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Technology Tightens Control And Widens Payment Options

Posted On: 4/25/2003

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Las Vegas- The latest applications of microelectronics to vending control and pricing systems once again took the spotlight at the National Automatic Merchandising Association Spring Expo here.

Highlighting the educational program were presentations on the continuing development of systems that can enable operators to  capture, retrieve or transmit detailed information on each machine's transactions in a standard format.

This capability, in turn, paves the way for efficient introduction of a wide range of payment systems, enabling operators to obtain accurate records of cash and noncash sales.

While both in-machine data collection and noncash payment have long histories in vending, the advent of systems practical for use in a wide range of typical vending environments awaited the microelectronics, computer and telecommunications revolution (which may be seen as a single historical process). Providing an overview of its sales and audit tracking component were Bill Lockett, InOne Technology (formerly Audit Systems Co. and EMS Solutions); Glenn Butler, Streamware (a Crane Co. company), and Graham Stewart of MEI.

Lockett led off by recalling that the Food Marketing Institute, which represented supermarket and mass merchandising chains, was given the mandate of overseeing development of a standard communication protocol that would allow delivery personnel to communicate with store computers on each visit.  This initiative was welcomed by major suppliers like Coca-Cola USA, and the result was the Data EXchange Uniform Communication Standard (now called DEX). Lockett participated in the early phases of this project while with Miller Brewing Company in the 1970s.

With the system in place at retail establishments, Coke wanted to extend it to vending so bottling company route personnel could communicate automatically with cold drink venders just as they were doing with store computers. Coin Acceptors, Inc. and Dixie-Narco, part of Maytag's Commercial Appliance Division, met this request.

The vending industry had seen a number of workable, but proprietary, transaction recording or "management information" systems in the late '70s and early '80s. One of the pioneers in this field used to tell operators, "Each of your vending machines is a small store; who's watching the store?" Thus, the arrival of a standard widely supported by suppliers was recognized as potentially valuable.

Accordingly, the National Automatic Merchandising Association Technical Standards Committee formed a subcommittee to begin drafting a uniform implementation of DEX (which is a subset of the widely-used RS-232c protocol) for vending machine use. A similar initiative in Europe led to broad agreement on uniformity, and the resulting Vending Industry Data Transfer Standard (VIDTS) is applicable both to North America (where route computers typically communicate with store computers and vending machine controllers through a plug-in cable) and Europe, where vendors prefer optical coupling and data transmission complying with Digital Equipment Corp.'s "DDCMP" protocol. VIDTS defines mandatory and optional data fields for each kind of machine, and the sequence in which a request for upload is authenticated and fulfilled.


Lockett observed that this project received a boost in the mid-1990s, as a new emphasis on maximizing brand equity impelled major suppliers to take a new look at vending. This led to a proliferation of "stock-keeping units," SKUs, in vending warehouses; and the traditional methods of tracking sales by product category could not provide the detail needed to identify the better and the worse performers. The need for line-item sales records and analysis became apparent. It always had been excessively time-consuming to record this information manually; thus, an automated data capture standard became even more attractive.

"Today, DEX is the 'glue' that  holds the latest vending technology together: wireless networking, cashless vending, and the like," the InOne Technology executive emphasized. He estimated that around 40% of vending machines presently are DEX-capable, to some extent; packaged cold beverage equipment has been in the lead.

The data content provided by DEX includes, at a minimum, cash and unit vend "meters." The standard provides for recording bill and coin transactions (bills to the stacker, coins to the coin box or change tubes, change paid out), as well as vends recorded by column at the price assigned to that column. This, obviously, is of great value in detecting discrepancies between withdrawals from inventory and collections returned to the counting-room; and many operators have adopted DEX for this audit capability alone. Profit protection is one way in which automated data collection bolsters the bottom line; increased sales; but detailed analysis of product movement adds value by increasing machine sales.

In current snack machines, the speaker noted, spiral turns equate to product vends. The DEX-compliant controller can record the performance of each spiral, but the supporting management software must "know" what items had been loaded into them. The data recording system maintains a cumulative record, and also a record of activity since the last machine service.

Another data standard, "multi-drop bus" or MDB, was developed as a standard protocol by which the vending machine controller can exchange information with peripheral devices, from coin changers and bill validators to refrigeration systems and door alarms. That information can be made available to the DEX data capture and retrieval system, so the machine can flag "alarm" conditions such as an overheating compressor or a pricing system failure. It also can flag unscheduled door openings.

Another development that made its way from supermarkets and mass-market retailers to vending was the "uniform product code," or UPC, that suppliers adopted as a universal means of allowing automatic identification of each item through optical scanning of a barcode on the package. This began to make its way into vending warehouses around 1992, although the application of barcoding to vended merchandise lagged behind its implementation on supermarket packages.

