by Abco | Dec 23, 2011 | Vending Business Show
Vending Efficiency Operating Procedures An interview with Larry Towner, vending consultant
In this podcast, Larry discusses: Vending Efficiency Operating Procedures
- Storing product
- Statistically you touch an item 5 times before it sells
- Create a plan for loading your truck so that you get a smooth flow of products
- Loading drinks vs. loading snacks
- Keeping things neat and orderly makes you more money
- Dealing with products going out of date in the warehouse
- Use vertical space to your advantage
- Eliminate confusion
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EPISODE TRANSCRIPT:
Tom: I’m Tom Shivers with the Vending Business Show here with Larry Towner who is a vending business consultant. He’s been in the vending business for a long time so thanks for being here Larry.
Larry: Thanks Tom, appreciate it.
Tom: In the last show, past couple of shows, we’ve talked about some interesting topics like marketing at the machine level and product turn. Basically, at this point, in the process, the vending operators may be selling more product. I imagine Vending Efficiency Operating Procedures is, becomes kinda important at this stage.
Larry: Yeah, it’s kinda time to start talking about Vending Efficiency Operating Procedures because now that you’ve got everybody selling product at a strong level, a couple of different problems that come up, everybody thinks oh it’s great to sell a whole lot of product, that’s great I’ll be making all this money except there’s a couple of things people don’t realize when they get out to selling a lot of product that, kinda like where do you keep it? And how do you move it? And a few things like that and so one of the things that we’ll start with, and there’s a series of shows that’ll go on talking about operations and efficiency and things like that, but one of the things that or where we’ll start is basically in your warehouse operation. And Tom, where do you think most people start in the vending business if they have a start a vending company? Do you they start with the-
Tom: Probably in the garage.
Larry: Yeah, probably in the garage is right. Or maybe just out of the truck and they use Sam’s club or one of the other warehouse clubs as their warehouse and that’s actually a great way to start but eventually you’ll get to the size where you need to start storing up a little product and usually everybody tends to move to their garage.
Larry: A couple of things about your garage. First off is, if you are married or you have a significant other or whatever, they general don’t like their garage full of snack food and drinks and things like that so it can lead to some tense moments in the family life and one has to just be aware that that might happen. But when you set your warehouse up and it really doesn’t matter how big your warehouse is, but you wanna have your, kind of your mind on efficiency and how do you move product easily.
Larry: One thing that we’ve done through statistics and things like that is that we’ve found that when we take products and from the time we receive a product to the time a product goes into the customer’s hands, we have actually handled it five times. And that’s an awful lot of moving of product if you think about it. If you’re gonna do some significant volume, if you say move a 100,000 items a year, you’ll have touched those items 500,000 times a year because you’ll have touched them five times.
Larry: So if you can remove one of those steps out of there, that’s say 400,000 times that you touch everything instead of 500 and that will lead to more profitability down the road. When you go in to laying your warehouse out, and this can be as simple as your garage, or it can be as complex as a very large drive in warehouse where you’re gonna be loading multiple trucks at any given time, you kinda wanna have a plan as to how you load your truck and subsequently your combines with your truck. Which your truck then should combine with your machines so that everything has a very smooth flow to it and that keeps you from having handle things too many times.
Larry: So I always say first off, in the vending business we have two basic types of products. We have drink products and we have snack products and those two things. What’s the difference between those two, Tom?
Tom: One is liquid and the other one’s not.
Larry: That’s correct. And the difference is, tell me a little bit about the weight of each of those items.
Tom: Well the drink’s gonna weigh more than the snack.
Larry: Absolutely. And the drinks are much, much, probably 400 times heavier, I don’t know the exact number but it’s quite a bit so when we go to lay out a warehouse, we always try to set. For me anyway, I always try to set drinks where they’re essentially at truck level when I bring ’em in. I try to set my warehouses up where I can back the bumper of the truck up to ground level and we can move things into the truck without having to lift them up and you’ll understand that if you get into the vending business and you go to load a hundred cases of drinks every day and you have to load ’em up three feet into your truck every day versus just rolling ’em straight across the dock plate or something like that.
Larry: Now that’s tough to do when you’re in your garage but you can set up a ramp system and you can make a kind of removable thing where you can actually roll your drinks up on a hand truck, into your truck, from the ground. And these are little things, but at the end of a long day, when you go to load your truck or the beginning of a long day, just depending on how you set up your particular route, these little things make a big difference as to how tired you are and how much extra work you can actually do.
