw in our safety business in 2020.
So let's just ignore all that noise for a second and what stands out to me is we continue to invest in the growth drivers of the business, we continue to invest in the people side of the business, we can continue to execute and grow our market share and what you see is in organization that is about 13% bigger than we were two years ago. As we've talked in the past, and I'm looking at Page 5 in the flipbook right now. As we've talked in the past, our growth drivers carry a different gross profit profile and you'd see with the rounding and Holden's schedule there, our gross margin is about 90 basis points lower than it was two years ago.
What we've talked about is, what we've liked about these growth drivers, if they differentiate us in the marketplace and they tap into the strengths of Fastenal and we're able to bring scale to these elements and manage our operating expenses more effectively and you can see that not only did we improve our operating expenses as a percent of sales in the last two years, we completely offset the impact of the gross margin change. In fact that's little bit of rounding, it's closer to 100 basis points and as a result, our operating income as a percentage of sales is 10 basis points higher today than it was two years ago. And so I believe in that two-year timeframe, we've done a great service to our employees, we've done a great service to our customers, I believe we've done a great service to society in general and what we were able to accomplish in 2020 and 2021 and I believe we served our shareholders well in the process.
If you think about the operating and administrative expenses and what's really happened, we picked up about 30 basis points on the people side of the business, we picked up about 70 basis points in that two-year period on the non-people side of the business. If I look at the people component, so our expense on the people side is up about $28 million in that two-year period, 14% of that number is the addition of people and/or changing roles and/or inflation in rates that raised the base element of our pay above 14%. The incentive component and this is looking at that -- not 14% -- 14% of the increase came from that, 61% of the increase -- in that $28 million over the last two years, 61% is related to incentive compensation.
So when we find success as an organization, we share that deeply into the organization and like we saw last year our incentive comp pulled back, it reloaded itself this year. On a two-year basis, 60% of our increase in human costs is incentive comp, another 14% is healthcare, one thing that's rippling really significantly through our P&L right now, not just on a one-year basis, which is like 45% increase, but on a two-year basis, 14% of our cost increase is healthcare and I don't know where that's going to go in all honesty. Another 1% of our increase came from profit sharing and 90% of our increases are bucketed into those four categories in the last two-year period. The other 10%, the biggest individual component of that is social taxes and then other noise in the numbers.
If I look at the increases, our remaining expenses and operating expenses increased about $4.5 million on a two-year basis, 25% of that increase relates to FMI, vending and bins, 25% of that increase relates to distribution center increases. Now part of that is cost per facilities, part of that is cost that we're doing to manage through the chaos that is supply chain in today's world, 50% of that increase is IT equipment. As you know, last year, we deployed 8,000 plus mobile devices throughout our network to create productivity gains, to create social distancing, to create a better means to serve our customers and illuminate for them what we do. That 50% of our increase there is what's funding a big piece of our labor efficiencies in the last two years.
The final, the other [Indecipherable] over the last two years, fuel prices are a little bit higher. Fortunately, everything else in our P&L offset the impact of fuel. And so, I hope you find that helpful of taking the noise out of the one-year comparison and looking at holistically and said what happened in the last two years. Fastenal has invested in its ability to serve, managed its cost effectively, it shared the fruits of our labor with our team and I think we served customers and society and our shareholders well in that process.
Flipping back to Page 3, get back off my [Indecipherable] FASTBin, we have talked about that next stage as we broaden our FMI. Fastenal managed inventory footprint. And vending has been around for 13, 14 years. Putting technology in the bins is relatively new. A year ago, we had 705 machine equivalent units deployed across our network, it's still pretty small piece of the business. That number has grown almost four fold to 2600 in the third quarter of 2021, it's now about 1% of our sales going through that footprints. Again, it's small, but the power to become more efficient and provide a differentiated value in the marketplace is strong.
I talked a few minutes ago about the mobility technology we deployed. A year ago that mobility technology helped us manage 6% of our revenue, today it's 11%. And again ways to better illuminate and create efficiencies for our team and frankly keep our team safer because these devices create social distance when you're in, whether we're in a pandemic or an endemic right now, I'm not smart enough to know, but these things help in our business. As you read about in the paper and as I've seen in some of the write-ups and I've seen from some of our peers and some of our other industries, the product and shipping cost inflation is not just high, it's brutally high. The chaos and the impact, not just from a financial perspective, but from a toll that takes on our human capital is immense.
