A major challenge for any business owner is figuring out how to increase profits without increasing the current workload. A common solution is to grow revenue through expanding an operation, yet expansion can only go so far before it becomes unmanageable. A commonly used tactic is increasing prices to expand profit margin, yet the vending industry is notorious for only allowing incremental price increases before scaring prospective customers away from purchasing products. In vending there are limits to profit expansion with both of these commonly used methods, so vending operators need to seek out creative alternatives to increase profits each month.
Want to Maximize Profit? Try Minimizing Costs
Luckily, there are a variety of ways to help establish a mean & lean operation to increase revenue. Rather than stretching an operation too thin trying to expand a business, a simpler way to increase profit is to minimize unnecessary costs. Now which unnecessary cost can be cut and how will it affect day to day operations? Labor costs are a good place to start. According to the IBISWorld 2015 Industry Report, labor cost can account for 20% of total operational costs. For the average vending operation this can account for almost $60,000 per year in expenses, which almost equals the average cost spent per route per year according to Vending Market Watch’s 2015 Industry Report. A great starting point would be to enhance the efficiency of the time drivers spend servicing machines. According to Vending Market Watch, drivers spend an average of 30 mins servicing each machine with an average of 20 machines serviced in a single business day. If we were able to cut the time spent at each machine in half, drivers would only spend 15 minutes servicing a machine. This would allow for an additional 20 machines to be serviced every single work day. If more machines are serviced per day, fewer routes are needed to service the entire operation, which will also reduce the amount of drivers & trucks needed on staff. So how exactly are you able to service up to twice as many machines per day? Welcome to the world of Pre-kitting & Dynamic Routing.
Pre-kitting & Dynamic Routing are major cost-cutting vending solutions that can decrease pesky labor costs by giving drivers detailed reports. These reports help them deliver the right amount of product to the right machine at the right time.
Put Drivers in the Right Place with Dynamic Routing
How does a vending operator make sure the right products get into the right machines at the right time? Many operators utilize static routing, which puts route drivers on a pre-determined route that does not vary from week to week. With static routing, it is near impossible to see what machines are empty or need servicing without that dreaded call from an unhappy customer. Hitting a machine for servicing on a frequent, predictable basis is the best way to operate statically. However, what if there was a way to see exactly how much inventory was left in a machine before you left the warehouse? What if an operator could factor in the weather, what time or days a location is closed, or the amount of cash to collect on a route? These features construct the basis of a Dynamic Routing operation. With this information readily available through a Vending Management System, its easy to hit only the machines that needed servicing, while avoiding unnecessary stops at machines that are fully stocked or locations closed for holidays. But how exactly does a a VMS make this option available to operators?
An effective Vending Management System (VMS) uses current inventory levels as well as breakdown alerts to best determine the most cost effective route. In an easy-to-view screen, an operator has the ability to choose exactly what machines they want a driver to hit on his route based on real-time data. After selecting the desired machines to service, a VMS will actually recommend a route to take. Utilizing an easy to read Google Maps overlay, a VMS will show the most efficient route to take.
Dynamic routing can save a vending operator precious time on every route. Eventually, as more machines are serviced per route, unnecessary routes can be cut completely. Less routes means less money spent on trucks, driver salaries, wear and tear expenses, maintenance, and even insurance costs. Vending Market Watch projects that a route has an average yearly cost of $60,000. If dynamic routing leads to the consolidation of even one route, the cost-saving implications can be massive.
Efficiently Service Machines with Pre-Kitting
So drivers can get to each location more efficiently, yet is there a way to speed up the way they actually fill machines? With the commonly used static route procedure, route drivers take an initial ‘counting trip’ to each machine to see how much inventory is needed. Then, they walk back to the truck, grab the estimated needed inventory, and walk back up to the machine to fill it – 3 total trips for each machine. Pre-kitting, on the other hand, cuts this down to just one.
So what exactly is pre-kitting? Simply put, pre-kitting is the process of preparing product in totes packed specifically for each vending machine ahead of time. Instead having a driver physically visit a machine to see how much inventory to stock, a VMS monitors exact inventory levels inside a machine in real-time. Inventory levels inside every machine across an entire operation can be viewed anytime from anywhere. Simply select which machines you want a driver to service on which route, and the VMS will provide a detailed list of products each machine on the route needs. No more guessing and no more leftover products, just the right amount of inventory every time.
Just how beneficial is pre-kitting? According to Vending Market Watch, companies that utilize pre-kitting can service up to 20% more machines per route. In turn, this lets operators consolidate 1 out of every 3 routes. For a 12-route operator, this can account for almost $240,000 in savings every single year. Pre-kitting can even decrease troublesome product spoilage by 25-30%. Overall, pre-kitting can save vending operators precious time and money, all while boosting their overall profits.
Powerful Vending Solutions at Work
Vending is an increasingly precise business that requires precise information. IBISWorld projects that the average operator only takes home 4.4% of their revenue as profit. When margins are thin, guesswork isn’t the best way to run an operation. With the insights from an effective VMS like Parlevel’s, it can be easy to decrease labor costs by visiting machines faster and servicing them more efficiently. An operator can have more time on their hands, more insight into their business, and ultimately more money in their pocket.