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Uniting Sales And Audit Interface Enhances EDP Investment Return

Posted On: 9/9/2003

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U.S.A. - The computer has no precedent in the history of machines. It is the first tool whose uses are defined by the user, and easily changed from one user-selected task to the next. The vending industry is beginning to come to terms with the value this flexibility has in widening and deepening management control and oversight, improving customer service, and realizing service enhancements that otherwise would be impossible or impractical without "stored-program" computers.

The unique flexibility of computers tends over time to minimize the need for different systems to do jobs that really are all parts of one overall task. In vending, those jobs are performed in sequence, from issuing merchandise through  counting collections, inventorying trucks and reconciling the cash collected to the customers' removal of merchandise from inventory, to calculating commissions.

Taking a step back, the entire task extends from receiving the merchandise through receiving payment when it is purchased, to replacing the items sold and repeating the cycle. And it includes securing the merchandise and the collections, wherever they happen to be. This involves control of keys for machines, vehicles and facilities, and also can involve surveillance or other monitoring of vulnerable points.

Methods for doing all of these things with paper-and-pencil record-keeping by humans, aided by mechanical devices of more or less sophistication, have been developed steadily over the past 40 years. Today, it is possible in concept to automate all of them, and to interact with each through a single management computer.


One consequence of this unification is that the manifold savings that accrue from tightening control over access to money and merchandise, plus the higher sales that result from more reliable equipment and more consumer payment options, all derive from the same technology.

The unifying element is the Vending Industry Data Transfer Standard, which was developed from the Uniform Code Council's direct data exchange uniform communications standard (DEX/UCS), and which therefore is usually called "DEX." Handheld computers have provided the instrumentality by which vending can benefit from the automated data capture, storage and retrieval made possible by the data transfer standard.

Another protocol, the Uniform Product Code barcode symbology, can work in tandem with "DEX" to increase speed and boost recording accuracy. UPC barcodes, also designed by the Uniform Code Council initially for use by supermarket checkout scanners, provide the means for warehouse personnel and route drivers to record the identity of each product, or stock-keeping unit (SKU), offered for sale.

In vending, barcodes also can be used as identifiers for collection bags, giving the driver a fast and accurate method for associating a particular bag with the machine being collected, and associating that collection with the transaction data loaded up to the handheld through the machine's DEX interface.

Automated data storage was not a task envisioned by the designers of DEX/UCS, which was written to permit the easy transfer of information between a store computer and the handheld computers carried by product distributors' route delivery personnel. For this reason, first-generation VIDTS features on vending machine controller boards often did not provide full implementation. Sometimes, the functions that were provided performed quite differently from one manufacturer to the next.

The turn of the century thus saw a good deal of testing, experimentation and software patching, and often was a frustrating time for vendors. There is a growing consensus that these teething troubles have been overcome, and that answers are available for all the questions that come up.

Every improvement to vender merchandising, security, or auditing capability has required operators to compare the cost of implementing it with the additional profit it can be expected to produce. The precondition for obtaining full benefit from today's computer and communications technology is uniform VIDTS compliance throughout each route, and the complexity of attaining this varies with the age and type of each machine. Historically, when the economy has turned down, vendors  have examined new technology closely to understand its potential benefits, but have put off making a commitment until business picks up. There was reason to expect that the current worldwide slump would be no different.


However, a leading manufacturer of retrofittable DEX data capture devices for older vending machines recently reported that sales are at an all-time high. The "Easy 1" module from inOne Technologies (the company formed by merging Audit Systems and EMS Solutions) achieved record sales during the first six months of 2003 (see VT, August).

Contributing to the widespread interest in working toward uniform VIDTS compliance is the recognition that this one upgrade provides access to benefits in three distinct areas, each of which has a long history of development.

The first, historically and in the minds of many operators, is accountability. The minimal implementation of VIDTS provides several electronic coin meters whose totals are recorded by the route computers and returned to headquarters for immediate audit after every service.

The logical complement to this is automated cash settlement, provided by management software that reads the coin meters against the actual collections turned in to the counting-room and the actual withdrawals from machine inventory calculated from the driver's handheld computer entries of products place in each machine.

