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.

Why your laundry failed: 7 signs to tell your laundry business is headed south

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Romy Apolega

The laundry industry is definitely booming. But while everyone is excited to open a new laundromat or try the new service provider in the neighborhood, laundry operations (at a profit) can be quite tricky.

Over the last 46 years in the Philippines’ cleaning and laundry industry, I have seen many businesses cease and hotels/hospitals/companies close down their on-premise laundry after failing to sustain operations. Their solution is often to outsource to cut back on cost. But as someone who came from both service provider (plant manager of one of the biggest laundry service providers in the country) and on-premise laundry (consultant for hotel, hospital and manufacturing OPLs) – I would say that it boils down to understanding the laundry process, maintaining quality (read: Total Quality Management) and knowing the signs before your laundry fails.

I list below 7 general symptoms that require your attention.

 

  1. A lot re-wash

Managers and executives in hotels, hospitals and companies that require laundry services do not often realize the huge impact of re-wash on cost. Re-wash repeats the entire laundry process due to failure in providing quality results. The normal re-wash 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.

 

  1. Excessive cost

There are cost-related events that cannot be controlled such as rising power and water costs and force majeures. But in general, when costs rise faster than the rate of production, it is important to check what inefficiencies and challenges exist. Are these utilities? Can manpower be streamlined?

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  1. Machine failure

A machine that doesn’t run efficiently (or one that breaks down) is lost opportunity for the business to earn. One of the worst things that can happen is a flatwork ironer breakdown, which can spell chaos for the laundry staff.

 

  1. Delays in delivery

For commercial laundry companies, failure to deliver on-time can break their client’s business – especially if the customer is a hotel with very few linen par stcck. Systematic delays are a cause of concern for the service provider.

 

  1. Damages, losses and mix up

One by one, your linen inventory decreases due to pilferage, or perhaps your linen’s life shortens due to bad wash, resulting to degradation. Bad wash and incorrect usage can negatively affect lifespan – for instance, using guest towels to scrub areas in the bathroom where strong chemicals are applied will eventually damage the linen.

 

  1. Graying of whites

Gradually, your linen loses its white luster and fails to meet the whiteness test.

 

  1. Customer complaints

The most obvious sign that something is wrong is via customer feedback – especially from loyal clients. For hotels, failing laundry services (whether OPL or outsourced) often lead to delays in releasing a hotel room (e.g. housekeeping doesn’t have fresh linen to replenish) or smell and stains on the towel (need for re-wash).

Are you encountering any of these signs? Consult with Romy Apolega through rhapolega@yahoo.com. Follow Is It Clean on Facebook and LinkedIn for more updates on the laundry business.

READ NEXT: Hotel Laundry: Outsourcing vs On-Premise Laundry

Hotel laundry: outsource or in-house?

Depending on a hotel’s business objectives, outsourcing laundry or operating an on-premise laundry (OPL) can provide a wide range of competitive advantages. Outsourcing avoids the capital investment in laundry equipment and paying for labor. It is an ideal option when a reputable commercial laundry supplier exists in the neighborhood. OPL, on the other hand, allows the hotel to control quality and inventory and can be an additional revenue stream for a hotel (laundry services for guests and outside customers). The key is understanding which options can drive greater value to the hotel.

Based on my experience in managing a service provider’s laundry operations and advising hotels with their OPL, here are my thoughts about outsourcing vs. in-house laundry.

On-premise laundry

Before outsourcing became a trend, the only way for most hotels to do laundry is to invest in huge institutional laundry machines, flatwork ironers and other equipment to wash and dry their linen, including hotel staff uniforms.

Linen, itself a huge investment, must be taken care of by a large group of personnel – from the housekeeping staff down to the laundry team. A well-known hotel in central Makati, for instance, has around 70 staff working on laundry alone. In addition, laundry consumes a lot of electricity (heat) and water, and environmental considerations such as water treatment must be factored into the equation.

