If COG is more then 40%, does that mean

[royalforest]

there is a good chance that my route driver is stealing :o? Thanks Rich

[mission vending]

It depends on your price structure. The industry norm is a little over 50%. What you need to watch is the trends. If there are are no price increases where you buy product and your GOGS starts rising then its one of two things, your driver is overfilling machines and product is going bad and being tossed out or he is stealing.

Look at the numbers from a couple of months ago and then compare to this month. Use a monthly number as the weekly can change greatly from week to week depending on deliveries.

[royalforest]

Thanks! How do you get to 40% COGS?

[coinvestor]

Thanks! How do you get to 40% COGS?

40% is much lower than the best in the industry. Unless your prices are very high I don't think it could be done and maintained for any period of time. Especially not with an employee who would not be as careful about waste as you or I would be.

I run about 55-56% COGS, but that includes me coffee that I don't take as large of a markup on. Unfortunately I don't separate the two when I buy product.

JD

[coinvestor]

RRRRRR...... Includes me coffee

[mission vending]

Well if you are paying .30 a can for soft drinks and selling at .75 then you are there on that product.

.30 divided by .75 = 40%

Doing this for the entire route is not so easy due to the variety of products. So working on the assumption that the number of locations, the inventory level in machines, truck and warehouse remains approximately the same then:

On a 200K route at 50% COGS your monthly product purchases should be about $8,333.00 a month. That would be $16,666.00 in revenue at this COGS rate.

If you had the same amount of purchases and were at 40% COGS your revenue would be $21,000.00.

Again working on the assumption that all collections are deposited on a regular schedule, whatever that is, and that inventory levels, while not exactly the same, do remain relatively similar your COGS should not vary month to month by more than a couple of %age points. If they start trending up then you need to investigate if there have been cost increases, significant increase in waste, maybe a donation of product for an employee party to cause it to happen. If nothing is identified on the cost side then a loss on the revenue side must be investigated.

If you do have an instance in which your purchases are loaded up on a given month then your COGS will go up but should also go way down the following month. Taking the 2 month average should yield you approximately the same COGS %age as a couple of months ago.

[mission vending]

40% is much lower than the best in the industry. Unless your prices are very high I don't think it could be done and maintained for any period of time. Especially not with an employee who would not be as careful about waste as you or I would be.

I run about 55-56% COGS, but that includes me coffee that I don't take as large of a markup on. Unfortunately I don't separate the two when I buy product.

JD

I am at 52% YTD.

[coinvestor]

I am at 52% YTD.

Does that include your OCS? Or do you track separately?

JD

[mission vending]

Does that include your OCS? Or do you track separately?

JD

I keep it separate.

[royalforest]

Extra Extra Extra my route vendor is not stealing. I just averaged the whole year and my COGS is exactly at 40%!

[mission vending]

So instead of getting all suspicious  how about keeping track of it on an ongoing basis so you can continue to trust your route guy........you know like the Ronald Reagan quote "trust but verify"?  I promise the work is not that hard and you will sleep better at night.  LOL

[royalforest]

I do keep track, that is why I came up with the number quickly. I should of not asked the question until I added it up. Sorry.

[mission vending]

No need to apologize my friend, it was a good discussion.

[lurtsman]

This thread provoked intelligent discussion, and helped me learn about full line vending. So thank you for starting it.

[mission vending]

This thread provoked intelligent discussion, and helped me learn about full line vending. So thank you for starting it.

So does this mean you are considering coming over to the dark side? 

[The Mage]

Do you keep track of spoilage?  If you inventory expired product, then the numbers should add up.

I have thought about this if I ever get into full line.  Personally I would prefer to have employees if I were to go full line. 

But I would think about going out and do a "quality" check every once in a while.  Randomly pick a location, get there before he does, check the machine out, and then leave before he comes in.  Naturally there might be sales by the time he gets there, but if the numbers are higher, or equal, he passes.  But if the numbers are less then you counted, obviously something is wrong.

You can come back later, after his service, and check to make sure he has done a decent job with the machine.

You can even let him know you are doing random quality checks, not specifically stating you are checking if he is stealing, but just that you are going to be verifying the quality of his work.  In fact you can make this part of a regular review process.  Let him know "some" of the machines you have checked, and what you have found.  Complement him on what he has done right, and mention anything he may be doing wrong.

But the big thing is that he will know you are keeping an eye on him.  And if you make sure you mention only "some" of the times you have checked, he won't know how often you do check.  Just make sure this seems like a quality check, and not a big brother type of thing, and most people will understand.

[royalforest]

Madge, that is good advice but I think the simplest form of checking is from the COG%. If that is off then I would use your method to see what is going on. If the COGS are in line then I will leave it alone.