Once each item could be automatically logged into the warehouse and recorded when issued to each driver, it became much easier for operators to track the movement of individual products. The availability of line-item data from each machine made it possible to update the traditional, category-based planograms with more detailed and responsive ones, based on item rotation models. The steady increase in power and decrease in cost of handheld computers made automatic data retrieval in the warehouse and on the route a more attractive proposition.

At present, machine data capture for retrieval with a handheld computer is a practical proposition, although it still requires management commitment and substantial effort. Lockett predicted that, by 2005, cashless vending will be sufficiently widespread and successful to provide another incentive for completing the transition. By 2007, he added, wireless inventory and audit reporting will make "dynamic" routing an attractive productivity-booster for vending operators.

The principal benefit to DEX line-item sales analysis at present is that it allows menuing each machine rationally, on the basis of actual performance. Management control over machine menus, when exercised intelligently, improves sales. "When I was with Miller, we found that we could use our records of store deliveries to stock the shelves for maximum turns; we could get 30% more turns than the store owners could get when they stocked the shelves themselves," Lockett recalled. "The reason was that we cared only about those particular shelves, so we could optimize the selection."

In a vending machine, a portion of the menu should be based on demonstrated customer preference for items in each available category. The rest of the space should be stocked with items that are rotated periodically, to gauge interest in new products and keep customer interest high.

"A few years ago, operators often were of two minds about handheld computers," Lockett concluded. "Today, they're not; but many are of two minds about DEX." He estimates that from 15% to 20% of vendors today are making use of route computers, though fewer have undertaken the process of surveying their existing equipment for DEX compliance. The numbers will increase substantially over the next five years, the speaker predicted.

In brief, a practical upgrade path is to implement barcode scanning in the warehouse, then replace paper tickets with handheld computers on the routes, and then work to insure DEX uniformity across the installed equipment base, he concluded.


Streamware's Butler pointed out that the majority of vendors think of DEX primarily as a tamperproof cash auditing system. "And DEX can do that; it can give you same-day cash settlement, if you want it," he said. "You can retrofit machines for DEX capability; you can use a depletable change fund and get audit data on that. DEX will tighten up your accountability."

Using projected graphics, Butler detailed the kind of reports that a DEX-compliant route can produce for the operator. Not only do these include cash accountability, but also "time stamps" for each service.

However, Butler said, the value of DEX extends far beyond its ability to protect profits between the machine and the counting-room. Item-level data collection and analysis not only can improve sales by identifying the fastest- and slowest-moving products, but also can make drivers more productive.

Adjusting a machine load plan on the basis of accurate line-item sales analysis has improved volume by as much as 15%, the speaker reported. Moreover, the ability to make accurate predictions of sales between visits on the basis of a growing historical record can enable the preparation of estimated pick lists for drivers with a high degree of accuracy. This technique can allow "pre-kitting" of merchandise for each machine right in the warehouse so drivers need not walk past the vender before returning to the truck to pull stock for it. This substantially improves route productivity.

Butler showed a sample truck report, demonstrating another benefit of accurate tracking of product movement. "This can keep your truck inventories streamlined without running out of anything," he pointed out. "There's no longer any reason to drive around with five times as much inventory as the driver needs."

In addition to guarding against losses, improving per-machine sales and making drivers more productive, DEX offers a "hidden" benefit: it can be a valuable tool for getting new business, the Streamware executive continued. Showing a prospect an electronic machine management system and explaining that one has the ability to show historical sales by item can build a very positive image of the operator as trustworthy and progressive, equipped to work intelligently with the account to maximize sales and customer satisfaction.

A long-term benefit of implementing DEX is that it is almost a precondition for adopting a number of technologies that have been gathering strength in recent years. One of these is wireless (or other remote online) data reporting. "All wireless systems will be built on item-level sales tracking and accountability, and on DEX," Butler emphasized.

Moreover, he observed, the ability of today's best DEX-based software to provide forecasts of sufficient accuracy to make prepacking feasible can provide the same benefit as remote polling. "And this will only get better with wireless, although there will be added expense," he said.

The benefit of not requiring the driver to spend valuable time determining what to bring into the location can be grasped by recognizing that NAMA member surveys have suggested that an average vending route does about $5,500 per week. With prepacking, that can be raised to $10,000, as more stops can be serviced in the same amount of time. An alternative that can be attractive is going to "truck estimate" routing, in which DEX data and management software provide the information needed to stock each route truck with a very close approximation to what the driver actually will need, stop by stop. Such organization also saves considerable time in the field, and can lift the route average to $9,000 or so, Butler added.