Investing in equipment and paying salaries and high utility cost may not sound attractive for OPL, but in-house laundry has its unique advantages:

  1. Revenue source (OPL is a laundry and valet shop service combined; laundry and dry cleaning services for guests and outside customers)
  2. Faster turnaround time (hotels need to have higher pars in inventory of linen and uniform to avoid shortage due to delays in delivery or bad coordination)
  3. Property protection (risk of service providers misplacing your linen assets)
  4. Low replacement cost of linen (bad wash lead to faster deterioration of linen)
  5. Low risk of contamination (commercial laundry companies also have other customers, like hospitals)

For many luxury hotels, having an OPL is often a default choice. Hotels not only need to provide a full suite of services (including guest laundry), but they also need to maintain the highest standard in linen quality, which can be a risk in outsourcing. Even in cases when the service provider is at fault, the blame for bad service (such as rooms lacking linen due to low pars) will always fall on the hotel.

 

Outsourcing

Over the last decade, more hotels have opted to choose service providers over OPL. While this is now the trend among lower-tiered hotels where cost is tightly controlled, we have also seen big hotels close down their laundry shops. Here are the major advantages:

  1. No need for capital investment
  2. Less utility, labor and overhead cost (although these costs would still be incurred the service provider and pass on to its customers)
  3. Space for laundry can be used for revenue-generating activities (additional hotel rooms, gym, spa, office leasing)

Here are some areas in outsourcing that both the service provider and the hotel must watch out for:

The value-add of service providers is that they absorb the cost of purchasing equipment and paying for utilities, salaries and other overheads to do laundry albeit some of these costs are eventually passed on to its institutional customers. A good service provider will minimize the risks of bad wash, misplaced linen, contamination and delivery delays.

Are you still undecided? Let’s talk at rhapolega@yahoo.com or call +639173235203.

READ NEXT: This laundry shop wants to change the way people see laundry

(Featured photo c/o http://www.brightwatergroup.com)

Tagaytay is the new growth area for laundry. Before you invest, consider these 4 challenges first.

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Real estate development in Tagaytay City. Wikipedia image courtesy of Manilaspirit

Like many cities, Tagaytay is experiencing a boom in tourism and business activities, which is good news for the laundry industry.

With huge demand for hotel rooms, restaurant services, wedding caterers and other hospitality services, these businesses are relying on a growing number of laundry shops to wash and provide their daily linen and uniform requirements.

On top of these, the hundreds of units of condominiums and houses that mushroomed over the last decade means a large client base for retail laundry services.

But putting up a new laundry in Tagaytay can also be a challenging endeavor – especially if you have not considered some location-specific challenges.

Here are 4 of them:

Supply and Quality of Water

It is known within the industry of Tagaytay’s – and the greater Cavite’s – water supply challenges. Read an article here by the Business Mirror.

Some in Tagaytay also rely on hard water (deep well), which I mentioned in past articles are not the preferred kind of water for laundry as it requires more amount of chemicals to wash off dirt.

Cost of Electricity

Cost of electricity and LPG are the most expensive portion of laundry. In a place like Tagaytay where relative humidity is higher than Manila, clothes dry longer due to higher amount of water vapor in the air relative to water vapor in saturation. This means laundry shops in Tagaytay (and Baguio as well) need extra heat to dry clothes and therefore use up more power.

Technical Education

Laundry is an industry that heavily relies on innovation and technology. It requires constant education on new techniques and skills enhancement for owners and employees. Owners and employees have to maximize the very few laundry-specific seminars and training available in the area in Tagaytay – or travel to Manila to attend some.

Suppliers

The low number of suppliers of chemicals for laundry, kitchen sanitation and other cleaning services has kept prices a bit up north.

 

Despite these challenges, Tagaytay is still the new hotbed of opportunities for the laundry industry. Laundry operators, owners and employees need to find solutions, be smart and get the right partners.

If you’re thinking of building your own laundry shop in Tagaytay, ask and plan your next venture by reaching Romy Apolega at rhapolega@yahoo.com.

