How to start prekitting

July 26, 2013
One of the fastest growing trends in servicing vending machines has the capacity to increase revenue 20 percent per route.

To tote, or not to tote? That is the first question a vending operation of any size using delivery trucks as rolling warehouses has to answer. Prekitting or prepacking totes/tubs in order to make one trip into a location has some great advantages. It increases revenue per route, allows for lighter vehicles with better fuel economy and isn’t dependent on a lot of technology. But where should operators start and what should they expect? Here’s what the experts say.

When to start prekitting

When McMurray Coin Machines in Fort McMurray, Alberta, Canada, decided to prekit, it had 13 routes doing traditional curbside picking. “Most of my good drivers were servicing 18 to 20 machines a day,” said Jacques Dube, operations manager. “We decided to add prekitting to improve that.”

Additionally, Dube wanted to get the trucks, which cost $75,000 each, to stop being parked in front of a location and start bringing in more revenue. In 4 weeks, Dube had each truck doing 30 machines and he dropped down to 10 routes. By adjusting the prekitting parameters, such as increasing depletion rates to 35 percent and having no more than two sold out columns as well as adding dynamic scheduling, he was able to drop two additional trucks while assigning each route 26 to 30 machines. “We service 1,200 vending machines with 8 trucks,” he said. Dube is considering adding adding remote machine monitoring which he feels would allow the company to cut an additional truck or extend without adding another route. With his current system, he is making an average of $180 to $220 per visit. “Your efficiencies and profitability go up significantly,” Dube added.

While Dube started prekitting at 13 routes, operators have found success starting much earlier. Six routes is common and sometimes fewer if they aren’t adding warehouse costs. Since every vending operation is different, there is a little math involved in deciding when the time is right.

“If small, there has to be a breakeven point,” said Warren Philips, president of Validata Computer & Research Corp. “…It doesn’t make sense to add all that [warehouse and handheld or remote machine monitoring] overhead for just 2 routes,” he added. Philips has been helping operators prekit, or what he calls just kitting or tubbing, for 30 years. Therefore, he knows the cost needs to be offset by savings per route measured in time.

“The time measures amount to how much time is saved by grabbing a tub or two tubs and throwing them on hand truck, and wheeling into the site, opening the machines, collecting the money, throwing the product in, closing the door and going back to the truck - one trip in,” said Philips. With the proper handheld device, he recommends to start prekitting immediately, but do it off the truck and use the same personnel who are currently being used.

According to Don Blotner, a former operator now part of the customer success management team for Cantaloupe, tracking and predicting what products will be needed for a machine can create substantial time savings. “It’s 3 to 5 minutes a driver spends in front of a machine that could be better spent,” Blotner said. However, he also warns operators about having economies of scale. “You don’t want to just replace street labor with back-of-house labor,” he added. He’s seen prekitting done from the truck early on, in order to avoid this overhead cost. A driver has a pick ticket for the location and loads up a tote before going in. It’s still one trip and saves time. In fact, Blotner says pre-kitting typically can help consolidate 1 route for every 4. This servicing model does come with a word of warning, however. It requires accurate data.

“Having poor or inaccurate data ripples through the whole process,” said Blotner. “An inaccurate amount of product means having to deal with product a second time when it comes back to the warehouse or having to go back to a machine sooner because of a short fill.”

Accurate data requires periodically inventorying machines to get field numbers in order. Blotner recommends this be done every 3 to 5 visits. 

Mark Kronenberg, president of CompuVend Systems, agrees. “Drivers do need to take an inventory,” he said. “Some people believe computers know everything.”

He uses an example. If the spiral holds 10 products and, for whatever reason, the prekit tote is two products short, and the driver never inputs that data, the pick lists will continue to be two short until the system is reconciled. Another example might be if the driver has to remove out of date products – the system needs to be updated.  

“It’s important to be accurate,” said Kronenberg. “Prekitting relies on item level tracking.”

What’s needed for prekitting

First and foremost, prekitting requires getting all machines to DEX. “We had two people doing this full time, said Jon Snyder, vice president of Snyder Food Services, Inc. in Kendallville, Ind., about when Snyder Food Services converted its 20 route operation in 2010. “Hands down it was the largest expense. We didn’t realize how much it was going to cost.” Snyder used a lot of manufacturer kits and still only 85 to 90 percent of his machines on location are fully DEXed. “Some machines just don’t,” he said.

