9 Essential Costs in Commercial Laundry

19442137_475836746083268_1201733967700342937_oThis is the second of a two-part article on utility costing. For questions, email editor@isitcleanph.com

On the last article, I tackled about the hidden costs in commercial laundry, such as re-wash and rejects, pilferage and leaks. Understanding these costs allows the business owner to put in measures to minimize or avoid these events.

Now, let me enumerate the “known costs” and the standard expenses that any laundry business will encounter. While these are essential and therefore difficult to avoid incurring, owners can implement smart tactics to manage them and maximize the bottomline for the business.

 

Labor 

The headcount of staff needed to operate a laundry varies. A luxury hotel in Makati once had a ratio of 1 laundry staff (whether outsourced or in-house) for every 10 rooms. There are also business models such as self-service laundry which are designed to be low-cost in labor.

In general, businesses (hotels, hospitals, and institutions) avoid hiring in-house and will prefer to outsource their laundry to a service provider.

 

Rent

Real estate is tricky if you don’t know how to make it work for you. Laundry shops must have the best and most strategic location, but rents can be too expensive in central business districts. One tactic employed by laundry shops today is to have a centralized plant (much like the commissary concept in F&B) where soiled linen from various receiving stations in different branches are compiled and washed.

 

Chemicals 

Commercial laundry requires a number of chemicals. By order of their application, these are: alkali or booster; detergent; bleach (chlorine or oxygen); and sour or neutralizer, and fabric condition.

 

Water 

For laundromats and self-service laundry shops, regular tap water is often enough to sustain operations. But commercial laundry operators are usually more discerning of the water quality (for instance, preferring soft water) for efficiency and to avoid damages to the linen. Better quality of water sometimes mean higher cost.

 

Depreciation and maintenance 

Machines depreciate in value over time and require regular maintenance. It is best to look for suppliers with good after-sales service. Remember: A machine that doesn’t run is a huge opportunity cost for the business.

 

Electricity 

Electricity powers the laundry shop’s machines and other appliances. Between the start of 2006 and end-2017 (nearly 12 years), electricity prices in the Philippines have gone up by 39% based on the Electricity Price Index. While seemingly high, this is lower than the Consumer Price Index (+54%) of the same period. The CPI is the basis of inflation figures.

 

Steam

Industrial laundry operations usually involve steam as a way to heat water (Hot water is the best kind of water to kill bacteria and remove most stains). Steam can be powered by LPG or electricity.

 

Packaging

Newly washed linen are packaged nicely in plastic or branded canvas bag, ready for delivery to the customer.

 

Logistics 

Delivery (and sometimes pick-up) of linen to the customer is a different animal. Logistics would involve vehicle, gas, and personnel who has a good sense of time, direction and record keeping.

READ NEXT: 7 signs to tell your laundry business is failing

Understanding costs is key to a laundry business’ survival. If you’re interested to learn more about training and advisory on costing (especially utility costing), email rhapolega@yahoo.com

5 hidden costs in commercial laundry

This is the first of a two-part series on understanding utility cost. For more information, email editor@isitcleanph.com

One of the big mistakes of owners and operators of commercial laundry is failing to understand their costs. You could be getting a lot of customers, but if you’re not aware how skyrocketing costs are affecting your bottomline, you could be out of business before you know it.

Most of us know that costs are classified as either fixed or variable. In laundry, fixed costs include rent and labor, while variable costs include chemicals, water and some utilities.

But this is a simple way of looking at your operations. There are those that I call “hidden costs” which are dominant in the laundry business. Understanding them is key to a business’ survival:

Pilferage

Pilferage refers to the reduction in inventory caused by either shoplifting by customers or employee’s petty thievery. In U.S. retail, pilferage represented nearly 1.4% of sales in 2016, and 80% of linen losses among hotels.

In laundry, these inventories can be chemical supplies or even clothes and linen of customers. Pilferage can also be undeclared services – employees providing unpaid laundry service to friends that eat up utilities.

Rejects and Rewash

Perhaps the most obvious cost among the five, rejects and rewash are brought about by failure to meet the agreed upon quality of service to customers. For commercial laundry servicing hotels, this may take the form of smelly and unclean linen, which need to be rewashed again to meet standards.

The normal rewash rate is 2% to 3% daily. If you’re beyond this, your utility costs double as you have to repeat the same process for the same items. In laundry, doing it right the first time is crucial.

Leaks

Leaks can be caused by minor events such as oversudsing and unsecured door or drain pipe, or serious causes such as water pump, water valve or drum seal. These must be fixed immediately, as leaks tend to affect water utility cost and render the machine unusable for quite a time. (An idle machine is an opportunity cost for the business.)

Leaks are not only confined to water, but also to steam. Steam leaks from commercial boilers also have implications on utility costs.

Under Load

Under-loading creates a variety of problems. Firstly, the disproportionate amount of water due to under-loading will suspend the linen, reducing the effectiveness of the mechanical action of the machine. Secondly, a disproportionate amount of chemicals will have negative effects on linen quality. Thirdly, under-loading creates more batches to wash, thereby increasing utility costs.

The opposite of under-loading (overloading) also impacts your bottomline. Overloading risks the effectiveness of detergents, thereby compromising quality that may disappoint your customer and cause you to re-wash. On top of that, overworking your machine increases its wear and tear.

Heat Loss

Laundry companies use commercial boilers to heat water, which is effective to clean linen. Blockages can cause heat loss that increases utility costs.

READ NEXT: 7 signs to tell whether your laundry business is failing

For more insights on the hidden costs of your commercial laundry business, email rhapolega@yahoo.com. Follow Is It Clean on Facebook and LinkedIn for more updates on the laundry business.