Technology has become a go-to strategy to drive profitability. Just-in-time inventory offline via SKU-level tracking at the machine level and online via telemetry are used to increase profits and increase efficiencies in vending operations. As more and more vendors investigate its implementation, telemetry emerges as an important tool for required data collection. Because telemetry enables operators to wirelessly collect real-time data from each machine on product movement, cash inventory and the machine’s physical condition, operators are able to make adjustments in SKUs and inventory and respond to machine malfunctions far more quickly than with manual data collection methods.
However, telemetry is not a “one size fits all” proposition. It should be used only where it makes the most economic sense. This proper targeting of telemetry became obvious to Coca-Cola Bottling Company United (CCBCU) during its recent implementation phase. CCBCU, with 30,000 plus machines over 120 routes spread across Mississippi, South Carolina, Alabama, Georgia, Louisiana and Tennessee, has deployed telemetry in three of its ten markets, totaling 8,600 machines. Despite what CCBCU describes as huge productivity improvements in terms of cases per fill, stops per day and cases per day for the driver, in its Chattanooga, Tenn., test market, David Sours, director of commercial leadership, discovered that his machines doing less than 50 cases annually were providing a negative return when the cost of the telemetry equipment and monthly charges were considered. As a result, the plan to convert all machines to telemetry changed. “Our strategy now is to cover 90 percent of our volume, so that looks like about 60 percent of our equipment,” stated Sours.
Performance dictates technology
So what does this tell us? Not all full line operators have CCBCU’s volume or have the luxury of being solely in the drinks market, but all can be smart about deploying technology to gain the best return on investment. Operators who have to contend with snack food and coffee machines need to understand how they are currently performing and then factor in how technology might improve things.
Times are tough, and most don’t have the budget to overhaul technology across their entire system. Even if operators have funding today, they might not be able to deploy the technology because of their existing infrastructure. That’s because telemetry builds on other core technology and processes. Before operators can take machines online, the core of their business needs to be healthy. And they need to have other processes and technology already in place. In short, taking machines online requires a carefully considered journey from here to there, best traveled in phases.
Phase 1: Putting The Traditional Operation In Order
Moving into technology-based forecasting and telemetry works best when operators understand the dynamics of the current operation, they’ve put the proper controls in place and they’ve documented practices and procedures regarding equipment, inventory and cash. Using vending management software (VMS) to capture this information will lay the groundwork for a more disciplined operation with good machine, inventory and truck accountability. It will establish a baseline for identifying where digital data exchange (DEX) and telemetry might pay off. Advanced systems offer a roadmap to follow in this progression.
For some, engaging in manual best practices based on recorded data for part or all of the organization may be all that is needed to secure a profitable outcome. However, it’s critical that data is accurate. Initially, this data collection is highly dependent on the motivation and capabilities of the route drivers, warehouse clerks and supervisors. Understanding the strengths and weaknesses of the team will go a long way in the transition to a technology-driven operation. Encouraging an environment that rewards accurate recording and sets penalties for inaccurate recording of truck, warehouse and machine inventories will help establish a precedent for future processes.
Migrating to SKU-level management at the machine level can be challenging. Leveraging DEX is the ideal way to achieve this objective. The importance of ensuring that machines are configured at the selection level with accurate column or row capacities must be achieved in order to be successful.
“You want to make sure all the data is clean. That’s been the biggest obstacle … and that is the biggest time-consuming aspect of the whole process,” said Scott Meskin, president of Black Tie Services, who is in the process of converting 10 percent of his machines to telemetry.
Although a significant process to secure clean data, once operators succeed, it’s possible to get accurate forecasts for route slips and avoid excess truck and warehouse inventory.
Phase 2: Data Collection Via DEX
The next progression in a technology implementation is to move into SKU-based product management and leverage DEX. While we talk about processes above, it is critical that the business move to SKU in the warehouse, the truck and the machine. Most operations manage warehouse and truck via SKU but not the machine. DEX helps them get control of the machine SKU data.
Automated data collection provides a wealth of information for basic tasks such as identifying route efficiencies, analyzing product sales, improving space to sales and managing over/short cash information.
Although most modern machines are built to be DEX-compatible, many machines in the field are not. It is important to inventory machines in the field to determine their readiness. A VMS supplier can assist with this. For example, MEI has a sheet that will describe the firmware needed for DEX or telemetry capability by machine make and model number. Key questions to resolve are: Does the machine have the right erasable programmable read only memory (EPROM)? Does the DEX port work? If it is an old machine, would an investment in a new machine be warranted? Some machines can be upgraded with the necessary boards, but those in low-volume areas may not warrant the cost. In this situation, it might be a good option to put non-DEXable machines in low-volume areas where monthly inventories are performed.
There are three additional phases to be explored on the road to implanting technology. To read those and how to get there, visit www.VendingMarketWatch.com/1101712 for Getting There From Here, Part 2: A Vendor’s Roadmap To Technology Implementation.
Doug Haddon is global director of technology solutions for MEI with 15 years of experience identifying and providing technology solutions for bottling, vending and OCS and specializing in operations software, telemetry and cashless. He can be reached at Doug.Haddon@meigroup.com.