Operating Metrics: Guideposts to the Future

The most optimistic predictions for the vending industry hold that new technology will enable operators to provide customers a higher quality of service and create new operating efficiencies that will improve profitability. No one doubts this is an optimistic view when taking full account of today's market realities.

Regular readers of Automatic Merchandiser realize technology will help professionalize the industry and hence, be ultimately beneficial. In the meantime, technology presents operators a new set of challenges. New equipment and state-of-the-art software demands a higher investment than was previously required.

For a vending operation to succeed, it needs a financial road map that will allow management to know if the business is operating profitably. This is not new. But the higher investment needed to incorporate new technology — be it software, more advanced equipment or cashless card readers — requires stronger financial expertise.

Higher capital outlays are needed
The capabilities that technology provides, paradoxically, will strengthen the operator's financial management, but at the same time, it requires a larger upfront investment.

Previous articles have noted that technology presents a "chicken and egg" scenario — the operator must invest more resources to gain the capabilities to improve profitability. While this is true about all types of technology in the industry today, it is especially true about those tools that specifically allow operators to manage better financially. This mainly includes management software.

Equipment and software are not the only areas where vending operators need to reinvest periodically. As products, equipment and software become more advanced, the bar also rises for the level of training required. Operators need to invest in education and staff development as well.

This article, part 2 in Automatic Merchandiser's Wake Up Vending Series (part 1 ran in January), will identify the financial operating metrics that operators need to succeed in the new vending marketplace.

Vending industry specific software combines financial management with other aspects of operations, including security (machine security and facilities security), route accountability and marketing. Software provides the operator data that will improve inventory management, product mix, route efficiency and personnel accountability.

Generic accounting software can help vending operators who don't yet have industry specific software.

"Wake Up Vending," published in November 2005, noted that vending operators need a plan to incorporate new technology that will make them more efficient and deliver higher customer satisfaction. While the ability to invest varies among individual operators, every operator has the ability to identify financial benchmarks that will enable him to measure return on investment.

New tools are needed
The November 2005 article noted the forces of declining location sizes, higher operating costs and new competitors all call on vending operators to use new tools to operate more efficiently and effectively.

Given the historically high levels of waste and shrinkage in the vending industry, due mainly to weak accountability systems, one can safely say that most operators will benefit from an investment in better information management systems.

The first article in this series (January 2006), which addressed raising prices and lowering commissions, noted that none of the seven action steps can be implemented without consideration of other steps. In researching financial operating metrics, Automatic Merchandiser again discovered that the different action steps are largely interdependent.

In order to gather the financial information needed, an operator may need to have an employee who is trained in this area, possibly necessitating the need for additional investment in education. Once the information is gathered, the operator will be in a better position to partner with customers, another action step.