sweating the small stuff – part two (lowering your Cash Cost)

I frequent this site to keep up with who is doing what, where and when in hospitality.  I’ve found about half the content recently is either economic-doom-and-gloom or hopeful-economic-optimism.  So which is it?  If you’ve come to this site to find the answer, I don’t have it for you.  Sorry…

What I do have are tips on how to optimize your existing technology solutions to either increase profits or decrease costs.  Today we are specifically focusing on lowering your Cash Cost.

Cash Cost is inclusive to each area your business incurs a cost in receiving cash.  This includes cash accountability on the part of the employee and cash accounting on the part of management.  Multiply this process for each individual employee that accepts cash and your Cash Cost can get expensive.

The prolific way to eliminate this cost is to go cashless.  Many venues across the hospitality space have adopted this model: such as this one, this one, this one, and this one.  But getting completely cashless requires cash, sometimes a lot of it.  Instead, let’s look at some small ways you can alleviate Cash Cost.

prevent cash theft

Most POS systems (probably yours too) have built in cash accountability to help prevent theft and cash counting errors.  The first step in taking advantage of this is to ensure your employees are not sharing POS User Accounts.  My experience is if employees get to share accounts, there is a good chance they have also get to share in an ” unofficial” employee bonus pool.  Second is to require employees to enter a Cash Drop at the POS.  (Whether this is a blind drop or a not should be based on your business requirements and employee job function.)  Requiring a cash drop allows the management staff to review system reports that highlight over/short employees saving time by focusing first on the problems.

increase credit transactions

Increasing Credit Card transactions is a good way to decrease Cash Cost (and is a type of cashless payment), but you need to do the math for it to make sense.  Getting the most from your merchant services provider requires transaction volume and aggressive negotiation.  If you are not sure about how to go about negotiating your fee contact a company like this that does it on your behalf and gets paid based on your savings.  To make any meaningful savings here you should also have a software based payment solution integrated with your point of purchase system(s).

The best way to increase credit card transactions it to market it, but you also have to incentivize the consumer.  This can be implementing a no-signature transaction policy (moot if we ever migrate to EMV) or joining programs that encourage customers to pay with their credit card (i.e. here and here).

implement gift cards

Offering gift cards creates the opportunity to decrease Cash Cost and encourage customer loyalty.  However, this is the type project where scope creep can kill the initiative so be conscientious and realistic in defining what you are going to implement.  There is a very good chance your point of purchase system (PMS, POS, etc.) or credit card solution offers or includes a gift card solution.  It will most likely not offer all the bells and whistles of this or this or this, but the goal remember is to initiate low cost steps in decreasing Cash Cost.

customer account integration

This is an often overlooked but simple option to move in the cashless direction.  Additionally, this option has the HUGE upside of tracking your customer’s purchase habits.  Again there is a good chance also your existing point of purchase solution some sort of customer account charge.  For larger venues the better option is to implement an integration between the point of purchase system(s) and the customer account system(s).

The basis of this solution is an interface from your POS system to your customer account(s) system.

Property Management System to POS:  guest transactions are paid with a room key and/or name
Membership Accounting to POS:  member transactions are paid with a membership card and/or name

As with automated product/item depletion there is a very good chance your vendors already have the interface in place, meaning you can implement it with a minimal investment.

currency counting integration

If you handle enough cash to use currency counting machines another interesting option is to investigate an interface from the currency counting solution to the POS.  I have only seen this integration implemented a few times, but it has proven to be a highly cost effective solution with a convincing ROI.  It usually is accompanied with a higher investment cost however as this type of interface is generally custom integration that uses the POS Accountable Cash data, POS Cash Drop data, and Cash Counted data consolidated to a single report for simplified cash accounting.

If you have someone on the payroll that has the sole duty of counting cash and reporting discrepancies, this is probably a worth while option to investigate.

Obviously this list is not comprehensive, but hopefully stimulates some ideas.  If you have successfully implemented other options or have other ideas post a comment and share your knowledge.  In times like this it is worth it to share our experiences so we all come out ahead.

For more information about kevin sturm Consulting please visit my website or email Me.

sweating the small stuff – part one (automated inventory depletion)

For whatever reason when revenue is up venues have the tendency to not sweat the small stuff.  I guess it’s because the small stuff doesn’t amount to much when focusing on the big investments.  But when revenue is down it’s time to look closely at where your staff is spending their valuable time.

The next few posts will be dedicated to the “small stuff”.  Each has a minimal time and dollar investment with a quick ROI.

automated product/item depletion

Manually entering inventory depletion should only be necessary if you don’t have a PC based POS solution (and even then it may not be required).  If you do have a PC based POS solution (and who doesn’t at this point) then now is the time to link the two system.

A basic overview of this interface is the POS system exports a text file (formats can vary) of product/item depletion.  This file is then used by the inventory management system to decrement inventory amounts.  A key prerequisite is a “Common Numeric Identifier” for each product/item that is shared; this is generally the SKU number.  Chances are good the vendors you use already have a functional interface, and it’s highly possible getting it turned on won’t cost you anything (except maybe vendor support fees).  If your vendors do not have an established interface you have a few options

option one
The first option is to work with one of your vendors to write a utility that meets the specifications of the other vendor.  For example, your POS vendor writes an export utility that produces a file matching the import specifications of your inventory control vendor.  Or, the inventory control vendor writes an import utility that uses the file format provided by the POS system.  Most vendors have vast experience with this option, as it is the most common and generally preferred solution  But, the price of this method can vary drastically among vendors.

Pros:  vendor supported interface, highly scalable for large volumes of data
Cons:  vendor may charge high price for development, any future changes to the interface require vendor time line

option two
The second option is to use a middle-ware utility to convert the standard POS export format to the standard import format for the Inventory Control system.  There is a multitude of middle-ware applications available allowing someone with development experience to accomplish this.  They range from free-ware applications to highly scalable solutions like Microsoft Biztalk.  Be careful however as the price of this option can unexpectedly creep as interface iterations spiral out of control.  The advantage is the opportunity to use the middle-ware application for other integration projects.  The important point here is data mapping.  Incorrect data mapping will lead to incorrect inventory depletion.

Pros:  scalable for large volumes of data, use middle-ware software for additional interface engines
Cons:  requires development experience, possible high cost of software and development

option three
The third option is to build a conversion utility with scripts, macros, and/or batch files. This process generally involves utilizing MS Excel and Visual Basic for Applications (VBA).  I would only recommend this option when working with small volumes of data (no more than few hundred lines of data per executed export file) and when manual validation of the process regularly can be performed.  Most IT resources (especially if they are a recent graduate with an computer related degree) have the experience necessary to build these utilities.  The important piece here again is data mapping.  Incorrect data mapping will lead to problematic inventory depletion errors and generally non-descriptive and unhelpful error messages produced by Microsoft.

