Part 4. Remote monitoring of coffee machines
Dmitry Petrov: It’s not the first time I hear from you about the remote monitoring of coffee machines — what’s that?
Artem Astafurov: Remote monitoring and control system is designed to bring together in a single control network an unlimited number of coffee machines installed on your chain of filling stations, regardless of their location. The main functions of this system will be the remote control of the settings, on-line monitoring of technical condition, collection of statistical data, as well as the exclusion of the risks of abuse and / or unskilled actions by gas stations’ personnel and service engineers.
In addition, the remote monitoring system allows timely identification and prevention of attempts to change coffee machines or data-sensors settings. If you try make any unauthorized changes, the system automatically restores the specified configuration parameters, and in case of disconnection of hardware and software module, it will immediately report violations in accordance with information algorithm (sending notification in an agreed format — in the form of SMS or e-mail to the list of responsible recipients).
Dmitry Petrov: I.e. instead of choosing the «best» of beans, you are suggesting installing yet another IT-solution?
Alexander Kuzmin: Whether we like it or not, but the art of coffee making in the context of the gas station businesses has transformed into art of automation. Understanding and most importantly, adopting to this new postulate will allow hundreds of your colleagues not only to avoid waste of time and resources, but also to make gas stations chain to generate hundreds of millions of rubles of additional profit.
Dmitry Petrov: Hundreds of millions of profit? Alexander, you throw huge numbers, wanting to impress me?
Alexander Kuzmin: OK, let’s do some first grade counting: uou said that the average level of sales of coffee at the gas station of the Russian Federation — 40 cups a day per station. I guarantee that you achieve target of 100 cups a day in one year after the «right» reforms. Suppose your chain has 100 stations which sell coffee, that is, 100 of sales outlets. With every cup you have sold your guaranteed profit is 60 rubles. Multiply 60 cups (sales growth) by 60 rubles (revenue per cup), then by 30 days and 12 months – and you will get profit growth of 1.296 million rubles, from just one gas station in one year. And you have 100 of them? Therefore, the total increase in income will be 129.6 million rubles a year.
Dmitry Petrov: That’s tempting. Why it has not yet been implemented, what’s the catch?
Alexander Kuzmin: There is no catch. A few years ago, in an interview with our trade publication, I spotted the main problem of the backlog of non-fuel businesses of local gas station chains from their western competitors. It is the lack of the required qualifications of managers as well as the lack of suppliers capable of initiating the changes required by the moment.
Regarding the situation of the massive use of remote monitoring coffee machines, this sad pattern works 100%. Russian suppliers of coffee for HoReCa sector are not able to offer gas stations networks any complex IT-solutions and chains’ managers do not have competence for self-development and implementation of such innovation.
In addition, the operating characteristics of coffee machines at gas stations require the use of two-way exchange of information, of which there is only widely available solution – American BMS Coffee Control. Simple data scanning and transferring it from the machine are not technically challenging – it’s a service offered by many IT-companies. Again, if you do not want to throw money away, you have to organize a two-way exchange of information between the service center and a coffee machine, which is able to provide only by a few IT-solutions.
Dmitry Petrov: How can I check what type of IT-solutions is offered by my counterparty — a two-way or one-way exchange of information?
Alexander Kuzmin: Simple. Set the task to the one who offers you remote monitoring of coffee machines to create a projection of the service screen of your coffee machine on any mobile device and work with the screen of the device (picture 1), and then ask them to implement similar functionality to the platform of any accounting system, even if it’s 1C (photo 2 ). If the counterparty cope with the task, then you are really offered with two-way monitoring system, if the task is not implemented — that means it is one-way monitoring and your money will be wasted. That this task is not complicated: a year ago, we used it as a qualification test for IT-professionals who want to work in our team.
Ksenia Van de Kamp: I agree with Alexander. The personnel problem is one of the key ones, and not only in Russia but also worldwide.
Coffee is a component of the whole caf? direction and a key element of non-fuel business at gas stations, centralization and automation – are the base for standardization of caf? quality across the whole chain. The management of all these components requires the experts well versed in the whole complex of problems.
