Despite my long history in vending, a few years ago I found myself wondering if I were going to make it after all. With all my experience, I had neglected a crucial game-changer. I had ignored the latest technology to improve my company's efficiency, productivity and competitiveness. But now, thanks to some of the industry's cutting-edge tools, Rawls has grown more profitable over each of the past four years. We have taken our vending company from where I had doubts about its very future, to being among the most technologically advanced vending operations in our part of the country.
Through technology that drives efficiencies, Rawls Distributing (a Canteen franchise) today operates 10 routes in the Savannah, GA, market. We have some 1,200 machines serving military bases, schools, hospitals and manufacturing plants. We're doing as much volume as we did with the original 25 routes when we first started out, at a much higher gross profit margin.
The new technology and the solutions it has made available to vending operators have convinced me the next 10 years will be the most exciting the industry has ever seen. Rawls Distributing has experienced the power of cashless payment, wireless DEX and new efficiency services delivered by USA Technologies (Malvern, PA), VendSys (Quincy, MA) and LightSpeed Automation (Alpharetta, GA).
When I first worked for Tom's Food, I was put in charge of vending in Orlando, FL, and New Orleans, LA. I was a kid, barely 23 years old. During that time, we largely operated from old route books -- technically a piece of cardboard -- and a pencil. Back then, I had never seen a bill validator. Today, it's vastly different. It's all about prekitting, "smart" machines and cashless payment.
Now that my company is making a significant technological change, I want to share my story of success, and pass on my knowledge, especially to young entrepreneurs wanting to start out in the business.
FIRST STEP: CASHLESS
Rawls Distributing's transformation began four years ago when I began to realize that we were becoming a cashless world, and my customers were telling me they wanted to pay for items from vending machines with their debit or credit cards. I recognized that cashless payment was more efficient, convenient and easy, and I knew we had to respond to the changing demands.
So we did our homework, which led us to ask USA Technologies to install its ePort cashless payment system in some of our vending machines. We were amazed and excited by the results, and that was only the beginning. We also upgraded our management information system from a traditional software suite installed on our computers to the online "software as a service" provided by VendSys.
I decided to go with Vendsys because of its ease of implementation, and it is very intuitive. We did all the training as we went, online at no charge, and the system worked perfectly. If we needed a report or offered a suggestion it was incorporated within a couple of weeks in an update.
The next big step on our technological journey came in mid-2011. We set an objective of finding a way to use a single hardware platform for cashless, and for DEX wireless telemetry into our new VendSys vending management system. We did not want redundancy.
Fortunately, USA Technologies had already been in discussion with VendSys to become a certified VMS supplier to USAT's DEX Partner Program. As our cashless provider, USAT approached us to be the pilot for an integrated solution.
PUTTING IT ALL TOGETHER
The proposal was to incorporate USAT's business-planning process for profitable cashless deployment, overlaid with the benefits of wireless telemetry of DEX data into our new VendSys system.
The combined solution was a customized hybrid network that optimized cashless with telemetry as well as standalone telemetry from USAT, while accommodating handheld route computers reading DEX machines -- that, together, improved the operational performance of routes as a whole.
USAT first performed a cashless evaluation on our existing deployed terminals. We found that consumers were already spending an average 35¢ more when they paid with cards compared to cash. The data attributed the increase to 22% additional spending from the ability to purchase multiple items with a single swipe of a card. Purchases of higher-priced items accounted for an additional 12% spending lift with cashless acceptance.
USAT then took all of our business data and developed a deployment plan for the hybrid solution that included account selection based upon projected incremental net operating profit for cashless vending plus wireless DEX. It also factored in net operating profit calculated from incremental sales increase projections, less our cost to deliver those incremental cases, less all cashless costs, plus a further 15% route cost savings from the handheld computers used to collect DEX information. At the end of the day, or even during the day, handhelds can be synced using Verizon cellular service; or they can be plugged into a dock at our office and synced at any time. When you are prekitting a particular machine every day, the salesperson must sync from that location as soon as possible, so that the next day's order can be pulled correctly. Many of our people pull into a McDonald's and use WiFi to sync up.
Account selection also was determined by customers' suitability for cashless deployment, machines that covered all product categories, where possible, and approximately 25% to 30% coverage of wireless DEX on each route, as we deployed VendSys.
We found that the addition of DEX telemetry to cashless vending drops the profitability hurdle down from a minimum of $5,000 a year per machine in cash sales before deploying cashless, to $3,000 a year for cashless and wireless DEX. In total, this qualified some 31% of our machines to be deployed with cashless and wireless DEX.