Larry: We always set our drinks on the ground. We generally try to put them on pallets because what my goal was is, that even in a garage type situation, I put it on a pallet, I invested the money in a pallet jack because if I took my drinks, I could actually take a whole pallet and pull it right over to the back of the truck and load from the pallet into the truck. It makes it much, much easier, must faster, and then you can roll the pallet back and put it back where it goes because keeping things neat and orderly is what’s gonna help you make extra money.
Larry: If you go into a UPS warehouse or something like that, you’ll find a huge automated system that keeps things tracked and itemized and inventoried and in the vending business, Tom, what’s one thing about vending products that you know that’s critical in a vending product, they all have something printed on them, what’s that that’s printed on every vending product?
Tom: The date. Or UPC code.
Larry: There’s an expiration date. Yes. And the basic problem with expiration dates is, is that when that expiration date arrives, you need to throw that product away or eat it either way but it’s no longer sellable as of the expiration date. And one of the things that always, always, always when I ran my businesses or I run my businesses I should say that absolutely infuriates me is to have product go out of date sitting in the warehouse and believe it or not, it happens in every company and it happens because people try to cut corners so you have to have a flow system where the old date product, the longest purchase to go gets put on the truck first and this is done by good organization, making sure you can see all of your product, don’t have any place where product can fall down behind other product or get hidden by other boxes and when you go and you purchase product, make sure you move the old inventory up and push the new inventory to the back. Sounds simple but you’d be amazed how much it doesn’t happen.
Larry: And one other thing when we go to lay out a warehouse and particularly in a garage type situation, you really wanna make sure you use vertical space. And when I say that invest in some shelving or build some shelving, either way, it doesn’t really matter but get some shelving. You can good, inexpensive shelving. Pallet racks work really well. They’re very, very inexpensive and you can stack your products up vertically. Drinks always go on the ground ’cause they’re heavy and you really don’t wanna be lifting drinks but your snack products can go all the way to the ceiling ’cause they just don’t weigh anything. A box of chips only weighs, I don’t know not even a pound and anybody can pick up a box of chips, including women.
Larry: So that’s just some little tips. The organization of it is, is that when you go from your warehouse into your truck, you wanna have a flow. You wanna have everything in the same place and we always organized our warehouse the same way we organized our trucks, which in turn, was dependent on how our planograms were set up in the machines, meaning, as we talked about in the last show when we were marketing at the machine level, we had certain things in certain places. We then took, we worked our way backward from the machine level to the truck. When you walked into one of our trucks on the shelves, it looked just like the machine. The top shelf stuff was on the top shelf. The middle shelf and so forth and so on down the shelf so when you walked up to that machine and you wrote down you needed six of this and six of that and six of this and six of that, you went into that truck and the truck was exactly the same way, where the top shelf had all those products and the middle shelf.
Larry: And then, at the end of the day, or the beginning of the day depending on when you load, you go into the warehouse, everything is in the same place there as well so you’re never confused because you put something in the wrong place. Does that make sense?
Tom: That’s great stuff, Larry. Thanks for sharing. Tell us a little about your consulting business.
Larry: Well, we do consulting. We give these kinds of tips and more out to the various people that are particularly start up companies or companies looking to the make step in vending that are looking to move up and do more in the vending business but startups are really who need the most help. We can be reached at [email protected] and just drop us an email and we’ll see if we can get together and possibly help you out.
Tom: You’ve been listening to Vending Efficiency operating Procedures at the Vending Business Show, a publication of A & M Equipment Sales. More Videos to look at FDA Requirements for Vending Machines: What You Need to Know
by Abco | Dec 16, 2011 | Vending Business Show
AN INTERVIEW WITH LARRY TOWNER, VENDING CONSULTANT.
Larry is a veteran vending operator who has had success in all areas of the vending business and in choosing a vending machine product. Listen to learn why it’s important to have the proper selection of products in a vending machine:
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Know the number of times a product turns in a year
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Know the difference between large and small profits
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Most vendors shoot to turn once every 2 months
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You want inventory to turn as fast as possible
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The key to profits is product selection
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Rotate products thru a cycle (the steak flavored potato chip)
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How to maximize product turn
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The McDonald’s McRib sandwich
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When users know what’s there all the time they tend to ignore the machine
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What’s new this week?