Pros: internally owned, can quickly be implemented, low cost investment
Cons:  internally owned (yes it can be both), not scalable for large volume of data, high chance of failure

reviewing your ROI
To calculate your ROI estimate how much time is spent reviewing sales and product mix reports and how much time is spent entering depletion into the inventory system.  For convenience use monthly estimates.   Next, calculate the Estimated Monthly Task Cost of this process using the hourly rate of employee(s) performing the task.

Estimated Monthly Task Cost = (time reviewing reports  X  hourly rate) + (data entry time  X  hourly rate)

Based on which of the three options you choose to implement calculate the Total Project Cost.  If your vendor charges a recurring support fee for the interface in Option One, don’t forget to include that in the Total Project Cost.  Also, if you choose Option Two and pay for a recurring support fee for a middle-ware application don’t forget to include that in the Total Project Cost. (If you plan on using it for additional projects you may want to only include a fraction of the support fees.)

ROI = Estimated Monthly Task Cost / Total Project Cost

This is how long in months it will take you to recoup the Total Project Cost, allowing your employee(s) to focus on other revenue generating activities. You may even find your ROI is less than one month!

If you don’t have the experience or time to implement this interface give me a ring, I’d be happy to help!   But don’t forget to include the cost of the consultant in your Total Project Cost.

If you are wondering about an integration capability post a comment and I’ll cover the details in a future post.  Even if you think it is probably not possible, it may be.  I’ve seen a parking garage gate interfaced to the POS cash drawer…so almost anything is possible.

For more information about kevin sturm Consulting please visit my website or email me .

mail call…what’s the scoop on SaaS solutions?

I received an interesting email a while back from Carson Mehl at Lumiere Hotels.

“I am curious to know if you have heard of any robust hotel software being developed that is web-based. Our company has started using a number of web-based software solutions such as Google Docs and Basecamp by 37signals and they have been a huge asset as far as ease-of-use, collaborative ability, and no-need for extensive/expensive hardware. The great thing about web-based software is that it all operates inside the browser so it can be easily accessible from a number of devices.”

Regrettably I was not able to point to any truly web-based solutions that I felt would meet the needs of a boutique hotel group. There are a few out there but none that I have extensive experience with or have been impressed with.

What Carson was really asking is why hasn’t a hospitality technology vendor come up with some true SaaS applications that fulfills the requirements for a boutique hotel or resort location? For those that are not familiar with SaaS it means Software as a Service. Wikipedia defines it as “…a software application delivery model where a software vendor develops a web-native software application and hosts and operates (either independently or through a third-party) the application for use by its customers over the Internet. Customers do not pay for owning the software itself but rather for using it. They use it through an API accessible over the Web and often written using Web Services or REST.”

In our email conversation Carson was good enough to expand to what hoteliers are looking for…

“…The newest evolution of internet browsers and runtimes like Adobe AIR are really opening up the possibilities for rich internet applications. Applications like Google docs, basecamp, ZOHO, buzzword (my fav), even Facebook that are stored in the cloud and accessible from anywhere, offer such an advantage. The ease of collaboration they provide is alone and tremendous improvement on traditional software not to mention the accessibility factor, ease-of-use, elegant design, and simple hardware requirements. I do not have super-deep ranging experience with hotel software, but what I have used is far short of what is possible today.

From an hotelier’s point of view, I see a demand for a well designed software platform that is easy to use and is far reaching ie: pos, pms, booking, web-booking, reporting, etc. What is currently available in this regard is very expensive and complicated from both a hardware and software standpoint. The existing platforms work well for companies with deep pockets, IT experts and central reservation departments…

I guess the dream software would provide seamless connection between web reservations, pms, and the gds. It would allow an administrator to provide different levels of access to employees. It would automatically create and update guest profiles. It would show activity feeds for a property (similar to a facebook newsfeed, but showing reservations made on the web, pms, or gds, and more). It would be dead simple to use. It would look elegant. Training would be obvious and intuitive. It would be a subscription based service or maybe annually licensed. The system would be complete so there wouldn’t be any interfacing problems between disparate types of software. All the data is indexed and searchable. Reports are automatically generated and distributed. Data is backed up securely. The software works in multiple languages. Software updates are seamless, because it is web based. Housekeeping could carry around a tablet pc or iPod touch and update their room list. Guests could check out from their tv or laptop. The list goes on and on. It may seem like a pipe dream, but I think it is a possibility especially as we are reaching the age of ubiquitous internet connectivity.

From a software company stand point I think there is demand for such a service. It might be a long long time before a large hotel company would make the switch but there are so many independent and small hotels for which this service would be a blessing. In addition, if the service was successful the access to data would be invaluable.”

I thought the question was a good one and the desires well stated. So the question stands to why are there not more SaaS applications for hotel/resorts?

In my experience the main reason has been a data access issue. For pure web based applications the data is held (and often owned) by the vendor. Data security standards and PCI regulations make it difficult for vendors to effectively and affordably deliver on the needs of a hotel/resort. PMS, POS, and GDS solutions are generally considered mission critical to the business. If you don’t have immediate access to the data then you cannot run your business successfully which often means inconveniencing the guest. And unless a company like Google with an almost infinite budget for infrastructure redundancy and fail-over brings a solution to the table the costs of effectively delivering a solution like this appears to be too high for a start-up looking at what is really a limited market (unless some of the larger brands like Hyatt, Hilton, and Marriott joined in).

Ultimately I hope I’m wrong because I believe we need this. A corollary could be made to what people thought about CRM solutions until Salesforce.com rocketed to uber-status of success and took over that space as the darling of the market.

If you know of a SaaS POS, PMS, GDS or other hospitality technology solution leave a comment as I’d be interested to find out more about them. Or if you have other thoughts on this topic post a comment and share your wisdom.

the attractive but un-sexy side of BI

I had a wonderful opportunity recently to join some very smart colleagues on a BI (Business Intelligence) panel presentation. I first need to thank Jon Inge for inviting me to be on the panel and for being an advocate for the un-sexy side of BI. Second I need to thank Rick Heuer, Geert Mol, and Clive Perry-Core who were on the panel with me. I learned a ton about CRM BI from Rick and Geert, and Clive has more hands-on experience to the nuts and bolts of BI than anyone I’ve ever met. It ended up as more of a round-table discussion than a panel really, but it was great for my own learning opportunities that way.

In his opening Jon referenced a great article from the Wall Street Journal on “Knowledge Management” which is largely what BI is all about. (Which I was bummed to not find on the web and provide as a link to all of you. If you find it give me the link in a comment.) The opportunity benefit of BI is to effectively act on meaningful information about your business…or more briefly put knowledge management.

