When Do You Consider Industry-Specific Software? As Soon as Possible

Whatever stage of development a vending operation is at -- beginning, growing, stagnant or declining -- vending management software offers an important tool for improvement. The only scenario where this would not be true is the company planning to sell or liquidate.

Industry specific software systems have existed for many years, and they have progressively offered more benefits. For vending operators that plan to grow, management software is a tool that will keep the company organized, allow it to operate efficiently, and help achieve maximum business results.

The challenge that most operators face is in making the time to learn their own company's information needs and the capabilities of the available software systems. Most vending companies do not have the resources to allocate an employee to studying and implementing software.

Once the information gathering process begins, however, it becomes easier as long as management remains committed to it.

A major investment that pays tangible dividends

It stands to reason that software, like any management tool, requires a significant investment. This in itself forces many operators to put off the decision to make the investment. In time, however, all sensible operators realize there is more to lose than gain in procrastinating.

It is easy for a software novice to become confused. New software products are introduced every year, making it seem like the amount of preparation is insurmountable. There is also the logical concern about investing in a product that will become obsolete.

A review of the major software packages indicates that most of today's packages provide significant benefits that will not become obsolete. While it is true that all of the system providers introduce upgrades regularly, these upgrades are not overly time-consuming and most of the work is handled by the software provider.

A key development in recent years has been the establishment of the uniform DEX (digital exchange) protocol; the electronic data standard that enables vending machines to report data to management software. Most vending specific software systems allow operators to use DEX.

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.

Operators who have not yet used vending management software will find that once they begin using it, the operation becomes better organized and improves its chances for increased profitability.

Learn the provider's capabilities

Companies that already have industry-specific software will find it necessary to determine if their software company's capabilities and plans for new products match the operator's business goals.

The investment in software is ongoing, and for a package to provide the necessary benefits, the provider needs to be able to deliver the customer's needs.

Software experts interviewed for this article agreed that operators should not only consider their existing information needs, but their future needs as well.

Consider your future needs

For instance, a company with three routes may not feel it can justify investment in a route inventory control system, but if that company hopes to some day grow to 10 routes, the investment will be justified.

A company also might not be sold on the benefits of category management, a system that simplifies product selection at the route and warehouse levels and gives management more control over individual machine menu. But if the company believes that this method might make sense in the future, it needs to have a data reporting system that will support it.

While it may be difficult to predict future information needs, a software system that offers a comprehensive package of management tools will be a better investment.

"Often, people feel they have to have a big enough customer base to justify the expense, but they overlook the fact that when the customer base is large enough to warrant a system, it also becomes a greater effort to load the system and build the data base," said Ashley Stevens, vice president at ChallengeMaster. "When your business is starting up, a fully integrated system is overwhelmingly to your advantage because of the wealth of management information that is at your disposal.

"Gross profit information, customer sales analysis, inventory information, balance and receivables information at your fingertips, the ability to change prices globally throughout the system, update tax rates, print out profitability reports by customer, salesman, route driver, etc. are only a few features immediately embraced by a fully integrated software system user," she noted.

Inventory control is the key benefit that vending specific software packages offer.

" 'Where did that inventory go?' is an equally, if not more important question than 'How many dollars of inventory were purchased and how much is left?' " said Warren Philips, president of Validata Computer & Research Corp., and himself a former vending operator. "If you're not tracking inventory movement at SKU (line-item detail) in the pipeline (warehouse, locations, machines, row/column), you don't get to see the most valuable leading indicators of both good and bad performance in the operation."

Key issue: inventory control

Philips believes that it's important for every operator to have ADC -- automated data collection -- inventory control systems in place from day one to spare themselves future aggravation.

"They go through an awful lot of unnecessary pain thinking they have to be a certain size before they put good tools in place," Philips said. "Today, our industry-specific systems are scaleable, and can be appropriately deployed in any operation where the values and commitment to management diligence are understood."

Philips also believes that every operator should plan on using DEX at some point. DEX provides the tools for cash and inventory accountability, and it is the architecture on which new features, such as remote monitoring and cashless vending, is based.

DEX brings new benefits to operators

"Over the past 15 years, our clients that have implemented line-item controls using industrial mobile-computers have grown to a majority. Consequently, many are now in their second or third generation of ADC -- automated data collection -- tracking products by row/column placement in each individual machine. For these companies, the evolution of DEX is a welcome value-add and logical extension of their technology investment," Philips said.

"Don't underestimate the size of the task," said Stewart Lester, a contract sales rep for MEI and a former vending operator. "Regardless of the current situation, the position requires someone with a strong understanding of current vending operations, the motivation necessary to see the project through completion, an understanding of basic cost accounting, and above average computer skills."