Another time-saver can be  wireless curbside polling, in which the machines on location report their inventories to a computer aboard the route truck as it stops at the location, and the computer prints a pick-ticket for the driver. To make use of this attractive technology, the machines must be DEX-compliant.

And, of course, any wide-area reporting or polling system will require DEX, the speaker observed. So will card-based cashless systems that must work in conjunction with cash audit systems.

For all these reasons, Butler summed up, operators today should (at the least) consider what will be involved in making the transition to full DEX compliance. The industry data standard itself, adopted from the manual retailing environment, is a serial communication protocol using ASCII (text) files. "It's not the best imaginable standard, but it can work great right now, if your software supplier is using it properly," he said.


DEX supports both cumulative and "interval" transaction recording. If the operator chooses to rely entirely on the cumulative readings, the software supporting the system must be designed to be used in this way.

Since DEX capability has been implemented (more or less) in a number of generations of vending equipment, each generally more satisfactory than the preceding one, most operators will find that their machines exhibit different levels of compliance with the full standard. The minimum  implementation is cash audit using cash meter, which requires only one data field.

Cash audit using DEX itself is more sophisticated, and requires the use of seven data fields to hold information on cash in, cash out, tube cash, box cash, bills to stacker, vend count (items sold) and cumulative vended cash. This system provides accountability to the nickel, and delivers an exact count of bills and coins put into the machine. This information is available immediately after loading the information up to a computer equipped to process it.

Because the implementation of DEX varies so widely through the population of machines manufactured over the past decade, software tools that allow quick reading of each vender's capability , a sort of debugging , can be very useful in surveying installed equipment with an eye to upgrading. Butler showed an example of a report generated by such a tool. The machine being debugged provided the box cash, bills to stacker, vend count and vended cash fields, but did not support the cash out or tube cash fields.

At present, Butler said, experience has shown that most operators have an equipment base containing between 30% and 70% of DEX-compliant machines. However, fewer than 3% of machines now are being read by DEX-equipped handheld computers or other data collection or transmission devices.

The operator who recognizes the advantages of fully automatic data collection, or who wishes to be prepared for the advent of remote data reporting and/or cashless vending, will want to make a plan for upgrading. Butler outlined some retrofitting strategies that can be applied.

One is to work with one's bottler suppliers to swap older leased equipment for newer, DEX-compliant models. Machines made before the adoption of the data standard might be near the end of their useful service lives, and the operator might consider scrapping them when the time comes to upgrade.

Not all machines need to be brought into compliance, the speaker added. Handheld computers provide a very practical alternative to DEX data uploading when selections are limited. Cold-drink machines are so easy to count that they can be handled adequately without automated sales data retrieval. If one wishes to upgrade selectively, snack machines offer the highest payoff.

And, of course, "boxes" are available from InOne Technology and MEI to retrofit older equipment. Butler reported that such a kit providing item-level sales detail costs about $150; kits that offer cash audit only cost slightly less.


The retrofit plan also should include a discussion with the operator's software/ hardware providers, before definite steps are taken. Questions to ask include how many companies today are using this system with DEX and how many of them have changed over to 100% DEX data collection. It also is important to know whether the software supports cash meter DEX accountability, or true DEX cash accountability, or both; and whether provision is made for depletable change fund auditing. "And ask whether they support item-level DEX; and, if they do, what is done with the data," the speaker recommended.

Other details to clarify include provisions for "rounding" , that is, if the driver must add 17 cans, and the cans come in 12-packs, how are the seven cans that are left over tracked? It also is valuable to record the information needed to calculate a "trigger" percentage for the number of columns that were empty when the route driver arrived. These represent lost sales. The operator also should ask about the software's ability to create pick lists and estimated pick lists, and should ask to see examples.

If the vendor is considering the purchase of handheld computers to work with the software, it is very useful to know whether the handheld in question can handle both "RS-232" and "TTL" versions of DEX (the difference is in the voltage level of the signal), and whether the hardware and the software support cumulative and/or interval "reads." It is easier to write programs that work with interval information, but this alone is not reliable, Butler said; "you want cumulative."

When the operator is satisfied about these matters, the discussion might continue by asking the supplier about rollout strategy. "A timetable that sounds unrealistic probably is," the speaker observed.

"It's also a good idea to visit that mentor, or another operator who already is using the system, and watch it in action; ride with the driver," the Streamware executive suggested.

It also is well to be sure about the available support for different machine "firmware" combinations ("firmware" is the embedded software installed by the machine manufacturer). "One size does not fit all," Butler warned. "Revisions to 'firmware' do come out from time to time."

Another question whose answer probably will become more important over time is what support is available for cashless systems through the DEX software (for example, a database field for "card cash"). Software that includes a utility, and "best practice" guidelines, for setting up planograms also is a plus; as is support for planogram templates.