Another key requirement for Snyder was driver buy-in. He got his drivers to transition, in part, by proving prekitting would help them be more efficient, in effect, work less hours, while servicing more machines and making more money. “It was most rewarding to see route drivers embrace it,” Snyder said. “That we were able to deliver on it and that it did improve their quality of life, yet cut operating costs and make us more profitable.”   

Software is another necessary component to prekitting. Products sold need to be calculated at item or SKU level in order to produce pick lists.  When operators consider software packages for prekitting, they should think about functionality, forecasting, DEX data and whether the software is scalable and robust – will it work for them in the future, explains Silpa Pande, Streamware product manager at Crane Merchandising Systems. Functionality refers to the program’s ability to take care of stores, trucks and warehouses and the flow of product across each. The software should be able to forecast what products will be needed for a prekit based on real-time and/or regular DEX data. “And finally, [operators] should consider a software package that will work for them long-term and is future proofed,” said Pande. “For example, after they implement prekitting successfully, it should offer other functionalities that will take them to the next level.

Launching a VMS and prekitting aren’t accomplished in one day. It requires dedication with both staff and time. Cliff Fisher, sales manager at MEI goes so far as to suggest four phases necessary to implement the technologies successfully. The phases are: disciplined operation, preroll machine and truck forecasting, prekitting machine and forecasting as well as telemetry based forecasting. “It is important to realize that skipping the prior steps doesn’t eliminate the prior requirements,” said Fisher. “…Trying to accomplish everything in a single step can be overwhelming, costly and disruptive.”

Get the first route right

“You want to hit a home run with your first route,” said longtime vending software salesman Bill Lockett, sales director of VendSys. “You want the drivers to want this – that it’s not just another big brother thing.”

Lockett explains that starting to prekit takes at least 4 months. It needs an administrator in the office to print reports and techs in the field to fix DEX issues and move machines. “Every machine talks differently,” said Lockett. “You have to have a service tech who can get it back online before the driver sees it again.” Lockett believes small operations should start prekitting from the truck, getting drivers to make one trip into a location. “Once you get 4 routes prekitting at curb and the driver says it works, then move it to the warehouse,” he said. At the warehouse level, operators can pay $12.50 per hour to pick product versus a driver picking it for $20 an hour. Plus, a driver can easily manage to service 80 to 100 machines per route, plus add another 50 to 75 machines to the route with just DEX driven hand helds, without being over worked. There’s a potential for servicing even more machines with the application of wireless/telemetry, according to Lockett. 

What to expect

“One trip in and one trip out is so much more efficient and economical,” said Randy Smith, president of LightSpeed Automation and former vending operator. “It pays for itself in no time.” One thing operators need to do is monitor how many units are going in each prekit. “You can’t afford to take a prekit with 30 products into a machine,” explained Smith, “It’s just too expensive. Conversely, you don’t want three totes - 250 products - because you aren’t going often enough.” Smith recommends the correct balance is to bring roughly 100 pieces of product per machine when a driver services it. “You want to have enough product to justify the visit,” he said. Drivers working on commission want this too.

On the warehouse side, the traditional vending model with 10 routes has 10 mini warehouses (the vehicles) and all the drivers want to fill the trucks back up to maximum product capacity, explains Smith. Essentially, that’s $2,000 to $3,000 of inventory rolling around on truck that never goes away. When an operator turns on prekitting, he or she gets a one-time pick up of $2,000 to $3,000 per truck just from that product going back into the warehouse. “Really, that pays for a lot of technology,” Smith said. Because product distribution goes back to the warehouse, it also tightens up inventory creating more ‘just-in-time’ ordering.

“I was an operator for 15 years. I just don’t think you can compete if you’re not prekitting,” said Smith.

When is an operator ready for a warehouse lighted picking system? Smith says that the systems are so fast, that an operator should have at least 3 to 4 routes before considering an automated system and at least 1 route fully prekitted before scheduling the installation.

Prekitting should be at least a goal of all vending operations. Operators need to consider the return on investment of hardware, software and dedicated staff compared with the revenue lift of route consolidation and potential for added machines per route. If sales growth per route is stagnant, prekitting could be the answer. It can start at the truck level with drivers making one trip into a location and grow into a warehouse housing rollers and pick-to-light systems. It’s a versatile tool that vendors can use to add to their profitability. 

About the Author

Emily Refermat | Editor

Emily has been living and breathing the vending industry since 2006 and became Editor in 2012. Usually Emily tries the new salted snack in the vending machine, unless she’s on deadline – then it’s a Snickers.

Feel free to reach Emily via email here or follow her on Twitter @VMW_Refermat.