"Implement procedures that will maintain perpetual inventory levels for every warehouse, every truck, and every vending machine within the operation," he said.

The primary inventory transactions

There are five primary transactions necessary to complete this requirement, he said:

1) product purchases from suppliers,
2) periodic physical inventories of the warehouse,
3) product issues from the warehouse to the route truck,
4) periodic physical inventories of the route truck, and
5) vending machine services by the route driver.

"Work towards creating a single source of information with detailed history," Stewart added. "Analysis all of the company's current procedures for tasks such as placing orders from suppliers, reporting rebates, calculating actual cost of goods sold, etc. If each of these is not pulling from a single centralized source of data, redundant and orphaned processes probably exist."

"Instill a sense of discipline in every employee so that each time inventory, equipment or cash is moved, it is accurately counted and recorded," Stewart continued. "Included in this step should be training, training and more training. The second you believe that all of your employees are well trained, it's probably time to go and train them again.

"Establish checks and balances to monitor that these procedures and processes are being followed and, most importantly, create consequences when they are not," he said.

Bill Lockett, vice president of sales at InOne Technology, agreed the operator must designate someone with project leader responsibilities when installing a new system. This person would ideally be well versed in the current process and fully understand the owner's vision and the goals for the new system.

Lockett said the need for a full-time collections person and a full-time inventory manager usually occurs when the company reaches five routes.

Procedures must be followed

"Do not attempt to control a warehouse unless you have someone responsible and available to enforce the warehouse management process," Lockett said. He suggested operators first consider inventory control, beginning with the warehouse. Inventory bought 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.

Step two: measure route inventory

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.

Lockett said the drivers need to record and report machine fills at every service and beginning inventory by category or item with every collection, as well as meter readings.

A company that is not already doing this needs to do it as a first step before introducing DEX handhelds. "Begin item level management on the can and bottle machines, which gets the driver to start thinking about item level reporting," he said.

With this data, the operator can monitor his sales-to- service ratios, which is sales for a period divided by the number of services. The target for can and bottle machines is 40 percent of inventory at retail, while snack is 30 percent of retail value.

The collection and inventory management system is now in place to introduce DEX reporting, Lockett said. This will enable the driver to eliminate manually recorded meter readings and automatically record product sales. The time saved -- between around 15 percent of the driver's machine service time -- will likely allow some routes to be consolidated.

Drivers must follow instructions

For DEX reporting to work, the driver must follow the machine planogram, because if Doritos isn't in A-1 and the handheld thinks it's Ruffles Ranch, the whole reconciliation process is compromised. 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.

The DEX handheld does not automatically record the column sales, because the driver does not have time to scan each product as he fills the machine.

RFID, when and if it comes to vending packages, will allow the inventory of the machine to be highly improved because it can instantly read the inventory level of the machine without opening the door.

A good beginning system, Lockett said, is one that handles warehouse inventory, location commissions and sales taxes.

One of the great things about DEX is that operators can take advantage of the benefits one step at a time. Electronic meter readings via DEX handhelds bring an immediate savings by giving the operator an accurate account of what cash should be returned from each machine. "A driver cannot tamper with that DEX file," said Damien Moroney, director of sales at Crane Streamware.

With more accurate data, the operator can make use of various financial reports to make the operation more efficient.

Moroney said operators have historically looked at software as a record-keeping tool, when in fact it is a business improvement tool. "The best run operations have the best financial tools," said Moroney. "We give them reporting and other tools to help them in that area."

New reports bring benefits

Some small vending companies do not feel the need for route accounting and inventory control. They should keep in mind, however, that some of the other programs that software providers now offer include other benefits.

Crawley Services Inc., a two-route operation in Littleton, N.C., is considering a package that offers product profitability analysis, noted Bill Crawley, who operates the company with family members.

Crawley said because the company is only two people, he does not need route accountability. He uses a general business software package to keep track of commissions, sales taxes and bookkeeping.

But he feels he needs a better understanding of product profitability. "Where we are lost is (product) profit margins," he said. "We don't always know how much we're making off of this (particular product)."

Reports can allow management to review the efficiency of their route schedules, noted Milan Dabcovich, president of Data Intelligence Systems Corp. (DISC).

By reviewing service times of different locations, a manager might choose to move a stop from one route to another in order to make workloads more equitable. "The load is not the number of services, but the number of minutes at each machine," he said.

"Route analysis shows how well your drivers covered their routes, or if they're filling in for another driver; it lets you know of any missed stops before your customer calls to let you know," added Ashley Stevens at ChallengeMaster.

Key stage of growth: five routes

Courtesy Vending in Portland, Ore., first invested in a software system in 2000 when there were five routes. Paresh Patel, company president, said he realized he needed better route accountability, and after studying the different packages for several months, decided he wanted to implement MEI DEX handhelds.

