If that wasn’t bad enough, the bottleneck extends to the entire location. If one machine forces a service, it adds service costs to every other machine that is being serviced prior to its normal schedule. Indeed an increase in sales of specific bottleneck products can drive service cost in every machine at the location. Knowing this puts the challenge into perspective, it’s not about the choice of a single product or facing — it’s how that decision impacts the entire location. The good news is all of this is that service cost can be easily quantified and an effective allocation methodology is all that’s needed to root out bottlenecks.
The second cause of excess services are what I call opportunity costs. These are the cost of decisions we do not make and therefore more of a challenge to quantify. A simple example of an opportunity cost is in chart 1. When we choose to set a machine with one or two candy shelves, what is the impact? Operators all have a rationale for why they set machines the way they do but how often is that rational built on real cost and data analysis? Do we set a planogram or place a certain model on location because we’ve considered all the options? The reality is that working through the daily business challenges and the sheer number of choices doesn’t leave enough time for this kind of analysis, but that doesn’t mean that the opportunities are less real. They are just harder to identify.
We have made great progress. Before telemetry, we lacked the information necessary to understand and identify these costs. However, true success would see us intelligently using pricing, machine configurations, promotions and assortment in harmony to manage total profitability.
2. We didn’t know how hard implementation would be.
Beyond affordability, the number one reason for slow telemetry adoption is that it’s hard. It starts with months of evaluating alternatives, negotiating deals and finalizing contracts. From there it takes weeks of changes to vending management software (VMS) or other systems to gather information and get ready for implementation. Next, operators start installation and testing while they run two separate businesses on different systems, and once that’s complete, they move onto reconfiguring their warehouse for pre-kitting and finally implementing dynamic scheduling and routing into their business. More than likely that means they need to re-think how they compensate drivers. On top of that, since they’re new to it all, there will be plenty of mistakes and reworking along the way. To manage it all successfully operators typically need at least one person to manage the project and extra technicians to handle installation and troubleshooting. Telemetry is not the “plug and play” experience that we get from our smartphones. Success is mainly driven by the commitment of everyone in the business.
Sadly, telemetry is just one of the decisions facing a progressive operator: cashless, consumer programs, multimedia screens, nutritional solutions, video screen and micro markets all compete for time and attention. Each decision is just as complex and has a similar potential for success and disruption. It’s easy to understand why many operators don’t make any bold moves with technology. One project is more than enough for an operator to undertake while managing his or her business. Undertaking more than one is a challenge for all but the largest operators.
The problem here is that customers expect us to do it all, and do it well. So we’re seemingly left in a lose-lose situation: don’t do it well or don’t do it at all.
To succeed, operators need to filter information, streamline decision making, manage implementation, obtain support and control costs. The reality is that no one operator can do it all, so one of the best options is a cooperative approach. An example of this is USConnect, a technology cooperative that takes all of the basic technology needs and bundles them into an affordable package for the operator. Innovative approaches like US Connect are part of Telemetry 2.0 because they help operators solve the challenges of implementation.
3. We can’t invest because we’re not profitable.
I don’t have to explain to any operator the profit challenges we face as an industry. We all know that subtract 1 percent net profit as an industry and a flat marketplace leaves little room for investment. Beyond that, we have suppliers trying to recoup an industry-specific investment across a small user base (read high hardware and service costs). Topping off the perfect storm is fragmentation. With more than 7,000 operators and hundreds of different technologies fighting for a limited amount of capital and operator attention it’s a wonder we’ve made it this far.