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NAMA Tech Seminar Spotlights Software

Posted On: 12/23/2008

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ST. LOUIS -- Overviews of technical developments have highlighted educational programming at National Automatic Merchandising Association Expos in recent years. At the 2008 National Expo, the spotlight was turned on the management software that receives, organizes, stores and processes information from a variety of sources, providing operators with timely, accurate and useful reports.

Moderated by Dr. Michael Kasavana, NAMA Endowed Professor at The School for Hospitality Business of Michigan State University, the technology seminar featured two consecutive panel discussions. The first panel, made up of software supplier experts, offered detailed overviews of the benefits attainable from well-chosen programs, and recommendations for obtaining those benefits by following a well-thought-out timetable. This session is covered here; we'll report on the second, which was composed of operator users, in a future issue.

The moderator led off by summarizing the emergence of standards that have made possible a wide variety of options that speed management access to audit and inventory information, and offer customers enhanced convenience, reliability and payment choices. The protocol for exchanging data between the vending machine controller and peripheral devices, from payment systems to adjacent dispensing modules ("dumb" vending machines), is Multi-Drop Bus (MDB).

The present standard for capturing, storing and transmitting audit and sales information, the Data Transfer Standard, is based on the venerable DEX (Data Exchange) protocol originally developed for direct store delivery operations. The information stored by a DEX-capable vending machine can be retrieved at the vending machine with a handheld computer, or remotely, with a modem installed in the machine and a landline or wireless transmission medium. That networking capability can be used to enable cashless transactions, and to obtain information on money collected, items sold and functional status from a distant point.

Dr. Kasavana observed that this fusion of data communications and data processing has the potential to make vending machines much more appealing to customers. In particular, he said, it holds the promise of solving the ancient vending challenges of maintaining freshness and avoiding "exact-change" conditions.

He introduced Glenn Butler, one of the original principals of Streamware (Norwood, MA), who led off by noting that a modern, fully-implemented management information system for vending, foodservice and coffee service provides, in effect, what large manufacturers call ERP (Enterprise Resource Planning), serving all departments of an organization. There are very substantial benefits, in terms of productivity, control, efficiency and profitability, to be had from making full use of the capabilities of a contemporary management information system, Butler emphasized. "But you need to devote resources and time to doing it. DEX will give you item (SKU)-level product tracking, and you may need to reengineer your warehouse and your route structure to get and to use this information to best advantage."

An obvious benefit of DEX is its extensive audit capability, Butler noted, and many operators who have implemented the standard have seen it primarily as an accountability tool. And DEX can accommodate not only traditional coin and bill validators, but also bill "recyclers" that pay back singles in change (this requires keeping track of bills paid out) -- and even cashless payments, where it can be very useful in speeding reconciliation of machine inventory to cash and noncash payments. He advised operators shopping for management software to make sure the package they choose is able to use the fields defined by DEX in which information on cashless transactions is stored. Even if one does not plan to add cashless vending in the immediate future, it is sensible to look for software that can support it comfortably when the time comes.

Automated data collection not only can bolster the bottom line by reducing or eliminating collection shrinkage, but it also can provide worthwhile cost reductions by making routes more efficient, the software veteran continued. "If you can eliminate drivers' 'walk past,' they can service more machines in the same time, with much less wasted effort," he pointed out.

Management software can make this possible in a variety of ways, Butler noted, and operators also should keep it in mind when evaluating a program. A popular method is forecasting, which when fully implemented makes use of DEX sales information at the level of the individual item to establish and refine a pattern in purchasing. This can predict just what a machine is going to need on the day it's scheduled for service, allowing the warehouse staff to pick and pack the route order, machine by machine. This enables the driver simply to pick up the appropriate containers and carry them into the building, rather than first looking at each machine to determine what it needs, and then returning to the truck to pull the stock.


Another approach involves sending the inventory information collected by the controller board to a route vehicle outside the location, Butler added. This can be done by short-range wireless data transmission, initiated by the driver pulling into the parking lot and sending an encoded signal to the machines ("curbside polling"). A mobile printer in the truck then generates a picklist, and the driver simply pulls the required stock before entering the location.