After reviewing machine-level inventory, Patel realized that the existing inventory and product selection system was inefficient and not providing the variety in the machines he had intended. The drivers were responsible for pulling products from the warehouse.

"Even though we thought we were offering customers a lot of variety, these machines always had the same set of products," he said.

Patel pared stock keeping units in the warehouse from 150 to 70 and instructed drivers to follow a planogram, which management changed periodically to ensure variety. "Paradoxically, we actually increased the variety," he said.

The reports also allow him to know what the better sellers are. "With the data, we're in a position to make a lot better decision," said.

The column level sales reports are also great customer relations tools for Patel's company, which has since doubled in size.

"Accountability is often the driver, but efficiency is often the benefit that accrues," observed Scott Larkin, a former vending software salesman who is now a salesman for D.I. Graphics Inc.

Preparation work for new adding new features will vary

Northwest Vending Co., based in Eugene, Ore., operates three branches and is in the process of implementing DEX handhelds. Like most companies with a lot of machines in the field, a major investment is needed in assessing the DEX reporting capability of existing machines.

Pete Fullerton, manager, recognized the immediate benefits that electronic cash accounting would bring. The drivers will download meter readings automatically using their handhelds.

Once the DEX reporting is implemented, Fullerton also believes the system will allow column level sales reporting, which will enable him to streamline product inventory in the warehouse.

Challenge: winning driver buy-in

The biggest challenge for companies in this position is getting drivers to accept the change. "It's going to be a major change in the way they look at machines," he said.

Northwest Vending is reviewing different software providers' information and expects the decision-making process to take one-and-a-half months.

Several operators have switched software providers based on new information needs and/or the quality of service their previous provider gave them. In many cases, the operators found the additional cost of making a change to be justified.

Just how much making a switch will cost depends on what else the company is doing in conjunction with this change.

A company that is introducing DEX handhelds to the drivers, moving product selection from the drivers to the warehouse, and also moving from one provider to another will experience more disruption than the company that is making the same changes with its existing provider.

But for every cost there is often a corresponding benefit.

Coastal Canteen Inc., based in Oxnard, Calif., switched software systems in 2000 to be able to track item-level inventory, said Jerry Scott, general manager. The MEI system enabled him to implement DEX handhelds on the routes, and he is currently testing remote machine monitoring at five locations.

Software forces better organization

Bob Johnson, a former vending software executive who is now a financial adviser based in Milwaukee, Wis., said the house cleaning involved in switching software providers results in a better organized company. "It almost has to be forced on you," he said.

In switching a provider, the operator has to keep in mind that the new system might require new procedures, and for more than one employee. The switch will bring more problems than solutions if the people using the information aren't willing (or able) to adapt.

Unrealistic expectations can also present problems.

How much difference is there among the main software packages?

Stewart Lester, a contract sales rep for MEI and a former vending operator, said there are differences in how much detailed information a system will report.

In selecting a package, all experts recommended consulting with other operators who have used the different products and find out not just what the system capabilities are, but the level of aftermarket support and the quality of customer service.

The five key areas of inventory control

  • Purchases from suppliers
  • Product in truck
  • Product in warehouse
  • Product in machine
  • From warehouse to truck

Like vending, OCS software continues to offer new benefits

OCS operators have long used software systems to manage their routes more efficiently. Route handhelds in particular have found a place in OCS operations, since the driver can print an invoice at the account and collect the cash. Automation eliminates paperwork, improves accuracy of pricing and sales taxes, and enhances the management of special promotions.

New products continue to emerge.

NationalDatacomputer Inc., a provider of mobile computing solutions, recently announced a reseller agreement with inOne Technology LLC for its RouteRider LE. Featuring a graphical user interface, the RouteRider LE allows a field sales rep to communicate via cellular and wireless telemetry, allowing the rep to access up-to-the-minute information on the account from any browser. The device allows field reps to spend more time selling and servicing customers by automating the ordering and accounting functions.

E-commerce products have been available for vending and OCS operators alike for several years. One product, known as OCS Access (www.ocsaccess.com), supports vending and OCS back-end systems, including ChallengeMaster, InOne Technology, and MEI.

OCS Access allows OCS clients to place orders over the Internet, even if the OCS provider does not have a website. The software allows the order to be written directly into the OCS operator's backend system.

For companies that do not have accounting software, orders can be simply routed to the operator's e-mail address.

For More information, contact:

ChallengeMaster - 800-888-1972
Crane Streamware - 800-4STREAM
Data Intelligence Systems - 800-627-0002
InOne Technology LLC - 800-426-1487
MEI - 800-345-8215
National DataComputer Inc. - 978-663-7677
Validata Computer & Research Corp. - 334-834-2324