Operator ‘must do’s’ to survive the recession:
- Protect their company financially
- anage revenue base and margins
- Streamline operations (routes and administration)
- Position company for recovery
With no change in sight for 24 to 36 months, operators can no longer do business as usual, according to Brad Bachtelle, who gave the keynote address at the NAMA National Expo opening general session at America’s Center in St. Louis, Mo. “It’s time to go digging in the manure,” said Bachtelle, president of Tustin, Calif.-based Bachtelle & Associates. “It’s time to do the dirty work to regain profits in a time of higher costs and difficult economics.”
In order to protect the company, Bachtelle insists on a personal commitment to action. Owners must come up with a confidential over-arching action plan that includes how to control costs and increase profits — right now, if things get worse, and in the worst case scenario.
Owners should create a public plan as well, with positive, actionable steps that the company will take and employees can do. Challenge all staff to do more and suggest changes to increase profitability of the company, Bachtelle said. Employees are scared of being laid off — they want to help the company succeed.
MANAGE REVENUE: CUT DISCRETIONARY SPENDING
Bachtelle recommends cutting discretionary expenditures by a flat 10 percent. All administration and overhead costs are discretionary. Other ways to cut cash include limiting inventory and collecting receivables.
He suggested waiting until the last day to pay bills without incurring finance charges. A worse case scenario might be prioritizing who to pay.
Gross profit has to be greater than expenses, he noted.
A key recommendation is to take product selection away from the route drivers. They are not trained in it and at 2.2 percent expected volume per slot, the operator is in a better position to align products with consumer demand and tighten warehouse to in-machines ratios.
Bachtelle implored attendees to fix or cut unprofitable accounts. Look for new business, but only if it’s profitable.
Commodity prices are likely to increase. Bachtelle cited the increased cost of wheat (175 percent), but the cost of flour has only risen 21 percent. Since flour is wheat, the cost has to increase in the coming months.
Because of these expected price increases, operators need to change/increase prices more quickly. The average operator takes four months. Bachtelle urges operators to notify the account the same day or the next day they find out about an increase and raise prices in 10 days. Operators can not afford to diminish margins by absorbing costs.
Location commissions must be up for negotiation, he noted. Offer energy cost relief to the location or perhaps install cashless payment systems with the supplement paid for by the account.
STREAMLINE OPERATIONS
Demand more of every employee, Bachtelle said. Consolidate routes, demand better route performance and tighten/lay off where possible (beyond necessary). Have performance criteria with measurements.
He urged operators to create metrics for:
- Routes/stops per day
- Collections/sales
- Service stops
- Repeat service calls
Base numbers on demand, not historical activity, he noted. And beware of setting goals that are too low. You want realistic goals, but you don’t want employees to stop working because they’ve met the minimum.
Dump weekly service — it’s inefficient. Instead move to a set number of times per week (creating a 2-week schedule with set days inbetween service calls) which can increase efficiency 17 percent. Reevaluating routes is a must, he said. If you have 10 routes and business is down 15 percent, two routes need to go.
POSITION FOR RECOVERYBachtelle reminded his listeners the economy is cyclical. “I believe absolutely in pendulums,” he said. Which means things will get better, and vending operators should prepare for better times. Becoming profitable now will position operators as survivors and more prosperous times ahead.
Get rid of weekly service and increase efficiency
A traditional three times a week route means the account goes most of the week with one day between service stops. However, on Friday to Monday, there is no working day in between.
A more efficient method, according to Bachtelle, is to use the number of days an account can go between service to establish a 2-week schedule. This drops a route and increases efficiency. This strategy also works for accounts being serviced twice a week.
(See chart above)
Get rid of spiral price tags and trade in the dollar
Bachtelle argues operators should eliminate the spiral price tag. They can then adjust prices more easily and efficiently. According to his research, consumers do not mind pressing the selection key to see a price before the purchase.
A second point Bachtelle mentions is moving away from the dollar bill. Jokingly, Bachtelle points out only two industries still use the dollar, vending and gentlemen’s clubs. The fact that usage among consumers has dropped is illustrated in the US Treasury statistics. The number of dollar bills the Treasury needed to revamp has dropped by a third.
