An ROI Model for Remote Machine Monitoring

Finally, our model includes a 15 percent increase in same machine sales due to tracking “item level” sales in the machines and using sophisticated merchandising software to know what to put in the machines. In this area, I have seen huge variances among operators. Those with experienced commissioned drivers will see less of an increase, while those with high driver turnover will see a higher return.

It is worth noting that sophisticated software tools have been used in retail for 25 years, and no retail store would consider letting the stock person determine how retail shelves are merchandised, yet this is common practice in vending where vending drivers arbitrarily decide product mix.

While the model includes a 15 percent increase in sales, this does not all go to profit because of a cost of goods sold (COGS) modeled at 49 percent.

‘SOFT’ BENEFITS BRING ADDITIONAL SAVINGS

There are other “soft” benefits provided by software systems such as accurate profit and loss (P&L) analysis, reduction in inventory shrinkage, and spoilage reduction, especially in cold food machines. These benefits are not included in the model.

The model attributes two main benefits to remote monitoring, but there are many other “soft” benefits not included in the model.

Dynamic scheduling allows the business to service machines only when they need it based on thresholds or profiles that are entered in by machine type.

As an example, a snack machine can be scheduled for service when any of the following criteria are met: $150 in the machine, two or more sold out products, four or more sold out columns, or 50 percent product depletion.

Newer dynamic scheduling systems can also take into account geographic proximity and machine banks to optimally plan each route.

There are many ways to measure the benefits of dynamic scheduling — for example, same machine collections usually increase, sellouts are reduced, etc. The model shows the benefits as an additional 20 percent route consolidation above the benefits provided by pre-kitting.

Remote monitoring systems also provide machine alerts for things like bill jams, power losses, etc. I have combined the reduction of sold-out columns from dynamic scheduling and increased machine uptime from alerts into a conservative 5 percent increase in same machine sales.

The following “soft” benefits for remote monitoring are substantial and are not included in the model:

• Remote monitoring (and end customer Web-based reporting) is a great differentiator in competitive bids and can allow the operator to win accounts without necessarily offering the lowest price or highest commission.
• Customers appreciate the alerts feature and the ability to provide proactive service.
• Many remote monitoring solutions also include a cashless option which can increase same machine sales, especially where vend prices are $1.75 or higher.
• Remote monitoring can make pre-kitting more accurate, which can be very important for unpredictable public locations.

Before moving on to the costs associated with implementing these solutions, I want to point out that the model assumes that either management software by itself or management software with wireless installed on all the machines.

DYNAMIC SCHEDULING OFTEN REQUIRES REMOTE MONITORING

In reality, customers are likely to initially deploy remote monitoring at only certain machines or accounts. Except on bottler routes, I have seen little evidence that dynamic scheduling can be effectively implemented without wireless devices installed on all machines on the route — so the additional route consolidation would be hard to achieve without wireless fully deployed.

What are the costs of implementation?

COSTS TO CONSIDER

There are some obvious costs associated with implementing software and remote monitoring, starting with the upfront and ongoing costs associated with these systems. To come up with the costs for software and wireless hardware, I use “worst case” numbers based on what is publicly known from various solutions providers.

I believe actual costs will be lower, but the model still proves itself with conservative numbers.

To keep the model simple, I have included $70,000 in salary for a dedicated project manager and assume that he or she stays with the company after implementation.

BENEFITS REQUIRE A FULL YEAR’S IMPLEMENTATION