Vending Reinvented

July 22, 2014
All aspects of the operation are more integrated in delivering products and services that better meet customer needs in a more timely manner.

The road has been long and the going has been slow. But new management tools have arrived and are being used, and operating a vending business is changing and will never be the same.

The innovation phase began in the early to mid 1990s. The equipment companies worked together to develop uniform technology standards. Management software companies developed a host of reports using electronic data. And operators have tested the hardware and software, allowing a new generation of business management tools.

As a result, computers have empowered managers in new ways and reduced the need for

managing by “intuition.”

In interviewing operators nationwide who have automated their route and warehouse operations, one can conclude that the most significant change vending is undergoing is that automated systems are replacing manual ones. The end result is a more efficient operation that provides a better level of customer service.

The vending operation of the future relies a lot less on the skills of the route driver. Instead, all aspects of the operation are more integrated in delivering products and services that better meet customer needs in a more timely manner.

Contrary to the claims of some technology opponents, automation does not remove the “human element” from the service delivery process. By fine tuning the product selection and delivery process, employees involved in executing these new systems must pay more attention to detail than under the previous, more loosely organized methods.

Operators have found that for employees to do their jobs successfully, they need to understand how the processes work.


Pioneers report success


As with all revolutions, pioneers have led the way. They are in the minority, but their success is irrefutable.

For these pioneers, technology has changed every critical function in a vending operation. The route structure is the one aspect that technology changes the most when an operator introduces automated product handling and delivery. The route is the most labor intensive aspect of a vending operation. Hence, new efficiencies have had the greatest measurable impact on that area.


Biggest efficiency: route management


The technology having the greatest impact is machine-generated DEX reporting that allows pre-kitting and dynamic scheduling of routes. The DEX data allows operators to schedule machines for service at the most opportune time, improving return on labor. DEX also allows for the most profitable menu of products in the machine, resulting in higher profitability, more satisfied customers, and reduced inventorying costs.

DEX furthermore gives operators far greater accountability of just about all aspects of their operations.

Operators who have introduced these tools have found they change almost all aspects of their operations – for the better.

The end result is a vending operation where service is defined by the constant availability of what customers want in their machines – as opposed to the presence of a route driver.

The process of transforming the old model to the new one is challenging. Operators introducing technology typically find they must take a few steps backward before moving forward.

For an established company, the most time consuming phase of using DEX to its fullest capacity is making sure the majority of machines are DEX capable. Once that change is made, the company must learn how to use the various reports that DEX produces. This typically requires changing responsibilities for drivers, managers and administrators.


Management becomes empowered


“All decision making is done at a much higher level,” said Barton Shaw, vice president of Atlanta Vending in Atlanta, Ga., which now pre-kits its routes using Cantaloupe Systems RMM (Seed) and automated product picking from Innovative Picking Technologies Inc. “I feel we (management) know the account better than the driver.”

The difficulty of the transition varies based on the personalities involved in each individual company.

The observation of Scott Guardino, marketing manager at Paramount Automated Food Services Inc., Pompano Beach, Fla. is revealing: “It (DEX) has made some of the greatest people who have worked for me ‘dinosaurs.’” Conversely, some people he never thought would be productive have emerged as leaders.

Veterans of the transformation unanimously agree that achieving buy-in by employees is critical to realizing technology’s benefits. This calls on management to communicate effectively to employees and to closely monitor their responses.

Joe Cordaro, president of CRH Catering Co. in Connellsville, Pa., said in the early stages of introducing the pre-kitting, drivers’ attention gets diverted from focusing on their accounts.

Terry Hovis, a customer success manager at Cantaloupe Systems, said companies often switch drivers to salary during the deployment phase of pre-kitting.


Management must lead


“There will be tremendous push back; it’s a complete paradigm shift,” noted Tom Whennen, formerly president of Triple A Services Inc. in Chicago and now a management consultant.

Having overseen his company’s transition to pre-kitting, Whennen observed that automation forces every role in the company to be more customer focused. “Every person in our organization had some alignment with customers,” he said.

The challenge is daunting, but it also creates a new level of enthusiasm. However, owners need to be willing to make personnel changes when and if necessary.

One operator, for example, met resistance from his warehouse manager when the manager was told to use software generated machine pull reports. The manager resisted the change not because he hated technology; he thought the reports would be used to ultimately replace him.

When the owner realized this was the problem, he was able to explain to the manager that his role was more important than ever. This changed his attitude and allowed the company to pre-kit routes in the warehouse without having to experience a personnel change.