READ NEXT: 3 Common Headaches in Commercial Laundry

 

Featured image by Steven Rascoe

The secret to a profitable laundry business

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Romy Apolega: rhapolega@yahoo.com

In my 46 years of experience as a Chemical Engineer in the cleaning and laundry industry, I have always been a strong believer of quality. If you can consistently provide services and products of good quality that make your customers happy (without losing money), then you’ve built a good business model.

There is an art and science to this case called Total Quality Management (TQM). TQM is a management philosophy that looks at a company as a collection of processes (marketing, sales, operations, production, finance, etc.) whose ultimate goal is to meet customer needs and the organization’s objectives.

Sadly, TQM is rarely used used in the industry.

Whether you’re an in-house launderer (hotel, restaurant, power plant, manufacturing, etc.) or an external service provider, it’s important to realize the benefits of adopting this business philosophy.

Here are some reasons why:

1. TQM is about Customer Satisfaction

TQM’s goal is to consistently meet customer needs. All functions of the business must converge and lead to this outcome.

In our industry, this compels launderers to provide services that meet these requirements:

  • Timeliness

  • Completeness

  • Whiteness

It’s not just the cleanliness of the items, but also the service that should be examined:

  • Laundry items should be delivered, properly folded (no crumpling) or hung

  • Reconciliation on losses, shortages, damages and mix-ups with the customers should also be cleared

  • Small damages and tears must be mended

  • In case of overage, these must be reported and returned

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Photo by Waldemar Brandt on Unsplash

READ: 7 Considerations Before Opening Your First Laundry

2. TQM puts emphasis on Continuous Process Improvement

No laundry is perfect, but you’re at least expected to learn and enhance your laundry business’ functions to deliver more superior services and products.

TQM puts emphasis on Continuous Process Improvement. It’s the way companies make an ongoing effort to improve, either incrementally over time or via breakthrough projects at once.

Laundry companies should have “Quality Circles” — an internal group that meets regularly to discuss and improve processes and production in the company.

Quality points should be identified and are functioning. Identification of the process from pick up to delivery

Management also need to regularly revisit the company’s mission and vision. SWOT will be a practical instrument to assess and improve.

3. In TQM, everyone is involved

The top management to the line person are involved in total quality. This means that to maintain competitive advantage, members of the organization must receive regular training.

TQM is not itself a competitive advantage, but it is a tool that can lead your laundry business to differentiate yourself from competition. For laundry businesses, the concluding quality question in every TQM initiative is, “Is it really clean?”

READ NEXT: 3 common headaches in commercial laundry (and how to fix them)

If you want to know more about TQM in laundry, email me at rhapolega@yahoo.com or editor@isitcleanph.com. Follow my Facebook page and LinkedIn page for more updates on the laundry business.

7 things to consider before opening your first laundry business

When faced with a mountain of dirty laundry, people today ask themselves: Should I wash this at home or should I look for someone who can do this instead, and quicker?

Sounds familiar? There are a lot who likely choose the latter, and this is probably the reason why laundry shops in the Philippines continue popping up. It is no surprise that for the past few years, the laundry business has become one of most promising (and profitable) SME or small and medium enterprises.

If you want to set up a laundry shop and become one of the service providers in the country, here are the seven things to consider in starting your own business:

  1. PRICING STRATEGY

Strategies can either be quality-driven, price-driven or capacity-driven. Pricing that is based on quality commands a premium as you’ll put in all the needed inputs and aim for the perfect wash.

Big brands usually follow the price-driven approach, where they capitalize on their reputation to justify their price despite the low rates offered by smaller competitors.

Meanwhile, a capacity-driven strategy offers low-cost pricing which the business tries to compensate by getting more clothes washed in a single spin.

  1. WATER

Water is an essential component of the laundry process. To save on the rising cost, launderers are tempted to source from deep wells, using hard water filled with minerals that are actually bad on the cloth as it does not easily dissolve soap. Soft water, on the other hand, requires less chemicals and provides a trouble-free finish.

Launderers need to observe as well the optimal water level in each wash. Rinse can be adjusted either twice or thrice, depending on the need.

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The author during the Cleaning & Laundry Show 2019 at SMX.

