Inventory management can be a challenge in many industries, but vending machine operators face unique obstacles such as trying to keep track of how many bags of chips, candy bars, and cans of soda they've sold and how often to replenish machines. Because sales can vary widely from location to location, route drivers typically follow a static schedule and base the inventory they carry on past sales. "You wind up overservicing the machines that way," says John Sowell, owner and founder of North County Vending Services (NCV). According to Sowell, drivers often wind up visiting machines that don't need to be serviced at all, and they frequently carry too much inventory in their trucks — or the wrong mix of inventory. NCV operates 16,000 vending machines through 10 branch offices in Arizona, California, Colorado, Nevada, Oregon, Washington, and Utah. Several years ago, Sowell began looking for a way to reduce his labor costs and initially toyed with the idea of applying a six-day rotation schedule to his routes in order to reduce the number of drivers he needed. But, with different drivers servicing the machines each day, that system would have created cash and product accountability issues.
Telemetry Provides Real-Time Service Information
What Sowell really wanted was a way for the machines to automatically report inventory and sales information to his back end vending management system, so that he could intelligently route his drivers. "What if I could devise a system that would take me to the machine 5 minutes before the last Snickers bar drops?" he says. "The driver has a certain number of machines he services on a weekly basis, and there is an inefficiency built into that." The answer, he decided, was telemetry, and Sowell began working with a solutions provider in the Phoenix area, as well as California startup, Cantaloupe Systems. Sowell first heard about Cantaloupe because cofounder and CEO Mandeep Arora's parents owned Vend Mart, a vending machine supplier that Sowell knew well. At the time, Arora and his business partner, Anant Agrawal, were still building the solution. Although he was initially skeptical, Sowell gave the young developers a chance. "They said they'd build this thing to my specifications," says Sowell. "I let them know that someone in Phoenix was working on this for me as well, and whoever could get me there first was whom I would go with."
Cantaloupe eventually delivered what Sowell wanted — the Seed platform, a wireless system that would allow him to perform dynamic routing. Seed consists of a wireless module that plugs into the DEX (direct exchange) and MDB (Microsoft database) communication systems in the vending machines. The system locally processes sales and machine information and transfers it to Cantaloupe's servers, then uses vending-based data mining algorithms to generate optimal delivery schedules and inventory pick lists based on the cash in the machine, inventory levels, and geographic data. It can also send alerts if a machine needs maintenance. Initially, Cantaloupe's system did not integrate with any back end vending management systems. Since then, the company's SeedSync tool has allowed it to integrate with NCV's EASITRAX vending management system from Mars Electronics (MEI). Cantaloupe selected the general packet radio service (GPRS)-based MC56 wireless device from Cinterion Wireless Modules (formerly Siemens Wireless Modules) for the Seed solution because of its competitive pricing, short lead times, and the ease of integration with the Seed technology.
Dynamic Routing Reduces Cost, Labor
Sowell first deployed the solution in San Francisco and was able to reduce the number of drivers servicing those routes from 12 to 6. NCV also increased its fills per machine visit by 75% while reducing the number of trucks needed at the branch by more than 1/3. During the initial deployment, NCV increased average weekly route revenue from $9,357 to $14,971, increased fuel efficiency by four miles per gallon through elimination of excess inventory, and reduced product shrink and damage by prekitting the correct inventory for each machine in advance. In addition, the prekitting functionality allowed NCV to reduce the size of the trucks needed to service the routes. The company also reduced machine downtime through proactive service. "If a machine is out of order, we are notified immediately," says Sowell. "One of our selling points is that we will know the machine is out of order before the customer does."
The biggest challenge, Sowell says, was changing the mind-set of the route personnel as NCV moved from static to dynamic routing. "All of a sudden, the drivers are going to different customers, and they don't know where they're going tomorrow," he says. "We've found we need to have people working for us who like change in their jobs. The pay is better, because we share the savings with the route personnel, but the job has changed a lot."
The system is now fully deployed in San Francisco, and once the company's Los Angeles installation is completed, Sowell intends to roll it out across the entire company.