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Issue Date: Vol. 41, No. 2 / February 25, 2001 -March 24, 2001, Posted On: 2/25/2001

In Control

Tim Sanford

It is widely known that the retailing revolution which continues to challenge traditional outlets, especially smaller ones, was the result of linking scanners on checkout lines with a central computer database. This allowed the innovators to obtain line-item sales information, every day (or more frequently, if they wished), from every store. Those reports, structured to highlight the slowest-moving items, permitted unprecedented control of inventory and reordering. They also made it easy to drop lines with marginal consumer appeal, to make room for items that would sell through more rapidly.

A key to the successful implementation of this method was the identification of "categories" comprising all the items the retailer sells. This organization of line items obviously is necessary. A pharmacy will sell more toothpaste than toothbrushes, and more blades than razors; but it must carry both. The trick is to stock more items within each category that are popular with consumers, and fewer items that aren't.

For the past several years, the vending industry has been perfecting the technology that offers operators the same sort of information and control. It is possible today to equip route drivers with handheld computers that will prompt them through the restocking of each machine, record the items they replace, and upload that information at the end of the day. The office computer then can prepare sales reports providing the same sort of line-item sales data that is enjoyed by club stores and supermarkets.

The role of product categories in a snack machine is, perhaps, not as evident as in our example above, but everyone who ever has looked for a chocolate bar in a vending machine, and not found one, knows that it is crucial to customer satisfaction. A great deal of work has been done in classifying the various sorts of candy and snacks available to operators, and in defining categories that should be present in each machine in order to satisfy the diverse tastes of vending patrons. Less popular categories will command fewer slots, but they must be represented, or sales will be lost - and customers will be dissatisfied.

The organization of sales data often takes the form of a "planogram." The difficulty with this term is that it is applied to different things, which can cause confusion in talking about it. Many very astute and progressive operators say that they don't use "planograms." The kind of "planogram" they don't use is a standard map of the snack machine, with every slot assigned an item by someone in the front office. They regard this, quite rightly, as excessively rigid, making it impossible to satisfy the very different clienteles of (say) a foundry and an insurance data processing center.

Equally progressive and astute operators who report using "planograms" use something quite different from a one-size-fits-all map. They identify a core of leading brands, within each category, that will sell rapidly in any location. They adjust the amount of space in the machine assigned to each category to reflect the clientele it serves, and they make sure that the items surrounding the "core" brands vary to meet specific location preferences, and to insure the kind of product rotation that maintains customer interest. They either rely on their drivers to choose those variable items, or use service-by-service sales analysis to pinpoint unproductive selections, then change the "planogram" accordingly.

At one end of the spectrum, then, is a "planogram" that is too rigid to reflect the present diversity of patron preferences. At the other is a "planogram" that's different for every machine, which many vendors would regard as unworkable anarchy.

It would have been, ten years ago. However, today's data collection and analysis tools make it possible, if due attention is paid to categories. The objective is to reduce the number of slow-moving items in the warehouse to an irreducible minimum. If a certain number of patrons ask for items that fall within a minor category, it usually is possible to satisfy all of them with one strong brand within that category. And, of course, it always will be necessary to provide a highly unusual item that the location decision-maker really likes. The old strategy of periodically buying a case of the product and simply presenting it to him or her remains workable.

It might be argued that a "planogram" that is different for each machine is not a "planogram" at all. But it does not matter what it's called. The object is to know exactly what is in every machine, to know its velocity, and to adjust menus whenever necessary, in order to maximize sales.

Topic: Editorial: Vending

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