Without USAT's wireless telemetry, if we service a machine once a week or every two weeks, the data we get from handheld DEX will successfully drive pre-kits for 70% of our machines. With USAT, either cashless with telemetry or just standalone telemetry for our highest-volume machines, we are getting data twice a day that is collected and sent to, or pulled, by VendSys.
The more data we get, the better Vendsys works for prekitting. It comes closer and closer to actual usage, with fewer overpulls or underpulls.VendSys works great with just its existing pre-order, pre-kit forecast model, but it is perfect in conjunction with USAT. The savings are realized by eliminating routes and personnel, and still increasing volume with fewer people. We are running more volume on nine routes now than we were running on 14 routes last year. Our salespeople are making more money, and I have eliminated large trucks and gone to much smaller vehicles with twice the gas mileage -- which is huge when gas is so expensive.
A big advantage in our largely rural market is the availability of Verizon Wireless, a USAT business partner, to complement our existing AT&T network. We were chosen by USAT as a pilot site for this communications network, and had rewarding results with major industrial customers. In some rural locations, we were able to provide the best coverage with the advantage of two alternative carriers.
USAT also helped us optimize our cashless performance of existing terminals, which lifted debit and credit card usage by 24%, in dollars, over a six-month period. This was achieved in part by configuring our terminals to allow customers to swipe their card once to purchase multiple items, such as a candy bar with their bag of chips, a beverage for a coworker. USAT advised adding more higher-priced items to the mix in machines with ePort readers, since consumers typically spend more when they pay with a card.
Our cashless deployments are delivering more than $1,500 annual cashless sales per machine. Our top 100 cashless machines are delivering over $2,500 card sales at 30% cashless usage. One of the biggest benefits is that consumers are spending an average 35¢ more per transaction when they pay with a card versus cash.
Our VendSys vending management system experience has shown excellent results, everything from ease of deployment and training and cost, to operational benefits. We immediately saw productivity improvements that allowed us to reduce the number of routes.
New features are continually being added at no cost to enhance operational and management reports to improve profitability.
Rawls Distributing is about to deploy USA Technologies' two-tier pricing program for our cashless vending, which will give the operation the ability to charge one price for credit and debit cards and a discounted price for cash.
I was prompted to try the program when I learned that USAT had surveyed two-tier pricing across nearly 2,000 deployments and found that consumers are willing to pay for the convenience of using their cards. Cashless sales rose, according to USAT, and the number of vends even were reported to increase when two pricing options were available.
The final step will be the addition of LightSpeed Automation, a warehouse picking system that streamlines logistics for even greater efficiency and productivity. It will simplify order fulfillment during the prekitting process by enabling our personnel to pick quickly because they can find the correct bin locations along an assembly line more quickly.
DEX data, delivered wirelessly from our ePort readers, will drive the Vendsys vending management system, scheduling machines that need to be serviced and identifying exactly what product needs to be filled. LightSpeed will then automate the warehouse picking process, completing the final piece of the puzzle.
So far, every step we have taken has improved efficiency, volume and net operating profit for Rawls Distributing Co.
photo | SHARING THE KNOWLEDGE: Robin Rawls (l.) explains to Chris Williams how Williams' small operation can increase sales and reduce expenses by employing remote machine monitoring. Williams works three jobs in addition to running his vending route to support his family. "He has so little spare time that one wasted trip means he may not see his kids that day," said Rawls, who has been mentoring Williams, and referring smaller accounts to him, for the past five years.
SPREADING THE WORD
Getting our salespeople to embrace new technology was the key to our success in implementing it. Not every salesperson has the ability to transition to the "information age," however, so we focused on those salespeople who could. Tech-savvy salespeople played a key role in applying the new tools, which helped to reduce the number of routes, again increasing our productivity, improving efficiencies and costs.
After a lifetime in vending, and seeing how technology has changed and grown my business, it is important to me to pass on what I have learned. I enjoy mentoring operators who call me for advice. The vending business has been good to me, and I want to help others succeed.
I have had people say: "I have some money to invest, and I am thinking of going into the vending business." My advice is not to go out and buy old, outdated equipment. I tell them to do their research and start knocking on doors, and I emphasize that vending is a highly competitive market. You must do it the right way, and you must employ the latest vending technology.
ROBIN RAWLS started in the vending business almost 40 years ago as an employee of Tom's Foods Inc. He established his own business, Rawls Distributing Co., in 1985, and it has since become one of the largest vending service providers in the Savannah, GA, market. Rawls Distributing operated 25 routes during its peak.