During the introduction of the panel each panelists described how they worked in BI. During this brief introduction I came to the sad realization that I specialize in “un-sexy” BI. The “sexy” side of BI is in CRM and marketing. Their personal introductions were exciting and I’m sure led to everyone dreaming about a hotel knowing you when you walk in the door, welcome you by name, hand you your favorite margarita, quickly tele-port you to your room with pre-set temperature and lighting preferences, and have music playing based on your perceived mood and core body temperature. It is what you read about in press releases from the big brands in the industry where they know everything about what the customer prefers. The summation is Know your guest and achieve total patron value! Increase revenue through understanding your guest’s preferences and market directly to them! Sexy No? (to be said in a French accent)

For the record I totally agree it is way more fun to talk and dream about the benefits of BI with CRM. But the reality is the ROI and TCO for BI with CRM is harder to quantify (I tried hard to get a fifth acronym in that sentence but I couldn’t find one that made sense. Though I digress). It is not impossible to quantify, just harder. Before I jump into the “attractive but un-sexy” side of BI I think it is important to lay some foundation. First let’s take a shot at defining TCO. Total Cost of Ownership (TCO) is the total investment capitol put into the technology solution over a specified period of time. Return on Investment (ROI) is the duration it takes for decrease in costs and/or increase in revenues to surpass the overall investment (or TCO). To put simply, save or make more money than what you spent within a specific time period. The measure of any good technology solution should be create cheaper, faster, and better operations than what you do now. The general problem with proving the ROI of BI with CRM is the generalizations that take place into why certain customer preferences exist and under what specific set of circumstances. It is the accurate capture of circumstances that really creates the challenge. It is difficult (not impossible) to tie a decrease in cost or more likely and increase in revenue to a specific preference or area of guest behavior being influenced by an almost infinite number of inputs (aka circumstances) that lead to a specific action (for more thoughts on this see when CRM will achieve its potential).

So if BI with CRM and market data is “sexy” then the operational analysis side is really the “un-sexy”. Note that both are attractive, but the former is far more attractive than the latter.

The un-sexy side is the analysis of your operational systems data in order to decrease costs and increase revenues (yawn). I’ll define operational systems as Property Management System (PMS), Point of Sale (POS), inventory management, time and attendance, service optimization, and other solutions implemented to manage the operations of a venue. See, I’m only two sentences into the “un-sexy” and you’re mind is already wandering…hmmm..what should I have for lunch today…

But, when this data is captured in a meaningful way and linked to other external data elements (i.e. weather, currency exchange rate, website click through, etc.) the value proposition of BI becomes very attractive. I’m going to say “becomes” attractive because generally the first thing that a BI system shows you is how poorly your systems are currently setup to capture meaningful data. You will need to spend at least three to six months cleaning up configuration elements of your existing system(s) before BI will begin to have analytical payoff. The correlation can be made that it’s like exercise for your technology solutions. You may hate the process but you’ll like the results. I’ll cover some thoughts on the steps to a successful BI installation in a future post. But for those in need of immediate gratification Jon Inge wrote a great article in this months Hospitality Upgrade (it’s free by the way…so subscribe) entitled Demystifying Business Intelligence. You can download the article here from Jon’s website.

As an exercise in brain storming here are a few examples of how to both define and achieve ROI for your BI solution. I am making a HUGE assumption here that you already have some meaningful KPI’s identified for your business and that you can apply them accordingly. If you have not, first go read Jon’s article.

the pms story
A key metric for any hotel/resort is RevPAR (revenue per available room). The value of this KPI becomes more valuable over time as you compare it against historical data. It is one of the measures used for how to price a room and it’s amenities. Some PMS systems will give you this number over a specified date range and may let you compare it to one other range. Or you can run multiple ranges and do the comparison yourself by entering the information into a spreadsheet. But, what if rather than just looking at previous RevPAR numbers you were able to review historical RevPAR numbers with the corresponding temperature/weather and current exchange rates with selected currencies over multiple selected date ranges. Then what if that information could be plotted graphically for you giving you some solid predictive analytics on what room rate would give you the best RevPAR based on matching factors from a historical period. The ROI benefit in this example is actually achieved in more than just the revenue opportunities. It can also be achieved in the “improved costs” column by spending fewer hours entering information into spreadsheets.

the pos story
The POS story I think is one often left behind, but it is one near-and-dear to my heart. Your POS (and PMS) system holds real data about customers that they pay you to keep so you can know more about them. How wonderful is that?! Grocery stores have the POS BI story down…it’s a science of revenue for them. Hotels, resorts, and other venues should be watching and learning from their successes and their mistakes. As a quick story lets meander into a world where all your POS data means something (meaning versus what you have now). It means what do your customers like, what do they not like, and what should they like but just are not finding and buying. By “should they like” I’m referring to placement, description of the item, presentation on the plate, verbal marketing, and price. BI with POS allows a manager or chef to aggregate and compare data for items that are selling well to items that are not selling well, and possibly against the day of the week, time of the day, and temperature outside.

the inventory management story
You get an even better story if you tie POS to Inventory Management and look at actual cost versus selling price data. A manager can run pricing strategies and get concrete data back on how well or poorly it worked. For example, take your top 10 selling entree items and increase the price of each of them by 5%. If you have historical price and cost for those items for the previous three months you should have food costs, theoretical and actual yields, margin, and profit for those items. Track on a weekly basis for three months how the 5% price increase affects each of those performance monitors and you begin to understand exactly how much items should be priced for in order to achieve minimum food costs, maximum margins, and maximum profits. You may tell me you can do this now, but I’m going to tell you only with a small troop of analysts and well massaged data.

the employee performance story
Wouldn’t it be great to have a better understanding of what made great employees great, good employees good, and poor employees…well…suck? I’m sure you can tell me about personal drive and character and customer relation skills and I’ll agree with you. But what if you could see metrics about employees like how many more transactions they perform, or how efficient they are in certain work areas, or why they are always able to predict what needs to be done before it needs to be done (okay…that one may be harder to figure out). Again, manufacturing plants have been dong this for years…we just have to catch up and figure out how to make it work for hospitality A BI solution should have all the data points where an employee enters information into your technology solutions, and that transaction is tied to an employee ID. Employee ID is often the ONLY common thread among disparate technology solutions so this specific area can be one of the easiest to achieve. The benefit of seeing performance information on your performance range of employees is to spot operational efficiencies that great employees implement and then work to train those into the rest of the staff.

If you are shaking your head at me saying, “Employees won’t do it even if I show them how to be better”, then I’m going to tell you that you have bigger problems. Employees suck either because of lack of education or apathy. BI can help you fix the education part and then you can help yourself and fire the apathy part.

the staff management story
The last story we’ll weave is the magic tricks around staff management. I never ceased to be amazed at the creative processes that I find managers and client venues using to estimate staffing requirements and build employee schedules. It is an artful guessing game made more accurate after years of experience and some trial and error. But if you have employees entering information for time and attendance (if you pay people you have this I think), and you have historical revenue information (for a specific day of the year possibly for multiple years), and you have employee performance detail (for example revenue per hour) for a “good” employee then you could have the best staff management procedures on the planet based on BI data and predictive modeling. Bringing this information together into a BI solution gives you forecasted revenue expectations with forecasted costs for which you can then effectively manage your schedule and get maximum revenue potential at minimum cost from your staff. I have a dream….