Finally, when drafting plans for actual rollout of DEX, the operator should plan on updating some machine "firmware," if newer versions are available from the manufacturer. It also is important to be prepared for a bout of personnel instability. "Your good drivers will love the system, and your bad drivers will leave," Butler predicted. The ones who stay will enjoy the increase in speed and ease that DEX will give them, and they will "take ownership" in working to insure that the numbers are accurate.

In conclusion, Butler said, the advantages of cash accountability down to the nickel, warehouse and truck accountability within 1%, the sales lift afforded by swift, responsive sales analysis, the productivity improvement afforded by accurate forecasting, and the resulting improvements in inventory management make DEX a very attractive proposition.


And even more benefits await as the use of DEX becomes more and more widespread. Vendors can look forward to the advent of "just in time" inventory management, with automatic ordering (large retailers are doing this right now). The evolution of full supply chain management, all the way from consumer to producers, will lead to greater efficiency, lower cost, better products and happier customers. And operators who collect item-level data can participate in one of the subscription market analysis programs, like InfoVend, which will return detailed sales information of great value in optimizing menus and streamlining inventory.

Rounding out the program was MEI's Stewart, who recommended that operators planning to adopt DEX think of the task as applying data automation "to your business, not to your machines." The purpose of making the move, he emphasized, is "to turn information into knowledge" (after first converting data into information). Over time, this process has progressed from paper-based reporting through the adoption of computer spreadsheet programs through integrated management software to handheld computers that replace paper in the warehouse and the field. The next step is electronic data collection and retrieval, he reiterated.

Data always has been collected, transported and processed, Stewart pointed out. This could be done with paper tickets, a clipboard and a ledger. Replacing the ledger with a spreadsheet program made the process faster and, arguably, more accurate and easier to use. Replacing the spreadsheet with vending management software provided tighter control and generated more knowledge, for those who opted to use it. Replacing the clipboards with handheld computers provided the same improvement in ease and accuracy to the personnel in the warehouse and on the routes. Now, freeing drivers from the need to enter data manually by enabling them to load it up automatically from each point of sale promises greater improvements in speed, accuracy and ease, as well as more information that can be converted, profitably, into knowledge. The next step may well be wireless, although this is not certain.

The hardest part in each of these advances was the transition, Stewart reminded the audience. Operators grappling with upgrading all their equipment for uniform compliance with the industry data standard may or may not recall the difficulty with which vending companies ran manual and computer data entry systems side by side, when installing their first electronic data processing systems. And, as always, the only way to deal with these transitions is by careful planning.

He agreed with Butler that an essential starting-point is the recognition that machines differ widely in their compliance with the standard as it has been developed. "DEX is not DEX" , despite tremendous efforts to standardize, older machines differ from newer ones. There is no magic right way to deal with this; one must know what solutions are available, and how they apply to the problems that are encountered.


In thinking about the upgrade process, Stewart noted, the importance of the drivers' "buying into" the program must never be forgotten or underestimated. Presented properly, DEX will make excellent sense to honest and efficient personnel; the others will fall away, and will not be missed.

The MEI executive agreed with the previous speaker that  "testimonial help," a mentor , another operator who has made the transition , can be extremely helpful, even if just for telephone consultation. But the real key to success is planning. "Where do you want to go? How do you want to get there? When you know, you can adopt a system approach," he suggested. Machines will need to be retrofitted and tested, and changes will be required in trucks and warehouses, too. "Who will do these things? Think it through, and find people who actually have been in the field with vending machines," he urged.

It is a good idea to lay out the changeover in a series of manageable steps. The operator can start with one route, perhaps the smallest, and implement cash audit only. When the kinks have been worked out of that, product can be added; finally, the warehouse processes can be modified. As everyone becomes familiar with the new procedures, adding routes becomes easier and will be approached with greater confidence.

"And, as you go forward, use the information you get to merchandise the machines," Stewart advised.

In a question-and-answer session that followed, an audience member wanted to know when the first machines were built that can be retrofitted to capture DEX information.

Steward explained that, if the machine uses a controller at all , as most have, since about 1983 , then it can be updated to capture information automatically.

"How much does all this cost?" another operator wanted to know.

Lockett estimated that a route on which 60% or 70% of the machines are not DEX-ready will cost about $7,000 to update and retrofit. To that, the cost of the handheld computers and supporting peripherals must be added. If management software able to work with DEX data already is in place, this near-worst-case conversion  will cost about $9,300, he said. "However, most routes today will have a higher percentage of DEX-ready equipment, and the conversion cost thus may be more like $4,000 to $5,000," he pointed out. The way to know is to survey the equipment in the field.

A seminar-goer from the Navy Exchange Command urged everyone to make the transition as soon as possible. "The first time you upload that stream of information, you'