If the local-area network linking the machines to the truck is replaced by a wide-area network, machine inventories can be read at the operating company's headquarters, but with a greater lag between report and replenishment. However, this central data collection can speed and simplify forecasting, if the management software is designed to do it.

Butler noted that the increasingly accurate forecasting made possible by today's powerful computers and improved algorithms also makes it possible to implement dynamic route scheduling. This involves "just-in-time" delivery; ideally, the driver is walking up to the machine with the restock order just as a patron is purchasing the last top-seller. To approach that ideal, the machine's menu probably would require some adjustment, analyzing sales in order to allocate space with greater precision.

Because of these potential uses of wireless networking, the panelist observed, it is prudent to make sure that the provider of the software one chooses can support different kinds of wireless hardware. It also should be remembered that, in most cases, the operator will not equip every machine for wireless communication, so the software should be well-designed to accommodate information fed into it from a variety of sources. And, he added, one should ask what happens if a wireless unit fails to report.

For practical reasons, when one is adding wireless capability, the object should be to use "one network, and one 'box,'" Butler continued. One's management software must provide comprehensive support for the wireless system one plans to use.

For all these reasons, Butler summed up, the time an operator spends finding the best management software for his or her company is time well spent. Good software used effectively can boost profits by reducing costs while increasing sales and enhancing customer convenience and confidence. And it can be used as a sales tool, too, differentiating the operation from its competitors.

MEI's Cliff Fisher explained that his company sees the object as creating a strategy, answering the question "What are you looking for, and how do you plan to get there?" Thus, he said, it's helpful to look at the entire picture: "For example, 'wireless' is a buzzword. How do you look beyond that and extract the value?"

Management software really is used to manage performance, the MEI executive pointed out. In selecting it, the operator does well to start by asking, "What am I doing, and how can I do it better?" Answering the first part of this question will suggest whether tools like handheld computers, wireless remote monitoring and other hardware-software solutions can help answer the second part.

"Performance management includes activities to ensure that goals are being met consistently, effectively and efficiently," Fisher explained. "Being busy is not the same as being productive; you have to produce results."


It is possible to draw a sketch of a vending management information system by placing "warehouse" at the center, with inputs (including product ordered, cash collected and information retrieved) and outputs (product issued, change banks replenished). Today, with computer and communications technology extended into the field, the same modeling would work for "route" and, ultimately, "machine."

The point is, Fisher emphasized, that a vending operator might have to keep track of the ultimate fate of an enormous number of individual items issued from one warehouse to (say) 15 trucks and delivered by them to (perhaps) 1,400 vending machines for conversion into cash -- as well as an enormous number of coins and bills removed from each machine and returned by the trucks to the warehouse. On each cycle, the disappearance of items from the machine and coins from the changer must be reconciled with the appearance of cash collected.

With these realities in mind, it becomes easier to see what performance management entails and how well-designed software can make it more effective. "One question a manager must ask is, 'How are we doing?' Software can help measure and monitor performance, providing a scorecard," Fisher explained. "Another is, 'Why are we doing it?' Again, software can help with reporting, analyzing trends and highlighting anomalies. A third important question is, 'What should we do?' Software is a valuable tool for planning and preparing budgets and forecasts."

And today's full-featured management information systems for vending include not only the software suite that resides on the office computer or network, but also extensions on handheld computers in the warehouse and on the route. While it is a very good idea to keep those extensions in mind when shopping for software, the speaker noted, it is not necessary (and, in the majority of cases, not desirable) to try to do everything at once.

Fisher concluded by sketching in a timetable for installing, learning and fully implementing management software, based on extensive experience and observation. An operating company that's doing a satisfactory job of record-keeping and reporting might expect the core programs to be installed and learned by the people who are to use them in 90 to 120 days. That includes the conversion of an older database to the new format, when the new system is replacing an older one.

Once the new system is performing reliably with the same data inputs as the previous one (electronic or manual), the operator is ready to add handheld computers, and DEX if desired. After the sixth month is well along, everyone should be confident in the system's reliability, and ready to take the next step.