See, you find it attractive…admit it. But (yawn) sooo un-sexy. Who wants to talk about boring operational efficiency metrics to executive management so you can purchase a BI solution? I hope you.

I would love to hear from you if you have other great examples of ways you achieved the ROI of your BI solution. I’d also like to hear from you if you think mine are ridiculous. And as always, if you’d like to find out more about kevin sturm Consulting please visit my website or email me.

apathy = a problem technology cannot solve

I am a big believer that technology can solve many business and operational problems. There is POS for tracking product mix, streamlining order flow, and revenue reporting; Inventory Management for getting accurate food costs, purchasing cycles, and inventory control; Reservations for managing guest reservations, table turn, and wait times; and a slew of other systems depending on the venue. But for hospitality venues there is a problem that technology solutions cannot solve – mainly apathy or the trait of “learned helplessness.”

Last night my family and some friends went out to dinner at El Paseo restaurant in Santa Barbara. We were doing an early dinner (we had two toddlers in tow) and were glad to see the restaurant was not too busy. We really like El Paseo because of the atmosphere (retractable roof) and good food (our opinion). We LOVE the table-side made guacamole and fresh made warm tortillas, and they usually have a pretty solid margarita. We go enough we know what is good and what is not, so we stick to what is good (like the fajitas). Also an important point is I go there because they are a former customer and I am a firm believer in supporting your customers.

But our experience last night ranks in my top 5 worst at any hospitality venue. I point the cause to apathy on the part of the manager and service staff. I will set the stage as it was immediately apparent El Paseo was understaffed for the night. We were all sensitive to this as my wife and friend both waited tables for years and I have spent hours on end helping restaurant staff work through system technology issues (I bused tables in a suit once at a customer site because that was where I could help ensure the guest’s experience stayed positive). From the moment we walked in the door at El Paseo we were an annoyance versus a guest. I had to find someone to seat us, and once we were seated had to flag down the manager after 15 minutes. We asked the manager if he could bring us water and napkins (napkins came half way through the meal…recall we had two toddlers with us) and requested a waiter to come over. He declined to get us water and replied, “I will find someone to get your drink order.” No apology for the wait or a comment that things might be a little slow.

When our waiter arrived (visibly annoyed we had him summoned) we ordered our drinks, our food (with a one special request), and asked for silverware and napkins. We got three deep sighs and at least four eye rolls. We had been given a kids menu and ordered two kids meals with a lemonade. When our drinks arrived the waiter set a foot-tall-cone-shaped-three-pound-bar-glass filled to top with lemonade in front of our friends 2 year old (no exaggeration!) We asked for kids cup to which he responded they have none (kids menu, kids meals, no kids cup?). We asked if they had a smaller cup, and he came back to the table with a plastic Budweiser cup and no lid (a Bud cup for a toddler?).

We arrived at the restaurant before 6:00 pm and received our food at about 7:00 pm. In that one hour we saw our server once to place our order and once to receive our drinks. We called the manager over twice to ask for more water and napkins, and never once got an apology or a comment on better service. I helped implement El Paseo’s technology solutions so I know their systems cannot be to blame for what we experienced last night. I also know the ownership group and have eaten at their other restaurants in Santa Barbara, so I do not believe it is part of the ownership group. Our experience last night was 100% caused by apathetic management and wait staff. But our experience could have been 100% different with the same staff and same poor service. Here’s how…

roll out the welcome mat
Greet your customer with a smile and welcome them to your venue. Even if the service is going to be below standard you should still make your customer want to be there.

when required set a low expectation
When as a manager or server you know you cannot deliver the best service, be up front with customers and set that expectation. Offer that you will check in as often as possible, but that service may be slower than normal. That way if it is slow the guest expected it, but if it is not you over achieved. Most customers will be accepting of this.

Image credit to Julianfoto

cater to your customer
If you offer a separate kids menu families will come to your restaurant. Parents expect kid cups to be available if you have a kids menu. Not having kids cups is saying you don’t want kids in the restaurant.

apologize when you know you should
You know when you need to apologize for crummy service, even when it’s not your fault. An apology can go a long long way. Everybody has bad days at the office. Apologizing when you flat out do not deliver means you care enough to want to deliver.

If only I could invent a technology solution that solved the apathetic employee problem…

For more information about kevin sturm Consulting please visit my website or email me.

has your POS become a commodity?

Over the past few years I’ve heard lots of talk that individual technology systems like point-of-sale (POS) have become a commodity purchase. All the solutions do basically the same thing so it doesn’t so much matter which system you go with. Now, I can’t argue with the point that most POS systems have the same basic functions. After all, a cash register and an enterprise POS terminal do the same thing from the guest’s perspective. But, I highly disagree that POS systems have become a commodity. That does not mean however that your POS has not become a commodity.

[For clarification I use the term "enterprise POS" versus "cash register" for
lack of better way to differentiate the two very different solutions.]

The differentiating factor is in the setup and use of your POS. Time after time I work with clients that purchased an enterprise POS solution that was $1500 or more per unit, but then configure the system to work like a basic cash register that costs $200 per unit. Here is my top 10 do not list in preventing your POS from becoming a commodity.

top 10 “do not” for your POS

1. Do not use generic items for ordering daily specials (i.e. fish special, meat special, pasta special). Setup the actual item in your system.
2. Do not believe seeing 115 “Soda” in your product mix report is tracking beverage sales. I’ll point out why this is important below (moot point if you have a self-serve fountain).
   
3. Do not have “Open Item” available to all staff because you are too lazy to ensure all items are in the system. Have “Open Item” only for true emergency scenarios and controlled by management.
   
4. Do not let employees share ID’s. This creates a theft risk, audit problems, and data integrity issues.
5. Do not let servers get away with voiding checks without entering an accurate void reason. This can have drastic affects on your product mix if you are a high volume venue.
6. Do not treat refunds, voids, and comps the same. They are different both operationally and financially.
7. Do not assume your POS cannot do something just because the tech support rep you spoke to at your vendor says so. Escalate up the chain until you get the same answer from two people that have worked there for a least 3 years.
   
8. Do not assume someone is auditing the accuracy of your item database. Make a point to schedule a review and update it at least twice per year. Duplicate items, bad naming, and inaccurate assignment happen even under the most scrutinizing eyes.
   
9. Do not leave the “cost” field blank if you know the cost. Having this information is extremely valuable for understanding food costs and profit margin.
   
10. Do not rename an existing item you no longer sell to create a new item unless you are 100% confident your POS tracks the name of the item at transaction time (most only track the ID). If it does not record it your historical reports will show whatever the name of the new item is, never showing the old name.
    