EPISODE TRANSCRIPT:
A VENDING MACHINE PRODUCT TURN CONVERSATION
Tom Shivers: I’m Tom Shivers with the Vending Business Show, here with Larry Towner, who is a vending business consultant. He’s been in the vending business for many years, and not too long ago sold the majority share of his vending business. Thanks for being here, Larry.
Larry Towner: Thanks, Tom.
Tom Shivers: In the last show, we talked about marketing at the machine level, and you pointed out a lot of interesting things. For example, which products sell best, product placement, presentation, setting the machine up, and then … a lot of other things that come into play there as well. Even another one was making the machine look fresh.
Tom Shivers: Why is it important to have proper selection of products in a machine>
Larry Towner: Ah, the magic question, why do you want the right products in the machine? Well, the basis of machine level marketing, or planograms, or whatever you want to call them, planograms is actually the picture of how your machine looks and where everything is placed, gets into a couple of different things, but the biggest issue there is to essentially give the people what they want, which in turn is going to give you what we call product turn. Product turn is the number of times that you sell a given product in a week, month, year, day, whatever it happens to be, but generally, it’s referred to as the number of times that a product turns in a year, and most businesses look at turn as being critical. Turn can be the difference between making large profits and making small profits.
Larry Towner: The key to machine level marketing is to make sure that you put the right products in there so that you can get enough turn to justify having the product in there, and when we say turn, what we mean is that if you sell a product … Just for example, if you sell one product, and you sell six columns of it, say, six full columns or 12 selections each, whatever, however you want to look at it, let’s just say you sell six versus selling 12, if your margin is the same, of course, you’re going to make more money selling 12 versus selling six, and that’s what we consider to be turn.
Larry Towner: Most people consider turn to be how fast you turn your entire inventory, and most vendors shoot to turn their entire inventory in, I’d say a figure of about six times a year, or once every two months. If you look at your dating on your products and things, that’s really where those figures come from. The figures come from the fact that most of our products have about a two month date one them, roughly, if you look at potato chips. Pastries, of course, are a little shorter, and any fresh food you do, of course, would be much shorter.
Larry Towner: But that gets to be the critical issue, is that you want your inventory to turn because you make more money when the product turns, or sells, basically. If you can turn your entire machine … If you take, and you take a 40 select machine, and you turn the entire inventory over six times a year, if you can make it turn seven times a year, that’s like adding another two month cycle into your year, so that’s like having your year be 14 months instead of being 12 months, and that can be significant money. The key to product selection and marketing at the machine level are giving your customers what they want, when it’s all essentially the same thing, that’s where it becomes critical, because to get the extra profit out of it, it adds up to some very, very serious money.
Larry Towner: At one time, I did a little study. I said, “If I can get each of my machines to turn one column more per week, that I would average,” on average it was something like, “an extra $5,000 a week in income,” and that’s significant in a small business. It’s significant in a large business. If you can get one more turn, you get an extra $5,000. So that’s why turn is so critical.
Larry Towner: Kind of interesting, isn’t it, Tom?
Tom Shivers: It is, it’s fascinating. It’s like you’re optimizing the whole business around the products that are selling in the machines that you have, though it sounds like you really have to experiment, perhaps, to find out which products turn the fastest or the best.
Larry Towner: Yeah, you actually, you do, you know? You want to try new products. New products always sell well. They always tend to turn pretty well, but the question is, do they have longevity? What eventually you’ll learn is, you learn at each given account what really sells, and what kind of cycles you can rotate things through.
Larry Towner: We rotate our products, or we always rotated our products through kind of in a cycle, and when I say that, I mean, we would give a product … I don’t know if I have a hard example, but an optional chip, we call them optional chips. It might be, say, a steak-flavored potato chip, and we would run those about every three to four months, just for example. We would find that when we would put them in, they would get snapped up and purchased very, very quickly. What we would do is we would watch to … at a point where they started to slow down a little bit, then we would take them out, and we wouldn’t run them for another four months.
Larry Towner: The best example I can give you of that kind of thing is McDonald’s, and I say it because right now, as we sit here, I know that McDonald’s has their infamous McRib back out in the stores, but they don’t run the McRib all year long. They only run it every so often, and when they do, they tend to get pretty good sales out of it, and so that’s a different kind of example, but it’s the same example. We always try to do the same thing with some of our optional chips.