The thing that stands out for me is the entrepreneurial culture within Fastenal, our ability to solve problems for others, means you can also solve problems for yourself. The disruptions we're seeing, our teams in the local market are able to figure out solutions to take care of their customer. Just like we did in 2020, we're doing it again in 2021, but it does take a toll to the organization. As we go through all this and have a lot of discussions with customers about disruption, about cost changes, price changes, as you can imagine, takes a lot of energy away from some of our growth drivers and it lengthened some of the sales cycles and you're seeing that show up a bit in our Onsite, in our FMI program.
So Onsite-wise, we signed 75 devices during the -- 75 on-sites during the quarter. Perfect world, I'd like that number to be a 100 and. And -- but it really is about how much participation are we getting across the network and how many customers are saying, yes, move in with me. We'd like Fastenal to help us on premises. That's a tougher sale in this environment. However, our total Onsites grew 10.5% over -- the number of Onsites grew 10.5% and the sales through those Onsites grew more than 20% in the last 12 months. So they've proven what they can do for our customer, what they can do for our revenue growth. We just like to get a few more signings.
As I touched on the Fastenal managed inventory. I think Holden does an excellent job and I know we haven't filed our 10-Q yet, but in our last quarter 10-Q and the 10-Q that we'll be filing in the upcoming days, does a very good job explaining our digital footprint. And looking at the FMI component of that, as well as the e-commerce component of that, we're pushing the hardest on the FMI because we think a great supply chain partner doesn't simplify the ordering process. They simplify the supply chain process and why are you physically ordering repetitive items. And we believe that's a unique place for us to be.
Similar to what we saw on Onsites, our Fastenal managed inventory from a device standpoint is up 10% year-over-year. So we continue to see great traction. But I would like the signings to be a little bit higher. E-commerce, it's about 14% of our sales now, it grew 43%. There's still a lot of one-off stuff and we're seeing that we're providing a better tool in the marketplace to help grow that piece of our business. You combine FMI and e-commerce, our digital footprint is now 44% of sales -- 45% of sales, excuse me and that's where we ended the quarter in September. And that number nine months ago was in the 30s, so really pleased with that.
Before I transition over to Holden, I thought I'd touch a little bit on our in-market locations. Page 13 in his flipbook, he does -- he has a great table in there that shows our in-market location statistics. I thought I'd share some perspectives on this and in the six years that I've been in this role, in the several years before that, we were doing a pivot and that pivot was really about the intensity of our branch-based locations, intensity of our network. We were starting to morph that into a few more Onsites and we took that into a really high gear in 2016.
But if I look at what's happened in the last eight years, we've removed 938 locations from the Fastenal network and that's basically adding up all those converted branch numbers over that timeframe and in three of those years: 2016, 2018 and 2021, we have removed more than 150 branch locations, part of that is us looking at our network and saying for what we are in the marketplace, what makes the most sense, but it's also a reflection of the Onsite as we're moving more and more business out of the branch network and moving into the customer, you rationalize your network.
Most organizations would look at this and say 938 on a base of 2,687, eight years ago, let's take a big restructuring charge, let's do it all at once, let's throw everything plus the kitchen sink into it and have cover. That's not how we operate. Our district managers, our district leaders have figured out over that eight-year period, how to be creative and making the economics of that work. In some cases, they might go to a customer and resell part of a building to them, but they figured out how to manage that process and constructively rationalize our footprint over an eight-year period where our footprint now, when you add in openings, we're 31% lower than we were eight years ago. But there wasn't a big disruptive impact. We just did it as a normal course of business. That's something, I think is the hallmark of the Fastenal organization.
In prior quarters. I've shared some COVID stats with the Group. We had a tough quarter in the third quarter. We had -- in the fourth quarter of 2020, we had five weeks where we had more than 50 cases in that discrete week in the fourth quarter of 2020, two of those weeks were over 100. In the third quarter of 2021, we had seven weeks where we had more than 50 cases, one of those over 100. I'm proud of the fact that our teams look for ways to take care of our employee base, look for ways to protect each other and manage through that process because it's been incredibly disruptive in the third quarter. Staffing locations when you have people out with COVID, when your average location has five to 10 employees, is incredibly challenging. We managed through it.
The other thing -- during the third quarter, we did a survey -- we did a pulse survey of our employees and some things that jumped out in that survey, our employees felt -- we always get a very high participation in these surveys, our employees felt in that survey, their manager, the team around them truly cared about each other and we were protecting each other and as the leader of Fastenal, I'm incredibly proud of Blue Team for doing that. There was a negative in there. There was one that felt, wish there was little more communication internally and that's the message to me. We need to always be good about communicating, what we're seeing in the marketplace. And the other thing that jumped out is my -- I know, what's expected of me at work and my manager cares about my well being and about my development as a person. So a lot of positive things, the team is tired from going through this period, but a lot of positive things we're seeing.
With that, I'll turn it over to Holden.