So now your thinking, “Hmm….I do half of these and paid way more than $200 per unit.” The good news is none of these things are hard to fix. A little time and knowledge can tune your POS right up.

There is a long answer to the “why is it important” of these points, but I’m going to focus on the short. In short – Business Intelligence. Business Intelligence (BI) or analytics is becoming more vital for venues in order to compete. And if you do any of the above 10 things you will find your BI purchase makes these problems glaringly obvious, and you will need to fix them anyway. There are three main reasons the above 10 rules apply to getting good information from your BI solution.

top 3 BI reasons to follow the top 10 “do not” for your POS

1. POS solutions are hugely valuable because your customers are paying you to give you their preferences. (Read that sentence again.) If you are not tracking what they are actually buying then tracking customer preferences becomes much harder. With customers expecting a more personalized experience at every turn, knowing what they like when and where is important. If I order the fish special only when it is not salmon, your data on my preferences is available but inaccurate.
   
2. Tracking historical inventory control and food costs is vital to measuring profit. If you are not tracking historical costs to historical revenues then your profit analysis is really just theoretical, and your analytics data in this area will be useless.
   
3. A huge benefit of POS data in BI (though less pointed out) is tracking and controlling employee performance. Versus just looking at a daily, weekly, or monthly views of employee performance you can see comparative detail and create benchmarks for performance.

If you need help in moving your POS purchase from a commodity to offering a value added benefit to your business post a comment or email me.

For more information about kevin sturm Consulting please visit my website or email me.

Innovative Hospitality Solutions partnership announcement

kevin sturm Consulting has been listed as an alliance partner with Innovative Hospitality Solutions (IHS)!

“Innovative Hospitality Solutions is a leading project management and food service design consulting firm that utilizes a systematic approach to help its Business Partners take their vision from insight to impact.“

Led by Matt Mundoc and Gary Gunderson, IHS not only brings great experience to the table but also great people. Matt I and worked together in our former careers implementing an enterprise POS technology solution for an international financial corporation. Matt’s direction led to one of the first global cashless programs in food service that returned some real and very meaningful data on the benefits both to the company and customer.

Matt is a visionary when it comes to technology initiatives, space planning, and strategic food service programs for business dining and other food service venues. He is also one of the most honest, genuine, and nice people to do business with. His dedication to the client and their success is paramount, and he is also a great example of a true family man.

I consider myself both blessed and lucky to be chosen as technology parter with IHS. If you are looking for assistance with your food service project in any capacity, IHS is the group to call.

For more information on Innovative Hospitality solutions visit their website or contact them via email.

For more information about kevin sturm Consulting please visit my website or email me.

find out about "Nutricate"

One of the hot new emerging technology companies in hospitality is Nutricate. I had the opportunity to spend some time at the Nutricate office and find out about the solution and story behind their initiative to “Nutritionally Educate” hospitality venues and guests. It was also a fun reunion as my former boss and mentor, Brad Bennett, is their VP of Products. Before sitting down with Jay Ferro, Nutricate CEO, I was treated to lunch at Silvergreens to experience the Nutricate brilliance.

One of the most interesting things about this interview was hearing about Nutricate’s birth from social concern versus financial purpose.

Me and Brad

1. What exactly does Nutricate do?
I guess the problem we’re ultimately trying to solve from more of a global perspective is there is an obesity problem on our hands, and the food service industry has responsibility in that. What you hear a lot about is legislation for trans fat and other things. The one you probably don’t hear as much about is the need to tell us what’s in their foods with nutritional labeling. What Nutricate does is we attempt to solve a problem from both the operator perspective as well as the consumer perspective. We try to create that “win-win” opportunity. What we have is a patented software tool that enables personalized nutrition information to print right on the receipt at restaurants, hospitals, work site cafeterias, or any food service environment. What we end up trying to do is take that opportunity to not only engage the consumer and let them know what they are eating, but also to educate them on how to eat healthier and make recommendations. We call it our “Did you know?” section. For example if you order a chicken sandwich we can put something like, “Did you know if you substituted grilled chicken for crispy chicken you would save this many calories and this much fat.” From the operator perspective this is huge because you want to move the accountability off of you the operator and put it on the consumer. It’s not that my food is bad for you, you just chose the french fries. You could have chosen the side salad as your side. I’m going to educate you on my options, tell you how to eat healthier, and then of course it’s on your shoulders. Don’t blame me for how many calories or fat is in this meal because you have plenty of options. Getting the consumer more educated on this is primarily where we are going, and then we will have peripheral products along the way that can add value for both the consumer and the operator.

My actual meal and Nutricate Receipt

2. What triggered the idea to put the nutritional data on the customer receipt?
Well, it was 1994 and I had just graduated from UC Santa Barbara and was writing a business plan for a restaurant. I wanted to go do my own thing and didn’t want to work for anyone. I knew Isla Vista and the community here. I said, “I think this place needs a healthy restaurant about salads.” Kinda take the salad bar concept and modernize it from the 80′s. While I was writing the business plan for that restaurant I started to research nutrition. I didn’t know a lot about nutrition, I just knew I thought the market was looking for a healthier alternative at that time. I started thinking I gotta get nutritional information for my restaurant, and then asked, “Wait, why don’t restaurants have to do this?” Turns out in 1990 nutrition fact labels were mandated and restaurants were made exempt at that time. It was 1994/1995 at this point and timing was basically bad for the idea. The idea was why not put it right on the receipt, it doesn’t change anything from the operator perspective. The customer gets exactly what they’re eating. One of the biggest reasons restaurants were exempt was I think 70% plus of your orders at restaurants are customized. Preprinted nutritional information whether on a brochure, poster, or menu board is inaccurate the vast majority of the time to begin with.

3. What is the value proposition that Nutricate offers the venue?
Well, I think it depends on what operator you’re going to. We segment the food service industry in two areas. One is restaurants and the other is the institutional market. For restaurants there has to be a tangible ROI. There does on both sides, but the ROI is how can I increase sales, how can I decrease costs, how can I improve customer loyalty, how can I improve brand. We’re targeting in the restaurant side those that are maybe socially responsible and trying to position their brands with more of a health conscience perspective. Obviously that’s not everyone out there, but they see the trends like everyone else and they know they have to change in some way. So, for those people were saying you have a competitive advantage potentially on what your nutritional information looks like compared to some of your competitors. There are so many dynamics in this because there is a perception versus reality. Subway may be perceived as healthy, but when it comes right down to it maybe they’re not. Disclosing nutritional information may be bad for business in that way. But if you’re getting just killed from the media like a McDonald’s, and your not that bad there may be a good business decision to do it. There are several dynamics within it, and we are way to communicate that. And then of course from real tangible ROI what you find is your drawing attention to a piece of paper that has been thrown away forever. And now you can leverage those new eyeballs for new marketing opportunities or new third party advertising opportunities. What do you want to know that you have some attention on there? It’s a new medium of marketing of sorts. That’s the restaurant side.

