New technology: will it catch the "R" factor?

Technology offers a bold new world for the vending industry. Two of the benefits that technology provides, improved accountability and a more professional image, are closely related. Emerging hardware and software address both of these benefits.

By allowing a customer to log onto a Website and view machine transactions and a host of reports, vending operators have a new and better accounting tool for customers. This is particularly advantageous for locations that receive a commission and want to know they are receiving the proper payment.

Many operators do not regard sales verification for customers as a major problem. In locations that don't get commission, it isn't an issue at all.

On the other hand, many operators say it has always been a problem since there are dishonest competitors. The most damaging impact of dishonest sales reporting is that it allows an unscrupulous competitor to win business against an honest one. The dishonest operator bids a higher commission, wins the bid, then underreports the sales to reduce the commission payment.

‘R' factor: a challenging issue
The need to police sales reporting for customers is a controversial issue. Many operators believe raising the topic alone creates a bad public image. Others believe that because the problem exists, the industry needs to correct it.

And it does exist. Underreporting of vending sales came to public light last year in Miami, Fla. after a county commissioner was accused of accepting payments from a vending operation and officials recommended banning the company from receiving any county business. Witnesses claimed the company regularly underreported sales to customers.

While operators disagree on how serious the problem is and how best to address it, technology providers are introducing new tools to prevent it.
Telemetry-based remote machine monitoring offers the most reliable tool to date to prevent dishonest sales reporting.

Gene Ostendorf, president of InOne Technology, said several larger vending operators have been trying to find a way to reduce the "R" (reduction) factor since it compromises honest operators' ability to make a fair profit.

Several observers believe that the impetus to police sales reporting is coming from the larger companies in response to The Sarbanes-Oxley Act of 2002, which created new financial disclosure standards and penalties for big companies.

Management firms encourage monitoring
In recent years, vending management companies have tested remote machine monitoring as a way to monitor sales and give their clients the chance to monitor machine activity themselves. While sales verification is only one of several benefits that remote machine monitoring provides, some observers claim the vending management companies are emphasizing this.

Best Vendors, the Minneapolis, Minn.-based vending management company, recently announced a plan to require its operator partners to install InOne telemetry in Best Vendors' managed locations. (See sidebar below). While sales accountability is one of many benefits of telemetry, many observers believe the company is emphasizing this benefit to customers.

The issue came to light in the trade recently when VTL Group, based in Auckland, New Zealand and active in the U.S., claimed that it will offer its vending management software free to U.S. vending operators who become authorized alliance partners.

VTL Group announced that a key incentive for making this package available for free was to provide an industry reporting platform with complete financial transparency to the client and visibility directly into cash box receipts via the integrated, proprietary system. The system also features customized retailing through SKU-level management.

Mark Bruno, president of Service America Group, the U.S. vending company affiliated with VTL Group, said policing the R factor is only one of several benefits that the software provides operators.