I would be more categorical in examples — if you are inviting any «Natasha» from the Volga village or «Bill» from the fields of Texas for the post of the head of caf? direction, it is likely that the first one will be a good specialist in operating a wood-burning oven and cooking meals of Russian cuisine, and the second – the same in the use of gas grill for cooking steaks, but issues relating to the choice of the «right» blend of coffee and coffee machines settings will not be available to their understanding.
You need professionals dealing with technological issues of fastfood, a market that is just beginning to take shape in Russia. And like all things new, the idea with great difficulty make its path through the existing barriers of stereotypes, stumbling over the mentality at the subconscious level which gives to «housewives» the right «to govern the state», and knowingly provide the right to control the caf? business to would-be managers who do not have the right knowledge and experience. And, more importantly, often not willing to change, to grow, to learn — not from their own mistakes or from mistakes of others.
Instead they know how to write coherent reports about strategic victories and impracticable plans for the next decade. Unfortunately, Russia’s ignorance is not only militant and aggressive, but also extremely resistant to criticism. The difference between the Western and Russian business is that after constructive criticism «Bill from Texas» will either resign or will be dismissed at the initiative of company’s leadership, and «expert» in the Russian company will for years defend its «dense» point of view, And his immediate supervisors for fear of disclosure of their own incompetence in this matter, will defend his subordinate in the eyes of their superiors, in this case, while advocating for the same meaningless tasting competitions and rejecting the apparent effectiveness of IT-solutions such as remote monitoring of coffee machines.
Dmitry Petrov: It is possible that Russian managers simply do not have confidence that the money spent on the purchase and implementation of IT-solutions will have the expected results? By the way, if I, as the head of a gas stations chain make a decision on the introduction of remote monitoring, what exactly my company will purchase? Does it look like — it is some kind of product, a CD with the program, or something else?
Ksenia Van de Kamp: In America it is sold as a set of two items — boxes of equipment and an envelope with a contract between you and the provider of monitoring services. The service provider sets for each coffee machine a small module of a size similar to a cell phone — this is the equipment. Then you as the recipient of services get access to a web-based interface, referring to which you can get all the information you need on your coffee machines and manage them.
Dmitry Petrov: A box on a coffee machine and contract … Ksenia, how much in your market such a contract for 10 coffee machines would cost?
Ksenia Van de Kamp: On the average, a set for one machine is 500 USD + expenses for the use of communication channels and the provision of information 0,03 USD from each cup of coffee sold. I.e. if you have 10 coffee machines selling 100 cups a day, the purchase of equipment and its installation will cost you USD 5000 plus 100 x 10 x 30 x 0.03 = 900 USD per month for the maintenance of the system providing you with the requested information.
Dmitry Petrov: So it’s nearly 1,600 USD for every machine per year … Don’t you think that this is very expensive?
Alexander Kuzmin: We’re not in the US market, and here such service should cost cheaper, especially now, during the replacement of all imported products by domestic solutions. In my opinion, in Russia the cost of such a service on a coffee machine should not exceed 60 000 rubles in the first year of operation of the system. In subsequent years, the cost will be much lower.
As a practitioner, I would say that at the start of the implementation for you, as company’s leader, there is a win-win potential to pay back with interest all the possible costs of equipment and implementation of two-way monitoring – that’s the solution of sales of coffee «for cash», i.e. suppression of banal theft by staff. In the absence of control at least 20-30% of the customers actually pay for coffee «over-the-counter».
Generally speaking, in the scale of the whole market gas stations owners annually «give away» to their employees some 2-3 billion rubles because of the lack of reliable records sales of coffee. This kind of «generosity» by the owners of all Russian public catering establishments is not less than 25 billion rubles a year.
Dmitry Petrov: But if the employee sells coffee «for cash», then eventually there is a shortage of coffee supplies may be discovered. Or am I wrong?
Alexander Kuzmin: Coffee beans shortage is inevitable. To cover this deficiency, your subordinates either reduce consumption of blend per cup, or buy coffee beans in unknown quality at the local supermarket at a price of 300-500 rubles per kilogram, then without flinching, put this product of poorer quality in coffee machines with the settings for the high-quality blend. The fact that instead of a delicious coffee your customers will drink some bitter swill is nobody’s concern, because in this situation is almost impossible to detect a culprit.
Dmitry Petrov: Modern coffee machines have the ability to block access to data-sensors and settings using the PIN-code, known only to the service engineer. That’s not enough in your opinion?