Automation makes learning easier


One of the greatest advantages operators realize after automating their route and warehouse operations is industry specific experience is not as important when hiring new employees. The new systems, once mastered, are easier to teach and to learn than the manual ones. Those operators who have become disillusioned with veteran vending employees say this is a great benefit.

Monumental Vending LLC in Beltsville, Md., which has pre-kitted routes for 12 years using Streamware software, recently hired a chief operating officer with no vending experience, noted Craig Kushner, president. That person has more diverse marketing skills, including an MBA.


The driver remains important


The route driver, while no longer deciding what products to pull from the warehouse, remains important, operators agree. Because pre-kitting and/or dynamic scheduling allow the driver to service more stops, the machine filling and cleaning skills remain important.

The driver’s new role is a subject of some dispute. Some operators want to see the drivers acting as customer service reps while at the location. Others believe this role belongs to sales people or dedicated client retention specialists.

“It (the business in general) is not as ‘social’ as it once was,” said Jim Brinton, owner of Evergreen Vending in Seattle, Wash., in observing that the driver is not expected to spend as much time with customers once pre-kitting is in place. While Brinton has attempted to improve customer contact through dedicated customer service reps, he believes that the business nonetheless has become more financially focused. “We’re becoming a different type of company,” he said. “We need to run it as a technologically driven company.”

Some operators noted that because drivers will service more stops on a given route, the physical demands are greater.

All operators agreed that driver compensation has to be reviewed after dynamic scheduling is in place. In most cases, commission arrangements were changed. Operators agreed that drivers earned more money with dynamic scheduling.

Operators also agreed that the introduction of DEX reporting on the route improved route accountability, allowing them to weed out dishonest drivers.

Dan Hart, president of Southern Refreshment Services Inc. in Tucker, Ga., takes issue with the view that automation makes the driver’s job less mentally challenging. While the driver is not selecting product, he still needs to follow his order sheet and pay close attention to machine fill levels.

A simple fill mistake can undermine the inventory reports, Hart noted, and uncovering such a mistake can require a physical inventory. “It turns into a total mess,” he said.

While pre-kitting does bring advantages, Hart noted that it is less “forgiving” than the old system, whereby a driver could wait until his next service trip to correct a miscount.

To prevent such problems, Hart focuses heavily on driver training.


Route supervisor role changes


The route supervisor remains important to a company, but there is less need for making site inspections to make sure the right products and prices are in the machines. The DEX data enables the operator manage this in the warehouse.

“It completely changes how you supervise your business,” said Joe Cordaro, president of CRH Catering Co. in Connellsville, Pa., which recently began introducing Cantaloupe’s RMM. “You can actually delegate to people (supervisors) who were (previously) posting sales to monitor inventory. The skills are going to be completely different than what our industry is used to.”

Stansfield Vending in LaCrosse, Wis. has supervisors spending more time reviewing machine merchandising, noted Janet Stansfield Hess, president. “We have much, much greater merchandising control than we had before,” she said. “They (supervisors) work on getting the route averages up.

“There’s nothing about my business that’s the same,” added Hess, who claims a 40 percent efficiency gain as a result of RMM. The company uses Cantaloupe’s RMM (Seed) in conjunction with Validata’s vending management software. “I wouldn’t go back.”


Warehouse management becomes critical


Once pre-kitting is introduced, the warehouse manager’s role becomes more important in many companies. The warehouse assumes the responsibility for filling orders and in many cases also loading trucks. This changes the warehouse manager’s role from overseeing deliveries and keeping the warehouse organized to managing more functions.

When a larger staff of people become involved in the warehouse, the warehouse manager will need more managerial skills.

The need for oversight in the warehouse is important since mistakes in product counting will have consequences. The warehouse manager is responsible for making sure these errors are minimal.

“There is a finer level of detail they need to manage to,” observed John Davies, president of Vendsys, a vending system software provider.

Once product picking becomes automated by means of a “pick to light” system, managing accurate picking becomes easier.

Warehouse inventorying becomes more important since there is less inventorying on the trucks. A properly pre-kitted route returns to the warehouse with no inventory. “You should always have some form of physical reconciliation in inventory,” Vendsys’ Davies said.

Another area of agreement is the role of the route scheduler. What’s not uniform is which traditional position assumes this role, be it supervisor, general manager, operations manager or owner. The scheduling of routes on an as-needed basis becomes one of the most important efficiencies made possible by DEX.


Merchandising becomes critical


DEX provides machine-level, line item sales reports which allow operators to identify top selling products with far greater accuracy, and to customize offerings to individual locations. This, however, creates the need for a merchandise manager.

