This is the first of a two-part series on understanding utility cost. For more information, email email@example.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 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 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-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.
Laundry companies use commercial boilers to heat water, which is effective to clean linen. Blockages can cause heat loss that increases utility costs.