Artyom Astafurov: The so-called «simple» or local PIN-code blocking by service masters it’s an illusion of protection of settings and data-sensor of a coffee machine. This statement is based on the following facts:
— On the Internet you can find information about the universal PIN-codes for all types of coffee machines.
— With the help of software available on the Internet, via USB-port you also may produce any changes of meter readings, as well as change the settings of the machine. Knowledge of a PIN-code is not required.
— Service masters easily go into collusion with employees of the gas station and tell them PIN-code to access the setup of the machine. Often, for a small fee, the masters themselves are involved in the process of «twisting» data or change the formulation of beverages, reducing the quantity of coffee consumption.
Remote monitoring system allows to timely detect and deter any attempt to change the settings, of coffee machines and data-sensors. If you attempt to make any unauthorized changes, the system automatically restores the specified configuration parameters, and in case of power hardware module breakdown it immediately reports violations in accordance with the configuration of information algorithm (by sending notification in an agreed format — in the form of SMS or e-mail the list of responsible recipients).
Information about violations has clear reference to the date and time of the event, which allows security structures to easily identify the persons involved in the violation detected. In the absence of this capability, it is difficult to company’s executives to determine not only the specific employees to blame for the episode occurred, but also to establish the very fact of the violation.
Dmitry Petrov: Sounds like a kind of security system, not a service program …
Alexander Kuzmin: You know, Dmitry, if there’s a lack of transparency in accounting and control, there is a risk of abuse – and not only in Russia. For example, in one of the Scandinavian gas stations chains widely represented in Northern Europe executives were convinced that their coffee business was flawless among other things, what was repeatedly expressed to me personally during the various negotiations.
Indeed, the average daily sales of coffee per station of this chain reached 200 cups, the staff had several supervisors who at least three times a week visited each gas station and made check-ups of machines’ data with cash transactions for the sales of coffee. It would seem that with such a control system theft simply can not take place.
And guess what an audit of the coffee business showed? Coffee machines, installed at that chain, incidentally, made in Germany, were not able to keep track of the types of beverages produced!
Using this, cunning managers were accounting the ingredients for so-called «drinks with a maximum bundle» (cappuccino, latte and so on.) meanwhile the main bulk of sales was coming from espresso and americano, i.e. the drinks with minimal cost. Such an unfair scheme of registration made it possible to obtain the surplus of milk up to 10 liters per day – multiply it by number of stations in the chain and it turns into tens of tons per year.
Dmitry Petrov: And what if non-payment of coffee is due to unscrupulous gas station customers? Because you insist on installing self-service coffee machines…
Alexander Kuzmin: The problem of non-payment by customers does exist. If the gas station sells coffee in the self-service mode, the staff is always trying to shift the responsibility for the discrepancies in the accounts made and paid for coffee to unscrupulous buyers who regularly «forget» to pay.
According to statistics, stations, consistently selling 200 cups a day, forced to write off more than a thousand cups per month: around 15% of total sales. To solve such problems, developers of BMS Coffee Control offer upgrading machines with a module, activating the machine only after reading the bar code, received by customer after paying for coffee (photo 3). That is, the client pays for his coffee first and then the operator gives him receipt from the cash register, and with a bar code on it exposed to the window of the coffee machine scanner it is activated, only one button associated with the acquired beverage responds. In this embodiment, the system guarantees absolute conformity of produced beverages sold: both in quantity and assortment.
Dmitry Petrov: Besides security and police functions to prevent theft, what else is the use of remote monitoring?
Alexander Kuzmin: After theft problem is solved, you should not stop there. Next task is to get in order the servicing of coffee machines installed at your gas station.
As of now the Russian leadership of stations’ chains has no tools to assess the quality of the service organizations. Coffee machine is a complex and expensive equipment for which the manufacturer requires lots of maintenance work aimed at preventing potential damage.
In practice, service mechanics travel to the object only when the coffee machine fails, i.e., when it ceases to make coffee. This very often involves drawing up acts of completion of certain “works”, which indicate the need for expensive replacement parts, although in reality this is not necessary. There are many cases when the heads of service companies collude with the heads of the gas stations, so they could call servicemen as often as possible, because it is always possible to come up with the reason for the call and it is almost impossible to check whether it’s justified.