The institutional side we’re selling to for a totally different reason. Some of the barriers that may exist from an embarrassment factor (“I don’t want anyone to know”) that is on the restaurant side are not there. If you are talking to a cafeteria, education, or hospitality that’s not their concern. Their concern, certainly from work site perspective, is primarily my health care costs are out of control and I need my employees to be healthier because I need to drive these costs down, and what kind of health and wellness programs can I put into place that can engage these employees of mine and give me measurable data I can give to my insurance company so they can justify lowering my rates. There is this a huge pain out there and that’s “dollars”. So they’re trying to reduce costs by implementing programs like this. Or obviously in K-12 there is a lot of public pressure. It’s kinda of like “walk-the-walk” is what’s going on in that side. So they’re not necessarily saying, “I want this to drive my sales.” They’re trying to do it for totally different reasons than why a restaurant would do it.

4. How is it that you can integrate with almost any Point of Sale System?
What our technology solution is….well you’re the one who is going to tell me if I’m right or not in this because this is your area of expertise.

Here’s how we look at it. We have the POS side of things and it’s an extremely fragmented industry. I think MICROS is the leader and they have maybe a sixth share of the entire market. That’s how many different players there are out there. So yeah, we can build software and it can certainly sit on the POS and we can integrate with it. But do we want to do that with 200 plus POS? When you look at what we are trying to do, we just have to affect the printer. And the printer market as you know is 80% owned by Epson, and the rest are Epson compatible. So that print stream is really easy for us identify and map to. So what we have is a proprietary device that essentially intercepts the print stream and adds all the necessary nutritional information and marketing message based on triggers, makes the receipt look pretty, and then passes it right on to the printer with no speed latency. Everything is managed via of the web so you don’t have to worry about where you’re at. It can be hard wired via Ethernet or a wi-fi dongle so it can be accessed. Essentially all we are doing is just matching what’s coming out of your POS at the item level, and if there are certain things we don’t want like a credit card receipt we just pass through. If we want it we make it a Nutricate receipt.

5. Quick service and chain restaurants are obviously a key market segment. Do you see hotel, resort and other high end venues adopting providing nutritional information to their guests?
I think you earlier were talking about the spa market. If you look at where maybe opportunities exist and where it would be more in demand by customers spas are one. Another interesting one in the hotel market is room service eventually. I think that could be a good application. Initially we’re not targeting the casual or fine dining for a variety of reasons. Typically you’re finding those in hotel atmospheres. I think there are certain places it makes sense in hotels and there are certain places it may not be the right fit today. And as you know many hotels are one-offs. If there is a one-off opportunity I need to feel like it is worth while to go in there and make enough money. The nice thing about chains is I do it once and I can duplicate it by the number of chains. For the institutional market it is our second product offering that excites them more than our first product offering, and that is a totally different revenue model for us that is very very attractive.

So I guess we are not initially targeting the hotels of the world, but I think spas is a good one. LifeTime Fitness sort of fits in the same model. As we look at what we are targeting today it is a big market, and we’re choosing quick service and fast casual in the restaurant side. The whole institutional market is pretty good for us, but work sites ultimately are in the biggest pain. They are the one paying all the health care costs and that is where we are targeting.

6. Why do think there has been a lag in the adoption of providing nutritional information to guests?
I think it is a couple reasons. One is the potential embarrassment factor, there is no doubt about it. You have the media making it sound really bad and beating restaurants up. I think the media has just done a terrible job of everything. We are kind of finishing out the “Supersize Me” era. From mid 1990 to mid 2000, in that ten year stretch bigger was better. If you could give me more french fries I would go to you because that is more value in my eyes. As portions sizes continued to grow over time it turns into a really really bad time to expose nutritional information. It’s all about quantity, which is why the casual dining market is so bad for us and them. If you get a BigMac and fries at McDonald’s and you get a burger and fries at Chili’s you feel better about yourself for eating the one Chili’s; maybe because it is being served or because you think it is a higher quality of food. But you are eating two to three times the amount of calories and fat, and that is not because it is worse for you but because that is how big everything is. But we don’t think like that from a consumer perspective. The last thing Chili’s needs to do is tell people now, “You just had 2000 calories.” And McDonald’s can say, “You had the BigMac and fries and your the one beating me up when it is only had 800 calories here.” I think it is different reasons for different venues, but ultimately the market is so nervous about how consumers are going to respond and react. “Are we going to get killed on this or appreciated. How mature is the audience out there?”

Two, if you look at what alternative methods there are to disclose this nutritional information, outside of Nutricate’s solution, there are no good methods. They’re going to put it on the web, but who goes and accesses the web before they eat. It just really doesn’t happen very often. They are going to put it on posters on the the wall. But the problem with posters or brochures is customized orders. You cannot put that in a preprinted format of any use to a consumer. No one is going to go find their specific desire and then order it. It is just impractical. If you put it on a menu board there are tremendous problems. Logistically finding the space for anything on a menu board is hard. What it could potentially do to line speed is also a problem; operationally another variable that confuses my customer and makes them ask questions potentially negatively affects line speed. But I think still at the end of the day venues would figure out a way to do it if they felt comfortable there would not be a backlash. They are not looking for everyone to say, “Wow, I’m going to eat out more often now.”; really they just don’t want people to eat out less. So we are obviously being very selective with who we target because our solution may not be the right solution for half of the restaurants out there.

7. Who are some customers that “Got Nutricated”? What has their customer feedback been?
Right now there are four. Silvergreens was the initial restaurant, which was the restaurant I founded, so it was the perfect place to put in a product that hopefully would work. There were a lot of questions like, “How is the technology going to work.” When we put it in in April ’06 at Silvergreens we had Maitre’D and we integrated it. There was not an agnostic piece to it. We did it and it was painful. 99% of the things the POS did we didn’t care about but we still had to make it work with. So it was a long frustrating process. What we were trying to do was figure out 1)does the technology work, 2)what happens to the restaurant’s sales, and 3)what was the customer’s response. We needed to test this and do a market test on it. All of those, with the possible exception of the technology, went great. Sales went up 20% unbelievably! It’s crazy! It is hard to say it because I know people don’t believe it. Here’s the reason it did – you get PR out of this thing. It’s different. It’s unique. We had news people come; we got some articles printed on us. Already when that happens you’re gonna get new people trying your restaurant. But we’re in Isla Vista, and for anyone coming into IV it is tough enough with the competition. Also people don’t want to challenge the bikes and are intimidated of IV outside of the students and those that are accustomed to it. So we got a new batch of people that were saying, “Wow, this new kind of restaurant.” Whether that was because of the Nutricate receipt, the food, or a combination of both is hard to determine. But we got the PR to get them in and prove ourselves.

