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Issue Date: Vol. 44, No. 9, September 2004, Posted On: 9/23/2004


Intelligent' Vending Boosts Sales, Cuts Expenses, Tightens Control With Cashless Options, Enhanced Audit And Energy Management


Tim Sanford
Editor@vendingtimes.net

- The present status of the Vending Industry Data Transfer Standard, based on the DEX/UCS protocol, and the growing number of options available for DEX-compliant machines were explored at a panel discussion conducted during the National Automatic Merchandising Association Spring Expo here. Panelists were Glenn Butler, Streamware; Alex Kiriakides, Atlas Food Service; and Jim Turner, USA Technologies. Moderating the session was Dr. Michael Kasavana, NAMA Endowed Professor at The School of Hospitality Business in the Eli Broad College of Business, Michigan State University.

Butler led off by summarizing the development of the standard. The DEX protocol was developed to permit the portable computers carried by route distribution personnel to exchange information on the quantities and types of product delivered with the computers in the stores they served. The task of developing a standard way to do this was undertaken by the Uniform Code Council (Columbus, OH). The result was Direct Exchange Uniform Communications System, or DEX/UCS.

Major soft drink bottlers using this system for their retail accounts wanted a way to receive the same information from their vending machines. Initially, DEX capability was approximated in packaged cold drink machines by adding data storage and retrieval capabilities to the coin changer.

As the potential benefits became more apparent, the National Automatic Merchandising Association Technical Standards Committee empaneled a subcommittee to define a "vending industry data transfer standard" based on DEX. This has undergone successive refinement over the past decade and, today, virtually all machines from major manufacturers are compliant.

The Streamware executive explained that DEX/UCS is a serial protocol using "TTL" (transistor-to-transistor logic) voltages, and these characteristics are retained in the vending industry data transfer standard. "It may not be the best protocol imaginable, but it works," he said.

Butler pointed out that vending operators initially regarded in-machine data storage as an auditing tool, and it certainly is that. Like the earlier, proprietary "management information systems" introduced in the late '70s and early '80s, a VIDTS-compliant controller maintains several tamper-proof electronic meters that record payments, between services ("interval") and cumulatively. Unlike the early "MIS" systems, VIDTS allows retrieval of the information with a standard handheld computer (running any of several operating systems) plugged into the machine. The standard allows for a variety of measures, including cumulative cash in, cash out, tube cash, box cash, bills to stacker and vend count. "And this information is available immediately," he added.

BEYOND AUDIT

The fully-implemented standard also permits capture of sales data, including "line-item" detail. Thus, information about all money put into the machine and all merchandise dispensed from it can be collected automatically, or even transmitted to a central computer. This permits immediate cash-to-inventory reconciliation, and allows management to respond swiftly to any discrepancies that appear in the reports.

Beyond its use in settlement, line-item sales information is valuable both in analyzing machine sales with a view to optimizing the menu and in establishing a sales history to permit accurate forecasting. Butler pointed out that the ability to predict what a machine will need without requiring the driver to walk past it saves time on the route.

EXPANDING POSSIBILITIES

Alternatively, the machine can transmit its sales record to a computer aboard the route truck over a short-range wireless connection ("curbside polling"); or the sales information can be sent to the operator's main computer over a wide-area network. A vending machine compliant with "DEX" is the precondition for all of these capabilities.

Butler explained that retrofit kits that add DEX capabilities to older machines are available from InOne Technology and MEI.

When planning to change over to in-machine data capture, operators should ask the bottlers from whom they lease equipment to swap out any older models that don't implement the full standard, Butler recommended. He added that, when converting or upgrading, the payoff is best for snack machines. Existing equipment of recent but not current manufacture may require upgrading with the latest firmware from the manufacturer. Vending software suppliers can provide a utility program that will assess the compatibility of a machine with the standard.

"A hidden benefit to DEX is that it builds trust," the Streamware executive added. "It can help you get new business." There also is a personnel dimension to making the move: "Good drivers will like it; bad drivers will quit," he reported.

These aren't the only reasons for making the switch, Butler emphasized. Experience has shown that, making full use of item-level sales analysis and the accurate forecasting that this analysis makes possible, the increased efficiency can upgrade a $7,000-per-week route to over $9,000. "Pre-kitting" , assembling orders in the warehouse for each location, on the basis of detailed sales forecasts , not only saves drivers time, but streamlines inventory throughout the operation, moving it toward a "just-in-time" model that frees up cash for other purposes. DEX also can improve changer management substantially, again improving the company's utilization of cash.

Next to speak was Turner of USA Technologies, who reported that the first quarter of 2004 witnessed tremendous changes in "intelligent" vending. As the application of computer controls moves beyond vend actuation and transaction auditing, it has allowed the design of energy-saving equipment. NAMA has been working with the Environmental Protection Agency on power consumption standards for vending machines, and electronics is coming to the rescue in making sure that venders are compliant.

Beyond that, Turner said, the integration of individual machines into networked grids of retailing sites holds the promise of offering, at a minimum, cashless payment options using major credit and bank debit/ checking cards. The well-publicized decision by McDonald's to accept major credit cards, he observed, exemplifies the massive shift toward cashless payment that has seen cash transactions outpaced by card-based payments over the past year.

This is a development that will be very beneficial to the vending industry, the USA Technologies executive emphasized. On average, cashless transactions tend to be larger than those requiring cash, largely because of convenience; an analogous lift in sales was experienced when vending machines began to accept banknotes. And that is just the start. The use of cashless payment media that identify the consumer will bring vending into the mainstream of modern retail promotion, he predicted; the ability to offer loyalty discounts is just one example of the possibilities.

