Introduction To Decentralisation
With the advent of globalization, international business has undergone a revolutionary transformation because now not only finished goods can be traded, but the supply chains for those finished goods themselves can be decentralized. This fragmentation of the supply chain has, industry-agnostically, led to the realization of better profits and more efficient product delivery. In this article, we discuss how decentralisation vending machine can mark an inflection point for the vending machine industry too. But let us first exemplify how this trend has pervaded, and brought significant results, in other industries.
The iPhone Case Study of Decentralisation
Have you ever wondered how Apple manufactures those coveted iPhones and other devices in its product line? Despite what the packaging boxes tell you by mentioning that they are “Designed by Apple in California”, these iPhones are not necessarily “manufactured” in the United States.
Like most mobile phones, an iPhone consists of innumerable components, most of which are actually manufactured around the world. Sourced from nearly 200 companies, all these components are manufactured by producers who are specialised in that niche area, e.g. camera is manufactured by Qualcomm and Sony with Japan being a primary manufacturing location, accelerometer is supplied by Bosch Sensortech from Germany, etc.
Being a US-based company, one would assume that the assembling process of these individual components will at least be carried out by Apple in its multiple locations around the United States. But Apple has even outsourced the assembly to companies like Foxconn and Pegatron.
Both these companies are based out of Taiwan but have manufacturing and assembly facilities in some of the most competitive economies of the world like South Korea, Malaysia, Thailand, the Czech Republic, etc., to take advantage of the cheap labor and economies of scale. The assembled products are then shipped the world over from these facilities.
What makes the iPhone (and by corollary, other Apple products) stand out is the fact that all the individual components are manufactured by specialised companies and all these individual specialised parts work in tandem to deliver a product that matches and, at times, even surpasses the customer’s expectations from a mobile phone, providing a product that is optimized for best performance.
One can be mistaken that this trend of decentralisation in manufacturing and supply is only limited to US-based companies. But even the World Trade Organisation accepts the principle of “comparative advantage” as one where countries can concentrate on producing the goods and services that yield maximum utilization of a country’s inherent assets, and then trade these products for the products that the other countries produce the best deploying their indigenous assets. This allows each country to produce goods and services at the cheapest rate possible and getting goods and services in return at the lowest possible prices, which would not have been possible had the country tried to produce all the products itself for domestic consumption.
Scope of Decentralisation in the Vending Machine Business
The above narrative affirms that the decentralisation vending machine trend is here to stay across all industry verticals, globally and nationally. As we have seen, being a “jack of all trades” renders significant advantages in terms of leveraging industry expertise in niche areas while retaining control over the overall production and supply chains. Being an industry that requires a considerable capital requirement in the initial stages, the vending machine industry can capitalize on this strategy to cut costs and achieve break-even or even profitability quicker.
The basic component of the vending business is, unwittingly, the vending machine itself. Like the manufacturing of iPhones, the individual hardware and software modules of a vending machine can be procured from niche manufacturers and assembled into a fully functional and “smart” vending machine. The outer +body can be sourced from metal unit manufacturers. The screen for a better graphical user interface and resolution can be procured from a specialised screen manufacturer, for a satisfying interaction experience to the customer.
Similarly, the Vending Machine Controller (VMC) board which controls all the peripherals of vending machines such as motors, lighting, temperature control, coin and cash collection, etc. within the vending machine can be purchased from a microcontroller fabricator. All these decentralised hardware and software components can, in this way, interact with one another to yield a vending machine that meets high quality standards while also bestowing considerable cost benefits to the vending machine manufacturing company.
Now, if we delve further deeper into the value chain of a vending machine business, we find that there are individual components available in a compartmentalised fashion all along the chain. Firstly, the basic capital required for a vending machine business is the installation of vending machines. Now instead of buying these machines and then scouting for strategic locations to deploy them, a vending machine operator can choose to rent the vending machines. And these machines can even be the ones already installed at strategic and revenue-generating locations. The operator would only need to buy the franchise rights for operating these machines and would be able to earn a sizeable profit.
The second component in the value chain of a vending machine business would be the filling and restocking of the products in the machine, depending on the customer footfall and preferences for that particular location. While deciding the type and quantity of products to stock a machine with, is completely dependent on the business acumen and sales prediction by the operator, some insights into the real time shopping experience and customer profiles from that location may aid s
However, the stocking of products in the vending machine can very easily be outsourced to niche companies in the delivery domain, who already have the network, vehicles, skilled personnel and resources to carry out this task meticulously. Delivery startups like Zypp Electric, Dunzo and Delhivery are already being used by food technology and e-commerce companies for last mile delivery. Their expertise and speed can be well leveraged by the vending machine operator to pick up products from the warehouse and place it in the vending machines, thus obviating the need to employ permanent staff for this task.
The next and perhaps the most important component for this business in the value chain is the acceptance of payments from the users for the products and then collecting the money from the vending machine. Since this also requires dedicated personnel, and collecting and depositing the cash can be a hassle, more and more vending operators are now opting for solely digital payments for their vending machines.
With the fintech boom being experienced in India, providing only cashless transactions no longer means losing out on customers. In fact, it only lowers customer acquisition costs and increases their satisfaction, encouraging impulse purchases by the customers who otherwise would require having the exact change to buy a particular product. Here, the fintech solutions already available in the market like digital wallets, UPI, card transactions, etc. can be integrated into the software of smart vending machines through the incorporation of payment gateways, thereby reducing cash management costs for the vending machine operator to zero!
Need for Technology Aggregator for these Decentralised Operations
All these individual components of a supply chain, when decentralized, offer enormous advantages to the vending machine operator in terms of reducing both overhead and operating expenses, which translates to more profitability for their venture. However, one discernible problem that can be experienced by the vending machine operator with increasing decentralization of operations is the difficulty in keeping track of all individual components and ensuring that they are working in conjunction to ensure smooth and optimal results.
It is here that the availability of a technology platform that works as an aggregator of these decentralized operations and components provides immense benefits, not just to the vending machine operator but also to the provider of these decentralized products and services.
Using such a one-stop solution, the vending machine operator can monitor and ensure the timely delivery of services, maintenance schedules, inventory management and, most importantly, tweaking product offerings based on customer insights gathered through real-time sharing of data coming from carrying out these operations.
The product and service providers, on the other hand, can benefit from automatic notifications generated by the platform whenever a prompt action is needed to be undertaken, e.g. if a vending machine runs out of a particular product quickly, the delivery partner has to ensure, based on the instructions received from the vending machine operator, that more quantities of the product need to be delivered during the next restocking exercise.
Vendify provides an IoT SaaS based solution and a single-point dashboard to enable the clustering of all the individual decentralized operations of the supply chain of a vending machine business on one platform. Along with reducing the need for manual oversight of operations, such a solution also enables higher operational efficiencies, often to the tune of 30% using cloud-based inventory and logistics management.
An automatic alerting system in case of scheduled or untimely maintenance requirements aids in predicting and consequently, nipping in the bud any disruptions that may arise in providing services to the customer which may prove detrimental for their purchasing satisfaction. Our ERP model automates and aggregates the entire supply chain of the vending machine business and even goes a step further by recommending product selection, refill plans and logistical routes based on sophisticated AI algorithms.
Providing a truly decentralized solution, Vendify’s hardware and software offerings can be incorporated into any legacy or contemporary vending machine, making it “smart”. The solution, thus, eliminates the need for spending time on trivial and routine things, and ensures that the vending business owners focus on their core competencies, keeping growth as their primary objective while handling operations. Drop us an email at sales@vendify.in to know more about how Vendify can help you achieve your desired vending business trajectory.
Brilliant