Also, I think the coupon aspect on the receipt works pretty well. It is a very inexpensive way to target your current customer. Hopefully it doesn’t cannibalize sales, but overall if you grow your volume you’re going to be fine. Usually you target. If it’s lunchtime and you’re trying to drive breakfast business, you know that person can come in so your going to try and target breakfast or a new menu item. Whatever it is, there is a lot to the tool of couponing. It’s neat and it’s based on lot of triggers.

The consumer response was fantastic. We did a bunch of market research independently. CSP did it and surveyed tons of people. There was really positive response to the receipt. It’s an interesting market, not to get on a side not here. College students for the most part don’t care as much. As you get older your body responds differently to what you eat. If you can be successful in a market where people don’t care as much as when you become more educated on nutrition I think it’s pretty impressive.

Then there are three locations in San Diego. Two Extreme Pita‘s, a pita concept out of Canada trying to penetrate the US market. They have probably 30 restaurants in the US and a couple hundred in Canada. They are competing with the “bigger is better” mindset in the US. It’s hard, but they are inherently healthier and they have a good nutrition story. We have tested in those two locations and are now putting it in Phoenix, their biggest US market. Then they will test it out in Canada.

8. Recently the the New York City Board of Health voted to require all chain restaurants to post caloric data on their menus. How long do you think it will take for this trend to reach other cities?
It’s a good question. I mean that’s legislation. Obviously that is a great driver for us. Nutrition disclosure strategy is on the board agenda this year, so it is something restaurants have to think about and try to figure out. It is going to make some of the bigger players out there think, “How do I want to do this? Do I want to be proactive? Do I want to be reactive? Where are we with this?” What New York City has done now is chosen the method of putting it on the menu board, and that is a very easy one to fight because it is such a bad choice of solution. One, it is very dangerous. You could give someone extremely inaccurate nutritional information just with the customization of it. If a venue puts one on their menu how in the world are they going to know what a guest actually orders? If the item defaults with wheat bread and no mayonnaise or cheese someone is thinking they are eating 400 calories when it is actually 700 calories. You can put up whatever you want to put up, so it is very dangerous I think in that regard. As well with meal totals and other things that are going on. The restaurant industry has got lots of legs on this one.

And, why would you think this would possibly work? Since nutrition fact labels have been put into work our obesity rate has doubled. So this really is the same thing but even worse than what we have been doing. Essentially the restaurant association sued again, because this happened twice. Essentially we are focusing in California. Something similar happened in California and went all the way up to Arnold, and Arnold vetod. It was a good thought and I agree the restaurant industry has to do something, but it was the wrong solution for a variety of reasons. Obviously we’re now getting active and saying look at the Nutricate solution and why we think it makes sense for everybody. But I think cities and states is where it is going to be driven. It is going to pop up all over, and then at some point go federal. The chains want it to go federal because they can’t have different legislation in different cities all over, it is just too much for them. So there is a point where they will say, “Let’s just find out what it is and just do it, and and move past this so we can go back to making our burger and fries.”

And this is the perfect place for technology to come in! They are so far behind in technology anyways at least use this as an advantage for you.

9. Starbucks is now offering a pamplet with nutritional information. They have upward to 87,000 drink combinations. Would Nutricate be a good fit for an operation of this size?
That is where we excel! That is the reason we’re relevant is because you order your latte your way. We can key off any of that stuff, that’s what we do. That is what Brad is doing. We are basically building that flexibility. If you want a “grande mocha” with six pumps of chocolate I’m going to come up with the number whether you want it rolled up, by item, or by individual pump. The venue gets to choose because there is marketing there. Do I want my customer to see it all rolled up? Or is the whole milk such a bad part of it that I want to show them it’s not me, and then recommend skim milk via “Did You Know”. And skim milk costs me less per gallon, but the drink costs the same so I save money! The point of “Did You Know” is to educate the customer and hopefully do it in a way that makes the customer healthier and the venue more money.

That is where Nutricate is of huge value to the coffee segment.

10. As someone arguably successful in both the restaurant and technology market, what advice would you give to entrepreneurs wanting to provide a technology solution to the hospitality space?
You should ask me when I become successful as I’m still trying to figure this out a little bit. I founded a technology company with no technology background. I have all food service. Being somebody who is pretty hands on and wants to know about everything, that is the space I couldn’t dive deep in. If something was wrong it was just wrong. For me, it is just get the right people. As you know in Santa Barbara that is such a challenge. But it is no different than any other business. Get well funded so you can afford the right people and the right technology.

11. You have an “Ask the Dietician” section on your website. What is the weirdest question that has come in?
(laugh) Unfortunately I’m not even a participant in that. We have our dietician who does that and I don’t know how much it is used or not. I could make one up for you, but I honestly don’t really know even one question that has been asked.

I was immensely grateful for the opportunity to sit down with the team at Nutricate. They are truly onto something great and everyone there is deeply passionate about the solution and the benefits of it for society in general.

The Nutricate team hard at work

If you are interested in finding out more about Nutricate you can visit their website or contact them here.

For more information about kevin sturm Consulting please visit my website.

relax your spa staff with RFID

A few weeks back Chrystal treated herself to a pregnancy massage with another “expecting” friend at Burke Williams Spa in San Jose, CA. The day spa offers a pregnancy package with a lavish milk bath, which Chrystal and Christy thoroughly enjoyed. Chrystal loved it and was definitely more relaxed afterwards. But upon her return from the spa she said that although the guests were becoming more relaxed the staff seemed harried.

When she checked in she did not fill out any paperwork simply signed in and was presented with a key and keychain for her locker. Her schedule was in the computer and on a printout. Throughout her three hour visit she had spa employees pop into the public areas (like the quiet room, sauna or hot tub) and ask, “Do you have an appointment and 2:00 PM?” or “Are you so and so.” If the person was there they informed them of their next appointment time and location. Chrystal had two problems with these very common operations. First, keeping track of a key at a day spa is an inconvenience. At one point Chrystal accidentally grabbed Christy’s robe and then could not get in her locker, as her key was in her robe. Second, consistently having employees ask me if I’m someone I’m not does not equate to the experience associated with a high-end spa.

I know Chrystal would go back to Burke Williams Spa if given the opportunity, but the prices may not be in line with the “experience”. We have a place in Santa Barbara where she can get the same massage treatments for 1/3 the price (maybe less) and many spas where she can get exactly the same treatments for the same price. At core a spa must be measured on the value and quality of the services it offers. But if those services are equal to competing spas then what incentive does a customer have to return?

Answer: A unique experience.

What if Chrystal’s experience instead went like this. After making her spa reservation she had the option to complete the majority of the information online (some HIPPA stuff may be only allowed on a form) and was able to note any preferences, allergies, etc. When arriving at the spa, the information she provided online is complete on the form and she is asked to take a quick profile picture and then sign the form (waiver and legal stuff). She is presented with her schedule of services and a small Breast Cancer Awareness wrist band outfitted with an RFID tag. She is assigned a locker number that can be opened with her wrist band. After relaxingly loosing track of time in the sauna a staff member pops in to let her know it is time for her milk bath. The staff member speaks directly to her and knows her by name, though has never seen her before. This happens throughout her day and both her and the staff are relaxed and enjoying her time.