Each call to a service mechanic costs 1500-2000 rubles, and replacing some mechanisms can cost tens of thousands …As a result, you spend millions of rubles for services that you do not need and spare parts that are not needed to be replaced.
Another indicator of the quality of service — the responsiveness of the service contractor. The main task of service –is maintaining an uninterrupted operation of the coffee machine, which like printing press must work around the clock, bringing you profit on each cup sold. But if it fails — it is not recorded anywhere. And when a call should be made is entirely up to station’s personnel, and there are lots of options — from «I wanted, but forgot » to «let’s take a break from this work a couple of days» or simply agreed with the repairman that he will call «someday of the week».
All this is simply not possible after the implementation of the proposed IT-solutions.
You will be notified automatically about the malfunction of the equipment. With remote monitoring, you can not only significantly reduce the costs of servicing coffee machines, but also to oblige the service organization to service this expensive equipment in strict accordance with the requirements of the manufacturer, including the troubleshooting before a major breakdown.
Dmitry Petrov: Repairing the coffee machine before its failure? Clarify please.
Artyom Astafurov: «Fault diagnosis at an early stage» means the ability to detect such deviations in a node or an entire coffee machine, which in the future may result in damage of the diagnosed machine and consequently lead to the stoppage of its work. Upon receiving timely information about the «deteriorating» state of a node service organization is able to carry out repairs or maintenance work before the coffee machine breaks.
A digital processor control unit in a modern coffee machine is able to capture more than 400 static and dynamic parameters that characterize the operation of the various components and nodes. This display only shows an «error code», which is an integral characteristic of a critical failure, typically requiring the termination of its operation.
For effective action service of workers (including providing “on call” service technician with all necessary spare parts) additional information is required to the extent that is offered by the functionality of remote monitoring system. In 9 cases out of 10, it is impossible to obtain this information from an employee of the gas station. Thus stations can achieve triple reduction of downtime of coffee machines compared to «traditional» system of service and 50% reduction in the number of service technicians visits paid by the chain of stations.
The lack of on-line monitoring of coffee machines’ condition deprives the head office the opportunity to have at its disposal objective information about the technical state of the coffee machines and the quality of their service, provided by service organization. Gas station chain manager responsible for caf? direction of business does not receive timely information about current outages, their causes, the speed of response from service contractors, the reasonableness of volumes of repair work, etc. For decision-making, they have to be content with the information coming from staff and service organizations, the relevance and validity of which almost always cannot be verified.
Dmitry Petrov: I never thought about the coffee business at the gas station in this perspective … High-quality blends and reliable equipment — it is clear, and there are a range of problems from supply to preparation of beverages involving IT-solutions. And economic security issues to boot. Impressive and causes a lot to think about. One question remains to be asked — whether such solutions are promoted here in Russia and how well?
Ksenia Van de Kamp: We showed you a general focus of efforts which for your chain of gas stations can quickly earn millions of rubles of additional profit by simply bringing to the final consumer of coffee the quantities of product initially conceived and removing unnecessary obstacles and losses on the way. Demand determines supply, so even if now no one in Russia offers remote monitoring for coffee machines, then, when a real demand for this service will emerge, this empty niche will be quickly filled the active efforts of the Russian businessmen or their Western competitors.
Alexander Kuzmin: Ksenia, do not be so pessimistic about the demand for such innovations the Russian market. Yes, there’s no large-scale offer of this service in the Russian market. But there’s interest in remote monitoring of coffee machines. I know that one of the largest federal gas stations chains the second year is testing a similar solution at stations in St. Petersburg and Siberia (Photo 4). In the opinion of company’s management, the use of remote monitoring led to a doubling of sales of coffee compared to the average value of sales per station, and it’s 50% higher than sales of stations in Moscow.
So I am sure that the remote technical monitoring in the near future will be as usual option as Wi-Fi or Internet payment service .. It will not mean a fundamental change in the concepts of the coffee business at the gas station, but will determine the transition to the next, more advanced level of an overall segment development
Dmitry Petrov: Thank you for this conversation, it was really interesting. You know, apart from the economic indicators of the profitability of gas stations chains, as a car owner, I’m glad because of the prospects for the development of Russian business. I also love good coffee.