DEX capability is the key, Turner pointed out. The widespread adoption of a standard for capturing, storing and retrieving machine information not only improves the speed and efficiency with which operators can obtain accurate sales and audit data, but also provides a standard interface for connecting to a transaction processing network. The area covered by such a network can be as local as a hotel computer serving vending machines actuated by guest room keys, or as wide as the operating company wants it to be.

USA Technologies is the developer of "E-port," which incorporates the company's innovations in processing micropayments economically. The "E-port" system offers a cashless payment "engine" that can accommodate credit and bank debit cards, "m-commerce" transactions initiated by cellular telephones, proximity (RFID) devices or local cashless media, such as hotel keys.

MAKING PROGRESS

The application of cashless payment technology to mainstream vending equipment (notably, cold beverage machines) is exerting its greatest initial appeal in entertainment, travel and hospitality locations. The need to provide refreshments behind the security barriers in airports has widened the role of vending machines, and those venders can be priced at $2 when offering a popular product with a brand that has communicated value to consumers. Movie theaters, too, have proven hospitable to state-of-the-art machines with cashless capability.

"The vending in theme parks in Orlando, FL now is more than 15% cashless," Turner continued. "Those vending machines are averaging $30,000 in sales per year."

In Las Vegas, cold drink vending machines offering 20 fl.oz. bottles for $2 exhibited a 15% sales increase when they were adapted to accept credit cards, the speaker reported. Cashless vending also gives operators a degree of price elasticity, including odd-cent pricing, hitherto available only to manual retailers. "And cashless can allow price adjustment without a loss of volume , sometimes with a gain in volume, like installing a $1 bill validator did, 20 years ago." Given these benefits, he said. the investment in adapting a machine for cashless sales can be recovered in less than a year.

Real cost savings, and other benefits too, can be obtained by applying "intelligent" energy management, Turner pointed out. Reducing energy consumption by vending machines not only makes locations happy, but also lowers maintenance costs by decreasing wear and tear on compressor motors and extending the life of lamps.

Kiriakides of Atlas Food Service, agreed that cashless payment is very desirable and long overdue. "I grew up in vending, and I always thought that there had to be a better way than nickel-and-dime transactions," he said. And so, when he was contacted by an Italian manufacturer about testing a cashless prepaid technology using proximity (RFID) devices encapsulated in key fobs, he was very receptive.

"They told me that the 'Paykey' system had been used in Europe for 10 or 12 years, and had been successful in getting the vending industry away from coins in industrial locations," Kiriakides reported. "I saw the value in that. I say, let's get people past the concern with pricing, and with change. When you go to $1.15 on bottled drinks, you often must pay back 85 in change!"

So Atlas Food Service undertook the test in its "closed" workplace environments. "It's MDB-compatible, DEX-compatible, and the operator controls the money," the panelist explained. Patrons prepay, with their payments encoded as value on the contactless "Pkey" media issued to them. That value is drawn down with each purchase, a system long familiar in vending niches through its implementation with prepaid or "debit" cards. "In a debit system like this, we hold the 'float,'" Kiriakides said.

"I've watched it work," he emphasized. "It takes the burden off the vending machine and puts it on the consumer, so to speak , there's no more 'The machine won't take my dime!' But the vender thinks the 'Paykey' terminal is a coin mech."

UP TO SPEED

Atlas's tests demonstrated that the best way to implement a cashless system is to phase it in gradually, the industry veteran noted. "You leave the coin mechs and validators on, for a while; the clientele needs a transition period."

The cost of adding a "Paykey" terminal to a machine is under $300, and the "Pkeys" cost $6 apiece. The usual approach is to give each patron a free "Pkey" at the beginning, and to sell replacements if keys are lost.

To speed trial and acceptance, the initial key often is given to the patron with some value encoded on it. When that value is expended, the key may be recharged at a bill validator-equipped vending machine, or at a "recharge station." This station will accept credit cards, and Atlas has found that a $20 minimum recharge offsets the credit card transaction cost. The "recharge station" incorporates USA Technologies card processing and Standard Change-Makers bill validation systems.

The ease of making cashless vending purchases appeals to customers and thus stimulates sales. "There's a sales increase, typically of about 5%; it's not a huge amount, but it's real," Kiriakides said.

Giving customers the opportunity to make their vending purchases with "Paykey" is a popular option; "people want the keys," the speaker reported. "Then, when everybody has one and everyone likes them, you can remove cash almost entirely. We've done this in one plant already."

There are real advantages, Kiriakides emphasized. With all the money in a single machine, the one available for recharging "Paykeys," service calls decrease dramatically. If that machine is a snack vender dispensing replacement "Pkeys," the system sustains itself nicely.

"We use sundry boxes to hold the keys for vending through snack machines," the speaker explained. The "Pkeys" can be customized for specific locations, and they can be used for manual sales as well as vending, using a cashier-station terminal available from Paykey.

The Paykey system is fully compatible with DEX, Kiriakides said; "We've done a lot of work with the manufacturers." Accounting data is stored in two of the fields defined by the standard, one of which holds "sales by key," and another, revalue amounts. Atlas has found Paykey data easy to integrate, and operators who have tested the system report that it ties in well with the software they use.

The two readings also can be retrieved by a "Special Pkey" without needing a handheld computer. Paykey offers an interface allowing a standard desktop computer to read the data collected by the "Special Pkey."

"Vending today is positioned to move up from nickels, dimes and quarters," the industry veteran concluded. "We're standing on the end of the diving board, and we're hesitating. I say, 'Jump!' It's relatively inexpensive, it's easy, and customers like it."


Topic: Vending Features

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