With the growing number of guests willing to spend money for a unique experience, this story brings customers back. It is not only possible but simple to make a reality. Just about every spa already has a loyalty program and most of them accept a small profile picture to associate with the guest, so that part is done. Implementing location services using RFID is becoming more mainstream with vendors like Motorola, PDC, and Microsoft leading the way. Guest information is linked to the RFID wrist band, which is small, inexpensive, completely waterproof, and even stylish if so desired. The entire staff has access to the guest’s picture and knows where each guest is at all time because of RFID scanners at each door. An added benefit is the spa gets automated guest preferances by reporting each room that a guest goes into and the amount of time they spend in it (this has to free up at least one administrative job). This information is also golden when it comes to personalized marketing with solid Business Intelligence data.

If your spa has a restaurant there is an added option to interface Point of Sale (POS) with Loyalty and allow guests to buy food and other items available for sale with their wrist band. LifeTime Fitness, a specialist in the “health and fitness experience” uses photo recognition at the POS as an added security measure. It also means the customer doesn’t have to carry anything with them.

Implementing location services with RFID obviously is not free. But balance it against the decreased cost of manual system entry and paying staff to herd customers, and the revenue opportunity of very effective personalized marketing campaigns and I believe you’ll find the numbers make sense.

You can call any of the vendors above if you want to look at implementing location services. Or, if you want someone to help you create a memorable guest experience give me a call or send me an email. I’d love to help!

For more information about kevin sturm Consulting please visit my website.

enterprise software, hoax or holy grail – part two

This is the second post in a three part series on enterprise software solutions.
If you have not read part one you can see it here.

build your requirements document.
You’ve made it this far, so now it’s time to dive deep into the viability and validity of your prospective solutions. For venues implementing a standard technology system this could be the normal RFP process that is common (read more below why I do not like RFPs). But if you are implementing a large scale enterprise system, specifically with multiple vendors, it is now time to discover how well you did your leg work and if all your prospective vendors were completely honest with you through the early discussions.

Most venues, with the possible help of a consultant, will build a very long and wordy RFP. That RFP will be sent to all prospective vendors with a timeline for completion. I recommend to avoid this process. The venue or consultant will spend hours and dollars building a thorough RFP. When prospective vendors receive it, they filter it through a process where it first goes to a marketing person that generally has minimal knowledgeable of what the system can and cannot do. This person reviews the questions and pulls answers from previous RFPs or from an RFP Library that has been built over time. Any questions that do not have standard answers will then be delegated out to prospective parties for answers.

When all questions are answered the RFP will be sent through a sales or marketing resource that reviews it to ensure there are no answers that will prevent the vendor from getting further into the sale. For answers that are obvious disqualifiers careful wording will be used to ensure ambiguity. I am not saying this is all vendors, but I have never found one that did not word answers to their benefit.

My recommendation rather is to build a Requirements Document. This is a table of features that compiled based on research of both technical and operational requirements. From the work you have already done it should be simpler (though not quick) to build this. Group features logically, but only you should know at this point which are required, highly desirable, or nice to have (this helps you get an unfiltered response from the vendor). Your goal is to have “Yes” or “No” answers. Avoid wording where “Yes, but…” could be used as a response.

An example of why I like a Requirements Document versus an RFP is outlined below using a common POS function.

An RFP might say, “Please outline how your system handles transferred checks between employees and how revenue is tracked.” This is not a bad question, but allows for all kinds of interpretation. A Requirements Document has a list of features associated with transferring a check:

• A check can be transferred from one employee to another by a manager at the POS terminal with employees present.
• A check can be transferred from one employee to another by a manager at the POS terminal without employee present.
• Ownership of a check can be transferred by the current owner to another employee without manager intervention.
• Ownership of a check can be transferred by the current owner to another employee with manager intervention.
• Ownership of a check can be transferred by the receiving employee pulling it from the current check owner with manager intervention.
• Ownership of a check can be transferred by the receiving employee pulling it from the current check owner without manager intervention.
• Revenue associated with a transferred check is always assigned to the employee that owns the check at tender.
• A check can be transferred from one revenue location to another after items have been added to the check and saved.
• Revenue from a check that is transferred will be associated with the revenue center that the check is closed in.

It should be immediately apparent that this will be time intensive process. But if you compare this upfront time against reading all the vendor responses and figuring out which vendor has what you want based on those responses my experience is this is a better process.

When you get your Requirements Document back from each vendor you can quickly create a single table with all responses and have a simplistic view of which vendor(s) best meet your need. I’m going to end this section here to avoid a detailed post on the system evaluation and selection process. It is more commonly understood, but I may cover the process in a future post. You can email me if you have a specific question on how to build a Requirements Document.

build a lab.
Making the assumption that you have made your vendor selection(s) and are ready for install, it is time to move to implementation phase. But before you jump directly into the deep end and install your enterprise solution(s), you best bet is to build a lab. For clarity, I am referring a test system to prove the viability of your selection(s). Your lab system should mimic your planned production environment as closely as possible, taking into consideration hardware requirements, network setup (i.e. VPN, LAN/WAN/VLAN, dial-up, etc.), and interfaces. The one exception to this is if you selected a hosted solution. When possible have the lab installed at your location. Hosted labs generally come with limitations that will prevent you from having control over testing and timeline.

The lab step is critical to your success and control in the contract process as well. You may be asking, “How does a lab affect the contract?” Your contract at this point should be specifically for the lab. This type of contract is common, but many vendors do not offer this direction because it increases the sales cycle and increases the risk of having to commit to features in a final contract. So your contract at this point needs to be solely for a lab. However, make sure you have wording in this contract to not pay for software licenses twice. Negotiate to pay for software licenses only in the production system. You should however purchase a support contract for both your lab and production environment so you have full technical support of your lab.

An important point not miss is your lab needs to include all the enterprise systems you are installing. This was the reason for diagramming interface points and system architecture early in the process, ensuring interface functionality meets your requirements. During this process document the installation and configuration step of each solution for production implementation. This will save you time and headache when your business is dependent on getting in right he first time. Another benefit to building a lab.

In short there are two main reasons to implement a lab.

1. Ensure the enterprise solutions you are implementing will interface smoothly based on your operations and requirements.
2. Discover any feature gaps that must be resolved before moving into production. Generally you will find these, and you want to find them now versus in production.

From this information you should now be able to make a final decision if you can move forward with the vendors you have selected. Part 3 of this topic will review documenting feature development requirements, contract language, and implementing your enterprise software project.

For more information about kevin sturm Consulting please visit my website.