This can, if desired, provide same-day route reconciliation, permitting immediate corrective action , a dream of detail-minded operators for the last three decades. Since every dollar that disappears after it's inserted into the machine drops directly off the bottom line, tightening control in this manner can offer a dramatic improvement in a company's financial health.

If the machine inventory information provides line-item product tracking, as it certainly can, the second benefit becomes available. That is immediate machine-level sales analysis, giving the operator a day-by-day record of the velocity of each product stocked in every machine.

Used together with readily available category management tools, a ranking of products by speed of withdrawal from inventory allows the operator to evaluate the menu, identifying selections that can be replaced with items likely to exert greater appeal. This increases per-machine sales and profitability.


A strategic dimension to this advantage is that possession of column-level sales history enables the vendor to take part in, and benefit from, data services that compile and analyze this information. These include "InfoVend," developed by Stream-ware, a Crane Co. company (Norwood, MA), and "VendScape," the result of a cooperative effort by Validata Computer & Research (Montgomery, AL) and Management Science Associates (Pittsburgh, PA). Operators who provide information to such services receive detailed performance analyses in return.

Another dimension to line-item sales tracking is that the machine's DEX interface can be equipped with a device that permits remote inventory checking. Such a device is the "Buzz Box" from Compuvend Systems (Metairie, LA), a small wireless module that is polled by a transceiver aboard the route truck as the driver parks at the location. Each machine transits its present inventory to the truck, where a pick-list is printed for the driver. This allows the driver to pull everything needed to complete the service before leaving the truck, with a considerable saving in time and effort. Taken together with the speed of automated audit and sales data upload to a handheld computer, this DEX advantage boosts route productivity, enabling drivers to handle more stops in the same amount of time.

Automated auditing systems for vending machines have a long history dating back to the mid-1970s. Some vendors always found their benefits to outweigh the cost of acquisition and installation, but for most, the proprietary interfaces and need for extensive custom engineering made them too costly and risky. The Data Transfer Standard was developed to standardize the interface, reduce the risk and simplify installation, and it has done those things.

The third potential benefit of DEX compliance is that it simplifies the adoption of cashless vending systems. That dimension was examined at this year's National automatic Merchandising Association Spring Expo by Mike Lawlor of USA Technologies (Wayne, PA) and Greg Westnedge, Marconi Online (Atlanta, GA), who observed that uniform DEX implementation is the first step on an upgrade path that not only makes cashless transactions practical, but also allows the integration of a variety of new technologies.

The reason for thinking about cashless vending, Lawlor explained, is that consumers have shown a strong preference for cashless payment options. He reported that a study by A.C. Neilsen showed cashless vending alone , typically, of nontraditional, higher-ticket items like prerecorded CD and DVD media, cameras, prepaid phone cards, and the like , totaling some $30 million last year. That figure is expected to increase fivefold by 2005, on the assumption that the popularity of credit- and debit-card "microtransactions" (purchases of less than $10 value) will encourage the vending industry to offer consumers this option.

Consumer demand is not the only reason for the vending industry to want to do that, the USA Technology president added. Mainstream vending products have been undergoing a steady upsizing and "up-pricing," as evidenced by the fast-growing adoption of 20-fl.oz. bottles and other larger packages , value-added branded items, and a tier of premium products like ice cream that sell for $2 or more. The dollar bill validator has helped give the industry the price flexibility it has needed over the past 20 years; the time is fast approaching when something else will be needed. Patron preference seems to dictate a cashless option as the preferred solution.

There are a great many practical and attractive ways to implement cashless vending, the speakers pointed out. These range from easy-to-implement stored-value concepts, like those from eSecure Peripherals (Brossard, QC, Canada) and PayKey USA (Greenville, SC), which use solid-state memory devices as payment media; prepaid cards, like those from Debitek (Ingenico); and remotely-authenticated credit/debit card "micropayment" systems, such as USA Technology's "ePort" (now supported by MEI).


Operators have been making selective use of cashless vending for several decades, and a good deal of experience supports the finding that allowing patrons the option of cashless payment increases sales, usually in the vicinity of 15%. It also eliminates the barriers to price elasticity that always have prevented vending operators from (for example) emulating other retailers by offering items for 99¢. "Pennying" has been attempted, and always proved more trouble than it was worth; it is easy with noncash payment media.