This will involve the upgrade to handheld computers and DEX and, if started on the 180th day, might be complete and proven reliable by the 270th. At this point, if one wishes to proceed farther, one can add wireless capability, with the cashless payment processing, curbside polling and/or remote machine monitoring capabilities it confers. It is well to proceed deliberately.

"You can improve your operational and financial control," the panelist summarized, "and increase productivity substantially by replacing paper route tickets with handheld computers; the savings in time can be as high as 85%.

"To get the best results, you have to plan and commit," he concluded. "You can get playback in around 12 months, but it's not easy."


Streamware's Bill Lockett picked up the thread by noting that "any machine you've bought in the past nine years is DEX-ready" and by asking, "Can anybody afford to go to a machine that doesn't need to be filled or collected? The technology to avoid that is here right now, but you have to use it."

DEX is rather intricate, and is best phased in through a well-thought-out series of steps. Lockett, whose experience dates back to the early application of DEX to improving shelf-stocking for retail beverage outlets, suggested a seven-step program for adopting it, and gaining the full benefit.

"First, control cash; then add cash-to-inventory reconciliation," he proposed. "Do this in the first one to two months." On average, it boosts profitability by 3%, or a bit more, over settlement based on manual data recording and entry.

"Second, begin tracking products at the item level, and use the information for serious planogramming," Lockett continued. "Then merchandise on the basis of the improved menu. Do this in months three and four." That, he said, generally increases profits by 8% to 9%, by increasing same-machine sales and reducing inventory expense.

 In the next phase, which might occupy months five through nine, the operator can work on upgrading route productivity by reducing the time required to service a vending machine, by curbside polling or forecasting and prekitting. This can provide another 11% improvement in profitability. Finally, if one wishes to complete the transformation, one can implement remote machine monitoring and dynamic route scheduling in months 10 to 12, for a final productivity gain in the range of 14%.

These things must be done carefully and with clear understanding of what is to be gained, and how. "For example, a good planogram only allocates about 60% of the slots in the machine; it offers a lot of flexibility to meet location tastes," Lockett noted.

He also pointed out that operators today must concentrate on increasing both the average machine collection as well as the number of machines that can be serviced on a route. "If you're not collecting at least $100 when you visit a snack machine, for example, you're doing something wrong," he instanced. That collection represents a "selldown" of just over 30%; deeper depletion can be attained by accurate sales analysis, adjustment of the load plan and preparation of planograms for drivers to follow in loading the machines.


Reliable forecasting also can be used to fine-tune service schedules and get drivers in and out of locations more quickly. As each driver can fill and collect more machines in the same time, routes can be consolidated. Lockett observed that, with wireless inventory reporting, "You can have 200-machine routes." In this connection, he pointed out that prekitting is very much like "preselling" in conventional route distribution, the sort practiced by coffee service operators: Rather than pulling needed stock from a "rolling store" truck, the driver simply delivers a prepackaged order, prepared in advance.

But it all starts with full DEX implementation. The information this provides is the key to everything from optimal product selection through absolute price control and simplified product rotation, but well-designed management software is essential.

Lockett concluded by predicting that cashless vending will drive remote machine monitoring. He explained that machines on location can be networked locally, so the data from all of them can be sent through a single "gateway."

Finally, he said, DEX has proven that it works. "Read consistency is 99%, and cash/inventory reconciliation variance is at 0.0058%. Support call resolution is 92% for the first call." It is past time for operators who have been deferring adoption of DEX to make the decision, the software veteran emphasized.

Warren Phillips of Validata led off by observing that his company is one of the two major vending software suppliers that's still independently owned and run. "And we only work with route-based companies," he added.

Over more than a quarter of a century, Validata has amassed considerable experience in assisting operators to computerize, and to modernize older computer systems.  The key to success, Phillips explained, is not to try to do everything at once. "Lay out a blueprint, and then take it one step at a time," he recommended.

To start the process, the industry veteran said, it can be helpful to imagine "building blocks," each of which contributes to the total solution. The first of these, the foundation on which the entire system is assembled, is the base software system. "That's the first tier, and the most important," the panelist emphasized. "If the management software isn't good, the rest won't matter."


