Bill Lockett tells operators that technology allows them to discuss something besides commissions and price with customers.
Many vending operators recognize that new equipment and software will allow them to operate more efficiently, but the newness of these tools, coupled with the investment required, can be intimidating. This is why technology suppliers such as Crane Streamware are developing operating models to help operators incorporate new tools.
Bill Lockett, national accounts manager at Crane Streamware, recently offered an overview of the new technologies and a plan to allow operators to invest in them. The purpose of the presentation was to simplify the steps that can oftentimes seem too cumbersome. Lockett presented a talk titled "The Emerging Vending Model" at the Texas Merchandise Vending Association annual meeting held recently at the San Antonio Marriott in San Antonio, Texas.
Lockett began his presentation by picking up on a theme from the speaker who preceded him, which is to use technology to "get in front of the customer and talk about something besides commission and price, and at the same time also improve profit." Lockett followed a presentation by Elliot Maras, editor of Automatic Merchandiser, who spoke on "Wake Up Vending."
Lockett noted that his company reviewed equipment purchases of operator customers and learned that those operators who invested the least in technology purchased 26 percent less equipment than other operators. This insight reinforced Crane Streamware's belief that technology holds an important role in the vending industry's future.
Traditional route service model has inefficiencies
Lockett noted that technology tools are those that enable operators to perform the most basic customer service tasks more efficiently: servicing locations. He said the traditional route servicing model is highly inefficient for the following reasons:
- Machines are serviced on a fixed schedule.
- The typical route returns an average $6,500 per week, according to the National Automatic Merchandising Association's operating ratio report.
- The average route covers 18 to 25 machines per day.
- The average route vehicle travels 85 to 100 miles a day.
- The vending product warehouse is organized by product categories.
Lockett said DEX (Digital EXchange) technology allows the operator to arrange machine fill orders based on individual machine needs. "That's the area where we have the greatest opportunity to change the (route service) model," he said.
He noted that under the traditional model, route drivers must return to the truck to retrieve the products needed to fill the machines and then make a second trip to the machines. Under the emerging model, he said these additional tasks can be eliminated.
Crane Streamware has also revealed the following insights about route servicing, according to Lockett:
- One in five machines serviced could have waited for the next service visit.
- An annual salary of $35,000 for a driver who works a 10-hour day translates into an hourly wage of slightly more than $14 an hour, which in turn causes high driver turnover. "Our drivers are working hard," Lockett said. "They end up doing something else."
"This is the (service) model that we're dealing with today," Lockett surmised.
Under the emerging model that utilizes DEX technology, Lockett said all individual products are bar coded and scanned in and out of the warehouse.
The DEX data that is retrieved by DEX handhelds allows the operator to determine what product mix will provide the location with the fastest selling products.
In other words, DEX allows for the design of machine planograms that ensure the top selling items are placed in each machine.
Important benefit: Electronic cash audit
Another major benefit that DEX provides is electronic cash audit, which Lockett said allows operators to know exactly how much cash should be collected, based on the machines' DEX readings.
DEX also allows drivers to conduct machine inventories quickly, he noted.
It further enables drivers to create machine fill orders with every service stop.
Machine pre-kitting, which refers to arranging fill orders for every location in the warehouse, can improve a route's machine service capacity by 25 percent, Lockett said.
He said that on average, routes that employ DEX and machine fill order forecasting return an additional $2,000 weekly, by being able to support an additional 20 machines per route than before DEX automation.
"The size of the trucks is going to decrease," he said, because the average pre-DEX route carries 50 percent more inventory than necessary to serve demand.
He showed a picture of what a "prepack" looks like in a warehouse. It consists of a tote filled with product, labeled for the appropriate route, that the driver simply picks up in the morning and places in his or her truck.
By improving location sales, an operation also increases the route driver's compensation if the driver is paid based on sales. Lockett said a driver who makes $40,000 per year instead of $35,000 is always less likely to leave and find another job.
Hence, the benefits of improved route efficiency also pay dividends in improved route driver retention.
There is still another labor related benefit associated with DEX, Lockett noted. He said that when a company uses DEX technology to prekit its deliveries, it is easier to teach a new driver how to do his job. He said a driver can be trained in half the time compared to the traditional route service model.
Cashless oftentimes includes remote monitoring
Lockett also noted the benefits of cashless card readers. He said the current card readers that authorize credit purchases via telemetry also provide the location with the added benefit of remote machine monitoring.
If a machine has a credit card reader that authorizes purchases by transmitting data to an authorizing party, the machine's DEX can also be transmitted to the operator's system, so it can be used to more accurately forecast demand in high traffic locations. These high traffic locations are usually the better candidates for cashless devices.
Introducing DEX in a vending business requires an education process, Lockett said. "Without the time, people and money to do it, don't do it," he said. "To properly embrace DEX requires complete focus and commitment from the top down. Take your time and don't rush the embrace, and you will succeed."
Introducing DEX: an 8-step plan
Lockett offered the following 8-step plan for introducing DEX to a vending operation.
1) Install handhelds first in the warehouse. "Put one in the warehouse first," he said. "It gives you that item level perspective" that serves as the foundation for the routes.
2) Introduce DEX cash audit before using the handhelds to retrieve column sales data. This will yield the immediate benefit of automatic cash accountability of the machines. It will also allow the reporting to become consistent, so it can then be used to support product demand and forecasting.
3) Develop machine planograms. By deciding what products should go in the machine facings, management controls what products the driver takes from the warehouse to the location. "The age of the driver has nothing to do with his ability to embrace it (the planogram)," Lockett said. "Once he realizes how much easier it makes his life, everything will begin to work, because without his 'buy-in,' we've learned nothing works."
4) Introduce DEX handhelds to the routes beginning with the best driver, then do the worst driver. Everyone in between will then see that it can work for them, too.
5) Introduce DEX handhelds to the other routes at a rate of one every two weeks for every route supervisor. It will take two weeks for a route to expand from DEX cash audit to "full" DEX.
6) Once all of the routes are using DEX handhelds, install dynamic scheduling.
7) Once dynamic scheduling is in place, introduce remote machine monitoring and/or a cashless card reader, to a site where purchase demand is unpredictable, such as airports, parks, universities and high traffic public locations. "It's a wireless world," Lockett said, looking to the future. "We'll see a day soon where wireless machine readings can be harvested for free, using Wi-Fi (wireless local area networks) public networks."
8) Begin consolidating routes or expanding the work load of the existing routes.
Lockett further noted that advances being made in electronic product codes will eventually allow vending warehouses to be inventoried much faster. Product tags embedded with radio frequency identification (RFID) readers will allow operators to scan an entire pallet of product by waving an RFID wand at the pallet. The product codes will automatically register with the reader.
"We're going to see it in vending and we're going to see it very soon," he said.