With the many challenges facing the independent vending operator these days, it’s easy to lose sight of the fact that significant progress has been made in operational management tools. So much, that even the smallest operator can work more efficiently and achieve greater profits.
Last month, technology expert Gene Ostendorf reviewed the functions of the two primary technologies that have evolved in the last decade, multi-drop bus (MDB) and data exchange (DEX). This month, we examine how a technology novice can utilize DEX.
Even if the company is operated by one individual, DEX can allow the owner to understand what’s happening in the machines much faster and with greater accuracy than by relying on physical inventorying.
The only operation that does not stand to benefit from implementing DEX is the one that does not plan to grow; the owner is close to retirement and is planning to sell or liquidate.
DEX is a tool that will keep the company organized, allow it to operate efficiently, and help achieve maximum business results.
WILL IT BECOME OBSOLETE?
Many operators worry that if they invest in technology, the technology will become obsolete. The fact of the matter is that with DEX, equipment manufacturers have created a uniform electronic code that will enable operators to add new features to their systems for many years to come. Once a vending operation’s information management systems are organized in a way that supports DEX, the company will be able to utilize future DEX-based benefits.
DEX HARDWARE VARIES
DEX is a tool that provides a new level of accountability at the machine, route and warehouse. The hardware that supports DEX includes handhelds, in-machine telemetry receivers, and telemetry. Operators have many choices in tools that support DEX.
Most operators utilizing DEX use handhelds. Technology has made it possible for operators to bypass handhelds and use remote machine monitoring instead. However, not all remote monitoring systems at the present time are compatible with all vending management software products.
The foundation for any DEX-based system is having machines capable of reporting DEX files. So the first step, whether the operator plans to use handhelds, in-machine receivers for remote monitoring or a combination of the two, is to determine how DEX-capable the machines are.
New machines are fully DEX capable while older machines often need DEX retrofit kits. Fortunately, there are devices sold by various software providers that will allow an operator to determine a machine’s DEX capability. Some will even provide this for free. Machines that do not report DEX to the commonly accepted level can be retrofitted to achieve this capability.
STANDARD REPORTING ITEMS
The standard reporting items in a DEX file are: coin mech fields, coin to tubes, coin to coin box, coin from tubes, total coins, total cash from bill validator, total vends, and total cash.
Another step that is necessary before introducing DEX is having cash and inventory collection systems in place that will allow DEX to deliver its unique benefits. The tool cannot be utilized in a business environment that has no use for improved accuracy and accountability.
CASH AND INVENTORY CONTROLS
The cash and inventory management systems are the basic tools that make a vending operation more efficient and profitable.
One of the great things about DEX is that operators can take advantage of the benefits one step at a time.
FIRST BENEFIT: METER READINGS
Recording machine meter readings electronically brings an immediate savings by giving the operator an accurate count of what cash should be returned from each machine.
This enables the operator to eliminate manually recorded meter readings. The accuracy of the data improves, and problems with illegibly completed route tickets and service logs are eliminated. The time saved can allow some routes to be consolidated.
If the driver is using a DEX handheld to record the meter readings, he does this by plugging the DEX cable on the handheld into the DEX port on the machine.
If the company is relying on remote DEX data transfer, the driver needs to press a button on the DEX device in the machine to report the meter readings.
In both cases, the operator can then compare the DEX readings to the cash collected.
SECOND BENEFIT: INVENTORY CONTROL
Using DEX to better manage inventory at the machine and route levels requires having certain inventory control procedures in place.
Improved inventory control yields benefits in the areas of labor, carrying (warehousing) and purchasing. These benefits are interrelated.
By managing the inventory on the trucks and in the warehouse better, it is possible for an operator to realize a better return on his labor.
According to some industry observers, many machines are 72 percent full when the route driver services them. In such a scenario, the operator is not getting the best return on his or her service labor.
RETURN ON LABOR
By introducing a system that allows the machine to be serviced when it is more than half empty, the operator can improve his return on labor without sacrificing customer satisfaction.
Before attempting to standardize truck inventory control procedures, the operator should first have warehouse inventory control in place. Warehouse inventory should be measured against what comes back from the trucks.
Using a bar code scanner, the warehouse manager tracks all deliveries from suppliers and all returns from the trucks.
When the warehouse reconciliation is within a minimum of 5 percent of actual ending count, the operator is ready to begin focusing on truck inventories. A 5 percent or less variance to actual ending count is also a reasonable truck reconciliation goal.
Once the operation is managing its warehouse inventory, the next step is to measure route inventory. This can be done one route at a time.
PLANOGRAMS MUST BE FOLLOWED
To use DEX to better manage inventory, the driver must follow the machine planogram. DEX automatically records the column sales in the handheld, but to be accurate, the handheld must remain in sync with what’s actually in the machine.
Drivers need to record machine fills at every service and beginning inventory by category or by item with every collection, along with the meter readings.