Once this base software is installed, understood, working well and producing the results desired of it, one can add more blocks. The second might be handheld computers in the warehouse and on the routes to improve the speed and accuracy of data entry and input. The third, following naturally, would be the implementation of automated data retrieval from DEX-enabled machines, further reducing the time needed to obtain usable reports and enhancing accuracy. Once the base software is receiving the complete set of DEX data, the operator can start performing sales analysis, and making improvements on the basis of the results. With all those "blocks" in place, adding remote machine monitoring can provide an extra dimension of speed and responsiveness.

Full integration is essential for getting the information needed to manage effectively with speed and ease, Phillips emphasized. Again, choosing good "base" software is the necessary foundation on which special-purpose applications can be constructed.

He reported that Validata has integrated Microsoft Mappoint into its management software suite, offering operators a quick and convenient means for rationalizing the present route structure to lower operating costs. An efficient route structure, in turn, is necessary to get the greatest benefit from flexible route scheduling.

And the software suite includes a module, "Route Supervisor," which monitors route drive accountability, sales and scheduling. This permits on-demand preparation of a performance report that's very useful for "one-minute" (or one-page) management with route drivers, every day if desired.

A new feature in Validata's management software package is an order-processing module that's able to receive orders, for coffee service or vending, from a wide variety of sources: handheld computers, remote vending machines, websites and many other transmission media. This makes inventory management and stock-picking a great deal simpler, and offers a firm basis for adding capabilities over time.

The point is that installing, learning and using a management information system to get line-item sales detail  is the essential first step in taking advantage of whatever technologies best meet the company's operational needs and market conditions, Phillips concluded.

Mark Kronenberg of CompuVend began his presentation by recalling that his grandfather had started a vending business in 1926. "My father and I grew up in that business, and we began writing software for our own vending company. Other operators expressed interest, and we sold our first systems in 1982."

The third-generation industry expert  pointed out that the principal drag on vending profits today is the unprecedentedly high cost of providing route service. The remedy is to increase the sales made between each machine service, reduce the time required to service each machine, decrease the number of unnecessary stops, and make each route as short and straightforward as possible. All of these corrective steps can be taken with the help of today's vend software and associated hardware.

For the past four decades at least, operators have recognized that pilferage is a major drain on profits. To plug this drain, it's necessary to control cash and merchandise, and to track the conversion of merchandise into cash. The first management software for vending was designed to do this, using information from the field and the warehouse, entered manually. Today's management information systems bring much greater speed and power to the task.

Beyond these essential controls, the CompuVend principal continued, today's software can use the information needed to put them in place for other purposes. The ability to track products vended at the item, or SKU, level makes it quick and easy to rank the selections in a machine by popularity.

"You can find out exactly what's selling, how much is selling, and how much to buy," the speaker observed. "You also can determine when to buy it, and use that information to maximize the benefit to you of supplier incentive programs."

Line-item sales information also makes it feasible to know just what the driver needs, Kronenberg continued, and this is the key to speeding service and reducing excess inventory. Given that information, it's possible to prepack route orders, poll machines from the parking lot or follow inventory depletion by means of telemetry. "And the ability to track line-item sales accurately gives you much greater pricing flexibility," he added.

CompuVend's current management suite, VendPro, consists of a core that can support a wide variety of applications, from which the operator can choose the ones needed for his or her specific business. These include the CashMaster module for money rooms, WarehouseMaster for receiving and issuing merchandise, DEXRouteMaster, which accepts DEX data collected in (or transmitted from) the field, and Route Optimizer, a tool for analyzing and streamlining routes as often as needed.

As a general rule, Kronenberg noted, an operation can expect a good management information system to reduce overs and shorts from an industry average above 3% to well under 1%; reduce nonfood "stales" from an average higher than 4% to less than 1%; and increase average weekly route sales from around $8,000 to more than $10,000, all in the context of providing a steady stream of current information needed to assess performance and make improvements.

"Partner with an experienced company, and buy only what you need," the final panelist recommended. "Take it one step at a time."