Marconi's Westnedge added that another alternative that has performed very well in retailing situations analogous to vending is the contactless smart card, or radio-frequency identification device (RFID). Perhaps the best-known of these in the private sector is "Speedpass," launched by Mobil to speed and simplify gasoline purchases at its filling stations, and now attracting attention from other retailers, including McDonald's and Stop'n Shop supermarkets.

Motorists in many markets use a similar device for automatic payment of highway, bridge and tunnel tolls ("EZPass" in New York and New Jersey).

A novel Internet-subscription based RFID payment service is offered by FreedomPay; it allows subscribers to add value to their accounts at a secure website, then use small keychain transponders to make purchases from a growing roster of participating merchants.

Of these, "Speedpass" has the longest history (it was launched in 1997), and it is doing very well, Westnedge said. "Over the past two years, when compared with cash sales, credit card sales are up 60%, but 'Speedpass' sales have doubled," he reported. The key features Mobil wanted in its cashless payment solution , "speed, smiles, and strokes" (i.e., fast, trouble-free transactions and rewards for loyalty) , were provided successfully, and the public has responded.

Yet another cashless option is often called "m-commerce," the ability to make purchases with a personal wireless instrument (usually a cellular telephone). The speakers reported that this alternative has proven popular in tests in a number of countries, and is being actively explored by organizations with sufficient resources to make things happen (telecommunications giants like AT&T and Sprint, the cellular technology titans Ericsson, Motorola and Nokia, and all the major credit card companies).

Suggesting the potential of "m-commerce" is the estimate that 20% of all the people in the world have cellular telephones, Cellphone users are comfortable with them, and if a single authentication and payment system can be devised that would give all users access to the service,  "m-commerce" surely will be a contender.  Westnedge cited a study by McKinsey & Co. that projects "m-commerce" sales this year at just under $20 billion, and predicts that these will rise to more than $40 billion by 2005.

Experience has shown that cashless systems will, in most cases, coexist with the familiar cash payment option in vending machines. Thus, automated data collection is necessary, simply to account accurately for cash and cashless sales. And any cashless system that requires remote authentication must be capable of wireless communication (although a landline sometimes will be available). The solution to both needs is a DEX interface, Lawlor emphasized.

Once DEX is available, the operator has a choice of upgrade paths. Beyond the accountability, sales tracking and optimizing, and cash/cashless payment options, these include remote machine monitoring to minimize downtime, intervene before catastrophic failures occur, and detect unauthorized entry. The DEX interface is the integration point for all of these features, and offers to increase the value of other new technologies as well.

One of these is the intelligent lock, featuring onboard memory that records the time and user identify at each entry. These locks allow management extraordinary flexibility in setting permissions (by day, time of day, user, and other variables). Electronic locks bring a whole new dimension to key control, and provide immediate recourse if a key is lost or stolen. Having machine entry data, detailed by time and key, immediately available while examining DEX audit data can be a powerful new management tool.

On the merchandising front, the DEX-facilitated wireless capability allows easy access to wide-area networks, including the Internet. The vending machine user interface can be interactive, such as a flat-panel touchscreen selector that doubles as a digital video advertising and communications medium. USA Technology's "e-Port," and a variety of special-purpose machines (like the book venders built through the walls of a chain of airport bookshops) have demonstrated the feasibility and appeal of this interactivity.

The speakers observed that competition drives technology in vending, as has been  demonstrated with coin changers, multiprice coin mechs and bill validators. The operator faces the choice of adopting it, or watching a competitor do so. The choice is not difficult when the competitive tool promises an immediate sales lift that will grow stronger as customers become accustomed to finding cashless-capable equipment, they concluded.

Viewed from one perspective, the entire movement of money and merchandise in vending , Alan Kronenberg of Compuvend Systems has called it the "circle of control" , is a series of similar processes that, for technical reasons, historically have been  approached as separate tasks. Today's computer and communications systems (also one technology that historically has masqueraded as several different ones) holds the promise of giving the operator a single vantage-point from which to observe the whole business, or any interesting detail, and to act immediately when opportunity presents or danger threatens. It has been a long time coming, but there is reason to believe that it is almost here.