- Created on Monday, 02 May 2005 17:05
- Written by Ken Tyler
As analysis, consultants and various levels of internal management continues to complicate laundry operational cost scenarios, it is apparent that laundry and facility managers require a cost benchmarking rule of thumb that will assist them in selling their operations i.e. justification for new systems, a new facility, obtaining new customers and probably the most important, comparing variable cost which should reflect decisions to continue in house operations or to examine the parables of outsourcing management, operations, linen rental, transportation etc.
It is quite apparent that large laundry and linen rental consortiums that deal specifically with healthcare markets are becoming more competitive as business tends to escalate.
A review of over 300 healthcare laundry facilities located in the United States with variable degrees of efficiency reveal the following benchmark costs that are deemed most efficient on the average, even though each and every facility demonstrated opportunities to reduce cost especially in labor sensitive areas, most important were the plans to reduce labor and utility cost related to washing, drying, conveyance, flatwork feeding and finishing. These facilities also reported that major efforts were in the process to reduce textile replacement cost through standardization efforts and by examining best value over lowest cost for an item. Other major components under review seem to drive at lowering chemical cost by conducting actual comparisons and focusing on the customer service element that is so critical to this facet of the operation.
Processing Cost: Direct labor costs including fringe benefits that are applicable to the receipt, sorting, washing, drying, ironing, conveyance and preparing textiles for delivery within a laundry processing facility. .16-.18 cents per pound processed.
Administrative Cost: Laundry, Linen Management, Secretarial, contracting administration, general foreman and non-production employees/housekeeping. .03-.05 cents per pound processed and delivered.
Maintenance and Repair Cost: Processing and ancillary support equipment, carts etc.: Labor cost and materials associated with routine maintenance of applicable systems: .03-.04 cents per pound of laundry processed and delivered.
Depreciation of Equipment: Equipment value divided by 15 years: .03-.05 per pound processed.
Depreciation of Property and applicable property taxes:Land and Building aggregate cost plus annual taxes divided by 75 years: .02-.04 cents per pound processed and delivered.
General Supply Cost: Leasing of office equipment, office supplies, covers, pads, hangers, thread, wax, patches, buttons etc. .005 .01 cents per pound processed.
Chemical Supply Cost: Laundry chemicals, water treatment etc. .01-.02 cents per pound processed.
Utility Cost: Electrical, Steam, Gas, Water, Oil, Sewage, Refuse Removal, Solar: .04-.05 cents per pound processed.
SUB-TOTAL: Production Cost for a most efficient operation should be: .325-.43 cents per pound processed and delivered. Facilities in the northern states had significantly higher labor cost and utility cost than the remainder of the country...
Textile Distribution and Return Cost: Drivers, fees, tolls, lease cost, fuel, vehicle Maintenance and Repair Cost: .04-.05 cents per pound processed and delivered.
Textile Operations: Linen Room Distribution labor and benefits, Seamstress, Uniform distribution, cart replacement. .04-.05 cents per pound processed.
Textile Cost: Surgical, uniforms, general linen, drapes, all other textiles based on a PAR maintenance value of 7: .10-.13 per pound processed.
SUB-TOTAL: Textile Distribution and Textile Replacement Recurring Cost: .18 - .23 cents per pound processed
Over-all Operational cost benchmark range: .505- .66 cents per pound processed
While the over-all variance in cost ranges is certainly wide spread, the manager must carefully and accurately calculate all cost associated with an operation. One major failure on the part of management is the inability to calculate fringe benefit cost and include this cost as part of the final outcome. Just calculating production cost and forgetting other cost simply will raise additional questions by those in the know. For example all depicted cost in this bench mark exercise are considered equally important, one without the other simply paints an inaccurate picture.
H. Ken Tyler retired from the Department of Veterans Affairs after serving over 35 years with the Federal Government. He also retired from the US Marine Corps after 27 years of service. In both capacities Tyler managed laundry, textile and uniform programs. Currently, Tyler is active with several professional organizations. He is a member of the Board of Directors for NAILM, and an active member of Textile Rental Services of America, American Reusable Textile Association, Retired Marine Corps Officer ’s Assn. and the Leadership VA Alumni Society.
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