A company that is not already doing this needs to do it as a first step before introducing DEX.
Once using DEX, the driver downloads the transaction data and can immediately read what is needed in the machine. At day’s end, the DEX information is sent to the warehouse. If the company is using handhelds to gather this information, the driver places the handheld into a modem and sends the information to the warehouse. The computer can then write the pick list for the next day, which warehouse employees use to prepare the next day’s order.
It’s not hard to see the efficiencies in this scenario. Veteran operators have realized significant savings in time and improved accuracy. The data that these reports generate can be powerful sales analysis tools.
With more accurate data, the operator can make use of various financial reports to make the operation more efficient.
The operator can monitor his sales-to-service ratios, which is sales for a period of time divided by the number of services.
The target sales-to-service ratio for beverage machines is 40 percent of inventory at retail, while snack is 30 percent.
DEX makes handhelds far more powerful as route management tools. Earlier, non-DEX handhelds served as replacements for the route ticket. They included bar code readers that made it easy to match a returned collection bag to the specific machine.
Without DEX, the only way to capture that information is for each route driver to manually record product fills, pulls and inventory on either a pre-printed route ticket or a service log stored inside the machine.
This data must be manually entered into a “back office” vending management system. In essence, with this system, the driver has been turned into a data entry clerk. The process is time-consuming and error prone for both the driver and the office employee entering the information.
MORE EFFICIENT SERVICE
By replacing the route ticket or service log with a handheld, the information is available for transfer at the end of the day.
The DEX data can allow the company to pre-kit the trucks for the next day’s deliveries. This provides another key benefit: more efficient routing.
Knowing what a machine requires before entering the location has been proven to reduce a route’s machine service time by about an hour per day. At day’s end, the DEX data provides what products to order, so day-end tasks are typically cut in half.
A company with three routes may not feel it can justify investment in a route inventory control system, but if that company hopes to grow to 10 routes, the investment will be justified.
MORE ACCURATE MENUING
DEX also makes it practical to track sales information by individual product rather than category, which is where most paper-based systems are based. This detailed product sales information provides opportunities to predict product requirements in advance of the scheduled service for individual machines.
The data makes it possible to fill the machine to a preset “par” level, which allows the operator to service the machine at the most opportune time. Again, this is possible to accomplish without DEX, but it takes more time. With DEX, it is possible to order inventory to meet machine par levels on a daily basis.
BETTER INVENTORY CONTROL
The sales analysis reports that most software systems provide allow an operator to menu machines based on sales history. Many software packages include sales analysis reports that allow operators to menu machines based on individual machine or location sales history.
This results in more efficient servicing of machines, but it also results in more efficient inventory purchasing.
Products that don’t sell well begin to disappear from inventory, and the quantity of stock keeping units (SKUs) maintained on the trucks and in the warehouse declines. This can result in significant savings in warehousing costs.
With more strategic machine menuing, it is possible to reduce service frequency and at the same time increase sales. The company’s return on labor ratio improves.
A company might not be sold on the benefits of individual product sales reporting. But if the company believes that this might make sense in the future, it needs to have a data reporting system that will support it.
IDENTIFY LOCATION PREFERENCES
Many operators who have introduced DEX have found that individual location preferences vary more than they had thought.
Better matching selections to location preferences will not only increase sales; it will also increase customer satisfaction.
Operators using DEX have found that in general, 60 percent of the machine will contain those products that sell well in every location. The remaining 40 percent of the selections are reserved for location preferences and new products competing for permanent planogram positions.
Another benefit that item-level reporting provides is it simplifies the driver training process. It takes less time to teach a driver how to use DEX than to fill out reports manually and pull his daily fills from the warehouse.
If the company is prekitting the trucks using DEX data, it relieves the driver of the responsibility of pulling product from the warehouse. The task falls to the warehouse, where the labor is generally less expensive.
IMPROVED CUSTOMER RELATIONS
Still another benefit that item-level reporting brings is improved customer relations. The operator can provide a customer with detailed sales reports. This is helpful showing customers the degree to which end users are buying the products in the machines.
Clearly, the benefits that DEX offers are tangible and numerous. Beginning with electronic meter readings and extending to route management, inventory control and machine menuing, vending operators can utilize the benefits in phases.
Standard DEX Reporting Elements
The standard reporting items in a DEX file are:
- Coin mech fields
- Coin to tubes
- Coin to coin box
- Coin from tubes
- Total coins
- Total cash from bill validator
- Total vends
- Total cash
DEX: A Key to Better Management
Software packages that support DEX offer reports that allow a vending operator to measure return on investment in the following areas:
- Cash accountability (improved changer controls)
- Product accountability (in warehouse, on truck and in machines)
- Merchandising (menu based on sales history)
- Elimination of office data entry
- Route labor efficiency (fewer trips from truck to machine)
- Loading efficiency (filling machine to par levels)