- Created on Saturday, 02 October 2004 16:37
- Written by Matt Alexander, MHS
On-premise and central laundry operators may have the impression they are operating in a cost effective manner until a comprehensive audit and review determines otherwise. Do you know how your facility would fare in an audit?
The most frequent reason for discrepancies between the laundry manager analysis and a professional audit can be attributed to miscalculating of actual clean (usable) pounds delivered, attributing an inflated value to added for ancillary services and/or failure to properly identify all laundry expenses.
Generally, an audit is performed by an independent consultant who conducts the comprehensive review, a professional consulting company that includes the laundry analysis in a facility-wide review, a contract management company or a commercial laundry supplier.
When an independent consultant or a professional consulting company conducts the audit and the laundry managers numbers don’t match the professional audits findings, the laundry manager is typically provided time to address inefficiencies and discrepancies.
When a contract management company or a commercial laundry supplier - who has a vested interest in either closing or managing the laundry – conducts the audit, the outcome can be different. Owners and senior management can be faced with alternatives that may include closing the plant and outsourcing, leasing the facility, or contracting with a management company.
This can mean that laundry manager is suddenly expected to demonstrate that his plant can be competitive with the alternatives. If this occurs, the facility could be closed or management replaced before there has been adequate time for the operations to meet their potential. Therefore laundry managers need to understand all elements of cost related to laundry operations and how those cost compare with out sourcing alternatives. In the event cost is not competitive with outsourced alternatives, laundry managers should be proactive in addressing the issues.
ISSUE: TRACK ACTUAL PRODUCTION WEIGHT AS CLEAN POUNDS DELIVERED.
Laundry managers should be able to accurately determine the actual weight of all clean textiles delivered. While there are many methods of calculating production weights, a certified scale is the gold standard for establishing production. One of the most common errors found in a comprehensive audit of laundry operations is that the pounds of clean textiles delivered are inflated. This typically happens for one of the following reasons:
The laundry tracks production based on pounds processed, or washer loads – this invariably results in a greater number of pounds being reported as processed than if the textiles are weighed. The reasons contributing to this condition include:
- Under-loaded washer loads
- New specified textile weights used to extrapolate pounds processed based on piece counts instead of using the actual weight of textiles in-circulation. Terry and some other cotton products may loose a significant portion of their original weight after processing. In the event that piece counts are going to be used to estimate pounds of textiles delivered, textiles items should be spot checked to insure that actual
weights are being used.
- Rewash work could be counted as being processed twice
- Raged-out textiles are counted as having been processed, however, the ragged out textiles should not be counted as clean pounds delivered.
- The laundry scale is not functioning properly or cart weights are not accurately being deducted from the gross weight recorded on the scale
- Someone is standing – along with the textiles – on the scale.
ISSUE: IDENTIFY ALL COSTS
On premise and central laundries should include all of the cost associated with the laundry operations. Some operations for example don’t track benefit or building cost. Sometimes utilities aren’t separately metered. The total cost should include but not be limited to:
- Laundry labor, clearly defined from sorting to packing only
- Textiles, utilities, supplies
- Building depreciation or lease cost and taxes
- equipment/facility depreciation
- benefits including FICA, healthcare, workman’s compensation, sick and vacation pay
- payroll, telephone, insurance, and administrative expenses
- travel, training, and employee recognition
ISSUE: DON’T INFLATE THE VALUE OF ANCILLARY SERVICES
On-premise and central laundry operators may justify higher than competitive cost of processing as being attributable to the added value the operation provides. Following are some examples of ancillary or added services that some operators attribute too much cash value to when analyzing their operations:
- Cart exchange services
- Inventory management
- Just in-time deliveries
- Specialized management and utilization reports
- soiled sorting
- 7-day service
- rewash and stain reclamation
- specialized packaging
ISSUE: KNOW THE FAIR MARKET COST FOR SERVICE
While there are many benefits to owning and operating an on premise laundry, economic viability is often a requirement and eventually a challenge that most facilities must meet. Therefore, a laundry manager should know the market cost for textile services in their region. While some commercial laundries with excess capacity may take on work at a very low price from time to time, a laundry manager should determine the fair market cost for the service.
More than a few contract management companies and commercial laundry suppliers have taken on accounts at a cost that, in the long haul, are too low to be profitable. This can result in a laundry being closed or management replaced only to have the outsourced alternative fail for economic reasons. This can leave only more expensive or less desirable alternatives. Therefore, laundry managers should be able to demonstrate what the market cost for services. In the event a low-ball bid comes in, the laundry manager should be able to demonstrate that it is lower than market cost and therefore may not be a viable long-term alternative.
ISSUE: FIX IT NOW
In the event that you accurately determine the clean textiles pounds delivered, identified all of the cost, and know the market cost for outsourcing; you should have a good understanding of the competitiveness of your operation. In the event that you’re not competitive, it’s time to start making changes.
Generally, when a laundry is not competitive, the following areas are involved:
- Inadequate or unbalanced textile inventory, this is a major problem
- High cost of rent
- High overhead (management) cost
- High labor cost
- Low production per operator hour
- Frequent machinery/equipment failure
- Ineffective utilization of equipment
- High supply and utility cost
Each of these areas requires careful examination and expert guidance to make reasonable and effective changes. In the event there is excess production capacity, bringing in profitable outside work may make a big difference in the economics of the operations.
Independent consultants often play a key role in the process of “keeping It competitive” by accessing the competitiveness of existing operations and, if necessary, developing plans and specific recommendations for improvements.
The measure of on-premise or central laundry value is a combination of how effectively and economically it meets users needs compared to alternatives. At any given time, Laundry Managers should demonstrate competitive-urgency while responding to their customers needs and also that the cost of delivered products and services is competitive with the outsource alternatives.
Quick Rinse - News From Around The World
Emerald Textiles Chosen As Linen Services Provider For Eisenhower Medical Center
SAN DIEGO, Ca. — Emerald Textiles™, a Southern California commercial healthcare laundry provider, announced its selection as exclusive vendor of linen rentals and services for Eisenhower Medical Center. Emerald Textiles operates a technologically-advanced commercial laundry facility that saves the county of San Diego more than 700,000 therms of natural gas and expects to save 40,000,000 gallons of water annually.
“We are pleased with the quality and cleanliness that Emerald is providing and proud to work with a provider who is focused on sustainability and the environment,” said Dana Francis, director of environmental services for Eisenhower Medical Center. “Since Emerald began managing our linen services, we have happier employees and patients.”
Emerald recently received the SDG&E Savings by Design Award, in recognition for its advanced design and extreme energy efficiency. Savings by Design is an award created by the California Public Utilities Commission and San Diego Gas & Electric