  1. LABOR

Imagine that you are to build a laundry business and you don’t have an assistant to help you out. Although some shops try to lessen manpower involved in the laundry process, having an experienced employee for cashier and customer service are still essential. Employees should be accountable, responsible and are analysis-oriented.

Whether you’re a big or small laundry, expertise produces less errors and rewashes.

Payroll for your workers is also important. Pay them fairly as they work for your business.

  1. CHEMICALS

Customers judge the best detergents and fabric conditioner by looking at physical attributes, like bubbles and aroma, and also cost and price.

From an operations perspective, launderers should aim for the best wash by avoiding highly acidic solutions. Less chemicals is better. Your supplier also must provide regular technical services.

  1. EQUIPMENT

You have to know which machine you should use in running your business. Aside from the price, you also have to consider the quality (good machines have powerful motors). Remember that it is always about their efficiency, capability and durability.

Laundry shops should also have enough space for the machines. A typical set of two machines will occupy about 1 square meter. With the waiting areas and reception included, the typical shop can be between 20 to 100 sqm with a capacity of two to 10 sets of machines.

  1. DRIER & HEAT

After the wash, the launderer puts everything into the dryer. There is a certain moisture content required prior to drying. Lint removal must also be regularly done.

Drying gives out heat. And if one would like to save electricity or gas cost, the heat coming from the dryer can be reused by setting up another small room for the pre-drying.

The drying area must be well-ventilated.

  1. LOCATION

In any brick-and-mortar business, location is always key. Location must be strategic and should be near target customers. Finding the right balance of accessibility and cost (lease) for your laundry shop can make or break the business.

READ NEXT: 7 trends in commercial laundry in 2019

If you want to know more about how to succeed in the laundry business, email me at rhapolega@yahoo.com or editor@isitcleanph.com. Follow my Facebook for regular updates on the laundry business.

 

Text contribution from Isabel Magsino. Image contribution from Isabel Magsino & JM Abcede

Checklist: 8 factors to consider to win in the business

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Image courtesy of Abstract-living.com

Competition is winning the business game — attaining the needed sales, leading the market, comfortable edge in the sales figure, and of course, getting to be popular in the line of business.

But winning is easier said than done. Times have changed along with technology, revealing new ideas, ways of communication, and equipment. This is especially true in the hotel, restaurant, and institutional industry, even among suppliers and players in related sectors of laundry, food safety, and sanitation. There are new tools to use to pursue objectives, new services coming up, and new approaches for these industries to win old and new customers and even to maintain them.

On this regard, are we prepared in the following considerations to fulfill our objectives?

Vision/Mission – Have you been visiting your vision and mission regularly to gauge whether they are still synced with the times and objectives? Are the customers’ wants and needs still the same? Have you realized what new segments can provide better figures?

Total quality management – Is this in practice and in conjunction with total plant management?

Marketing and sales – Are these two groups well coordinated for the common goals and sales target needed? Are the new customer types, services, and products considered very well?

Operation – Will it be able to deliver the sales and marketing group efforts?  Are the commitments, terms, standards, and quality tailored fit for the customers fulfilled?

Services – After the necessary products are delivered, will the corresponding, expected after-sales service be provided on time?

Suppliers/Supplies – Have the quality standards been established to the point of reliability in all aspects?

Contracts – Different contracts are drawn with customers and suppliers, too. How about the advantages or long- and short-term  contracts? Will such contracts bring down costs, increase productivity and quality?

Pricing – After all has been said and done about quality, availability, standards, operation, and terms, pricing is established. This is the final measure in the competition game — will it result to bigger sales but lower profit or lower sales yet bigger profit? Take your pick.

What do these all mean for the hotel and restaurant industry, specifically the laundry, food safety, and housekeeping sectors?

Customers are happy with clean crisp linen and being served with quality safe food in sparkling and spotless dining wares. These are easy to be promised but they also require a lot of backroom effort to produce the quality and standards needed. All the eight issues above will have to be dealt with carefully to succeed with the competition game.

Are you performing well in all these factors? Let’s talk: rhapolega@yahoo.com or send me a tweet @isitcleanph