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Insufficient Inventory Can Put You Out of Business (Part 1 of 3)

“What aspects of inventorying and securing textiles pose the biggest challenge? What percentage of losses would you consider to be acceptable if the proper controls were in place? And how could an insufficient inventory impact the rest of my operation?”Consulting Services — Charles Berge, American Laundry Systems, Haverhill, Mass.
The process of inventorying and securing textiles can be challenging and will test any manager’s skills. If you do not know your facility’s inventory, you need to get a handle on the total goods in circulation. Securing those goods poses a whole different problem.
Communication and education are usually the best ways to secure your inventory. Your service staff needs to be well educated in order to go into the field and educate your customers. The rental industry is different in that an operator purchases an item at list price and then rents the same piece for a fraction of the cost. The more rentals he gets out of one item, the more profitable it becomes, hence the importance of controlling inventory.
First, your production facility should have a designated area for linen storage waiting to go to the customer. These goods are existing inventory that has been rented and is waiting to be issued again. This area needs to be secured so there is limited access; during the hours the plant is shut down, the area needs to be locked. New goods that have been purchased and are waiting to be put into the system also need to be secured in their own area.
Now, there is work to be done at your customer’s place of business. Encourage your customer to understand the true value of the inventory that you have invested in his operation. The customer who is paying $50 per week for his uniforms and/or linens may not understand that the total investment could be in excess of $2,500. If the customer is a hospital, that investment could be in excess of tens of thousands of dollars.
[NP][/NP]Encourage your customer to keep the linens in a secure area that offers limited accessibility and can be locked. Additionally, I have always found that when such a responsibility is given to an individual within the customer’s facility, they achieve much greater success in reducing lost inventory. Educate the customer to take ownership of the goods.
The acceptable percentage level of losses depends on several factors. What is your customer base, and what are the quality expectations? The losses could be as low as 8% to as high as 25%.
Is your business a for-profit or non-profit? Are you a food-and-beverage, hospitality (hotel), uniform, mat, or healthcare laundry? All of these factors will play into the acceptable level of losses. I would even go as far to say that each laundry type has a level of acceptability that differs from all the others.
In addition to the customer base, the types of linen you purchase factor in. Do you review your purchasing specifications annually in conjunction with your rag-out statistics? Should you upgrade linen items for longevity or decrease them due to loss and abuse? Remember, a 12-cent washcloth is just that! If you purchase a lower-quality product, be prepared to have to replace it more frequently.
Insufficient inventory can put you out of business. I have seen an operation send its trucks out empty in the morning to pick up soil and bring it back to the plant to be processed, then deliver the cleaned goods to the customer later that same day or the next. That company is no longer in business.
Lack of inventory will cause poor morale among both your delivery staff and your production staff. The excessive hours of operation will limit the amount of time for preventive maintenance on equipment, therefore reducing its reliability. The excessive labor costs will reduce your profitability, and extended hours will require additional utility usage.
Inventory control affects all aspects of the laundry operation, from customer service to quality to overall profitability. This will likely be the most important function of your job as laundry manager. Make sure you communicate with your employees and customers about the value and importance of maintaining good inventory control.Equipment/Supplies Distribution — Donnie Weiland, Tingue, Brown & Co., Alvin, Texas
Except for having a job as a taste tester in an ice cream factory, most jobs probably include some rather repetitive, vapid elements. Such is the modus operandi of inventorying. But it is a necessary evil, and to carry out this activity while unfocused can create a less-than-accurate set of results, defeating the whole purpose.
[NP][/NP]The ramifications of this potential malady necessitate a set of checks and balances to enhance accuracy. Face it, when people have to carry out redundant tasks, i.e. inventorying, they can become more lackadaisical as the minutes go by. So, what do you do about it?
Meet with those charged with the tasks and explain what is to be accomplished to whatever degree necessary for their understanding. Establish clean “break points” between production, shipping and warehousing. Have clear-cut detail/summary forms available. Ensure that the off-site goods have break points as well.
When the tally is in, check the results through cross-verification for each item to determine if the numbers are reasonable. Compare the actual to the perpetual inventory and determine if the differences are within previous or industry standards. You should already know the desired inventory level for each item. Now, considering the time lag for new-goods delivery and the rate at which losses occur, you are prepared to order what you need to bring the levels up to par.
Everyone wants to operate as profitably as possible, so any delay in bringing your inventory back up to par will only cost more in the long run.
When you run so short on an item that you can’t deliver, it is apparent that you must make extra pickups, process these goods, and then return them to the customer. This causes overtime, uses extra fuel and energy, and requires excess equipment operation at the sacrifice of scheduled preventive maintenance. It degrades the linen and then you still have to place an order for more goods, sometimes incurring extra freight charges for expediency.
Setting up guidelines for all daily activities, communicating with your key people and having them do the same, maintaining proper inventory levels, and investigating the reasons for your losses can certainly minimize these extra expenses.
Examples of reasons for losses—other than normal wear and staining—are pilferage, abuse, inferior linen, too-harsh washroom chemistry or dryer time/temperature, or inconsistent quality determinations by “checkers.”
If all this work has you thinking about that taste-testing job, just consider how much healthier you probably are!Check back tomorrow for Part 2 of this story!
 

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