Merchandising requires a dedicated role, notes Terry Hovis, a customer success specialist at Cantaloupe Systems. “Merchandising isn’t just a one time thing,” he said. “There’s always going to be two drink selections out of nine that are specific to the (location’s) demographics.”

All Star Services Inc., Port Huron, Mich., agrees with this assessment, and plans to find someone to focus more on “mining” the data, said Jeff Smith, president and a 29-year industry veteran. “It (wireless pre-kitting) has affected our entire system,” said Smith, whose operation uses Cantaloupe’s RMM and is also using Lightspeed’s automated “pick to light” picking in the warehouse.

Smith said he is seeking someone with a background in operations software. “It’s not the type of position that stumbles in off the street,” he said.

Smith noted that one location has five facings of one item, something he never would have thought possible. “We’re placing what the consumer wants,” he said.

Hart of Southern Refreshment Services said product use reports uncover some unusual preferences at certain locations. In one situation, an account manager demanded to see a report because he took issue with some of the facings, and was very impressed by the company’s reporting. “We never had that data before in our lives,” Hart said.

Some companies combine the merchandising function with the route scheduler role.

The buyer’s role also takes on new importance since better sales data gives the buyer more negotiating leverage with suppliers. The buyer will also have a better idea which supplier promotions do and don’t benefit the company.


Sales role changes


Operators agree the sales person’s role becomes more demanding. The sales person must understand the technology and what it means to the customer. This includes not only more efficient service, more customized product offerings, timely notification of machine malfunctions and more detailed sales reports, but a “greener” footprint since delivery trucks are not making unneeded trips.

“You need to ‘hypercommunicate’ to customers,” Whennen said.

As the sales function must be cognizant of new customer benefits, so too must the marketing function for companies with dedicated marketing staff.

Less frequent deliveries require companies to pay more attention to customer relations.

Next Generation Vending and Food Service Inc. in Canton, Mass., has metrics for tracking the performance of client retention specialists, noted John Ioannou, president. He noted that this position is not part of the sales position and has become more important as the company has introduced RMM.


Service tech remains important


The service tech’s role expands to include DEX, MDB, data transmitters and, depending on the company, cashless readers. If a driver encounters a machine that isn’t reporting DEX, someone needs to know if it’s a cable issue, a machine issue or a problem with the DEX stream.

Installing RMM hardware in machines is not hard for veteran service techs, noted Stewart Lester, support and implementation manager at MEI. “It’s a very similar task at the machine to setting up a credit card acceptor,” he said. He added that DEX related hardware is less complicated than most vending machine controller boards.

Royal Vending in Maple Grove, Minn. hired additional techs when they began doing DEX retrofits in order to pre-kit, noted Steve Marx, president.

Marx thinks that overall, the DEX reports will allow him to install the right amount of equipment and the right products. “I think it’s going to cut out tons of headaches,” he said.

The money room is most affected by the introduction of cashless; the more cashless sales, the less work for the money room.


The data is manageable


While there are more reports to review, the amount of time required by managers is not overwhelming, operators agree.

Stu Riemann, marketing manager at D&R Canteen in Rochester, Minn., which has introduced dynamic scheduling using MEI’s Easitrax software, said a manager can review transactions in 3,000 machines in a few minutes.

Riemann noted that customer service managers find many reports helpful in dealing with customers. A report on bill changer use, for example, can be used to justify redeploying a changer.

Operators agree the product use reports are especially helpful with customers who want more “healthy” selections in machines.

While the system generates a lot of data, Riemann said it is not hard to decide what to share with customers. “I do kind of a snapshot of their account,” he said.

“I think you invest the same amount of time (as a manager),” said Don Blotner, a former operator who is now a customer success specialist for Cantaloupe Systems Inc. “You’re far faster at being able to react in ‘real time’ than before.”


A must: a technology leader


One of the most important roles of all when introducing pre-kitting and dynamic scheduling is that of “technology leader.” This is not an established role in many vending companies, and it can be assumed by a number of different positions. But according to some observers, it’s the most important role of all for companies transitioning to DEX-based management.

“Unless you have one person solely responsible for ensuring the success of this implementation, it’s not going to work,” said MEI’s Lester.

Lester noted that at D&R Canteen in Rochester, Minn. the technology champion emerged from the service department in Stuart Riemann. As the technology provider, Lester was delighted when someone at the company assumed that role.

“Every day they don’t invest in technology, they have a rapidly declining asset,” Whennen said.




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