Larry Towner: You’ll find that some of your chips will sell all the time, and when you get those chips, you leave those in, and they sell consistently, day in and day out, but your other chips, candy bars, it doesn’t matter. It all has its cycle, and you can cycle it through, and that gives you maximum turns, and so that’s how you get maximum turns.
Larry Towner: If you go … I’ll give you another example. Tom, have you ever had vending in any of the businesses you’ve ever worked in through the years?
Tom Shivers: Sure.
Larry Towner: When you walked up to the machine, and it was the same stuff in there that you saw for the past two months, were you real excited about buying any of it?
Tom Shivers: No. I mean, you know what’s there, so you just kind of ignore it, I guess.
Larry Towner: Yeah, you kind of ignore it. See, that’s … When you get at machine level marketing, that’s what we always try to not have happen, because we realize that … The difference is, see, a vendor goes to the machines, let’s just say, he goes once a week, or even if he goes on a daily basis, as a vendor, if you go to the machines, and the machines look stale and boring, and when I say stale and boring, it’s like, “The same stuff, the same blah, blah, blah,” it’s time to change the machine. Just change how it looks. Move stuff around, maybe add some new product.
Larry Towner: That way, what happens is, is people go to the vending machine. My goal, anyway, was always to have people go to the vending machine and say, “Hey, what’s new here today?” Or, “What’s new this week?” Pretty much every single time … We did the majority of weekly accounts, so every time we went, every week we went, we would try to add something new and take something out, so that the machine always had something different in it that people could look at and try.
Larry Towner: I’ve been in and worked in too many places in the past where nothing ever changed, and you just kind of got to the point where you’re like, “Yeah, whatever.” And so, that’s what our goal is, is to maximize turns, is to keep rotating things around and changing things up.
Tom Shivers: Yeah, it makes a lot of sense. I mean, you definitely want it fresh, like you said, and kind of like you were talking about the McDonald’s McRib sandwich is kind of a scarcity play, because you never know when it’s going to be there and how long it’s going to be, and then when it’s gone, it’s gone for a while.
Larry Towner: For a while, right. But they do tend to cycle it and bring it back, so you know it’ll come back sometime, and they sell it and that, and we do kind of the same thing, because we have, essentially, 40 selections or so, 32 to 40 selections, most of our machines are 32 to 40 selections, and drink machines run anywhere from five to 10, but even with the drinks, we tended to rotate drinks around a little bit. We’d always add a couple of optional flavors in that were … and I say optional in that pretty much our planograms had Coke, Diet Coke, Mountain Dew, Dr. Pepper, Pepsi, and then usually another … we would have flavors and things like that, but we would rotate the flavors around too.
Larry Towner: We’d run orange for a while, then we’d run grape, and then we’d run … Warm months we’d run tea, and then we’d run non-carbonated stuff in the summer, maybe chocolate drinks like Yoo-hoo or something like that in the wintertime. That way, you always had something that’s fresh and new also, even in the drink machines, because while people want what they want, they also do like to try new things, so that’s kind of the concept of turn, and that’s the way that you, or it’s the way that I’ve found that maximizes turn really well.
Larry Towner: That’s why we do it, and we do it … If you take and run the numbers sometimes, you’ll see it can add up to significant in money.
Tom Shivers: Yeah. Well, thanks for sharing, Larry. Tell us about your consulting business.
Larry Towner: Well, what we do is we do consulting. We give you tips like this and a whole lot more, just depending on wherever you’re at with your vending business. We work mostly with startups, or people that have been in business and are looking to get bigger, and/or are struggling with their business, trying to figure out what are they doing, how are they doing it, and how can they become more efficient?
Larry Towner: Efficiency is something that’s absolutely critical in the vending business. It’s probably a topic we need to talk about for another show, but efficiency comes out to how you make the decisions on which product to buy, and how you actually operate your business, how do you walk into the business and do your job when you actually get accounts? How do you, right down to the nuts and bolts … If we can save you minutes, we could save you dollars, so that’s what we do. We do analysis and we can help you with sales and marketing. We can help you with all kinds of things, all aspects of the vending business.
Tom Shivers: All right. You’ve been listening to the Vending Business Show, a production of A&M Equipment Sales.
