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)