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Outsourcing Trend Gains on OPLs

Bruce Beggs |

NEW BRIGHTON, Minn. — Outsourcing of laundry services by institutions is a trend that’s “gaining speed,” a longtime industry consultant says, but there will always be a need for on-premise laundering at some level.
On-premise laundries often defend their service by focusing on providing quality and timely access to goods. Competing textile service providers hammer on OPL costs and their ability to free up an institution so that it can direct its resources to other pursuits.
“The situation continues to move in the direction of outsourcing,” says Glen Phillips, a noted textile maintenance expert with Phillips & Associates, based in New Brighton. “More and more hotels, for example, are determining that doing laundry is not part of their core competency.”
But while he says on-premise laundries – OPLs – are losing ground to textile service providers, commercial laundries in many cases are failing to take advantage of these business opportunities by not investing in new technology.
“There’s a modernization issue,” he says. “They’re wanting to process 1,000 acres of wheat with an old-style sickle.”
Two trade associations, the Textile Rental Services Association (TRSA) and the Uniform & Textile Service Association (UTSA), actively support their members in their attempts to take the business away from OPL operations.
Both offer tools designed to help textile service companies market their services to businesses that have OPLs or are planning OPLs. Often, their arguments in favor of making the switch focus on costs and the benefits of having an outside vendor handle the support service while the institution directs resources to other pursuits.
For OPLs, their chief defense is maintaining control over linen quality and having easy and swift access to the goods, Phillips says.
Linda Freeman, the director of academic affairs for the National Association of Institutional Linen Management (NAILM), oversees the American Laundry & Linen College that offers industry certification in laundry/linen management and environmental services management.
She says there’s a delicate balance between financial management and customer service that any laundry – no matter how it’s categorized – must achieve to be successful. It’s hard to make a blanket comparison of OPLs and commercial laundries or textile rental companies, she adds, but she’s noticed one key difference between the two sides.
“What I see in the school, when they’re in the classroom, is that OPLs are not quite as savvy in financial management as they should be. When it gets to customer service, you see a switch and it’s the commercial side that struggles. They’re so tied to that contract.”
Freeman said she’s received calls from institutions, particularly hospitals, that had shut down their OPL in favor of an outside firm only to switch back.
“I’ve seen the pendulum swing back years later,” she says. “The commercial laundry that makes the hospital their partner” is in good shape. “The one that only focuses on the contract won’t have it long.”
The Microeconomic Analyst Inc. (TMA Inc.), a Philadelphia-based research organization, studied laundry trends in the healthcare market a few years ago, and the American Reusable Textile Association (ARTA) summarized the results in a 2004 newsletter.
The study involved interviews with 40 to 50 respondents, including individuals from healthcare or laundry industry associations, and laundry operators in nursing homes, long-term care housing and hospitals.
Industry size was estimated as follows:
• Hospitals (acute, long-term, psychiatric, specialty): 6,200 facilities; 1 million beds; 18% OPL, 10% shared facility (laundry done within same owner hospital system), 33% cooperative, 19% textile rental, 21% commercial laundry.
• Nursing homes: 18,000 facilities; 2 million beds; 78% OPL.
• Assisted-living facilities: 36,000 facilities; 1.1 million beds; estimated 90% OPL.
Many hospitals had discontinued their OPLs due to space limitations, cost-effectiveness, not wanting to spend capital expenditure funds, capacity limitations, lack of labor expertise, and wanting to focus on core issues, according to the survey. Respondents agreed that the overall number of OPLs was declining.
OPLs were either in metropolitan areas and had a significant volume of laundry to remain cost-effective, or they were in more remote areas.
Many of the OPLs that still existed had invested capital expenditure in more efficient equipment, had some level of laundry management expertise, and had a relatively high volume of laundry (the average was 4.8 million pounds annually), according to the TMA survey.
Many respondents saw space, cost, capital expenditure and productivity as forces that may cause hospitals to outsource. Increased environmental regulations and overall cost pressures were also mentioned. A small percentage said they thought the lack of quality when outsourcing would cause some hospitals to reopen their OPLs.
At the time, respondents saw no move toward outsourcing among long-term care laundries, save a few assisted-living facilities that outsourced table linens because they didn’t have an ironer. Several respondents said their corporate department did an outsourcing study for laundry and concluded it was better to keep the service in-house.
There will always be a need for in-house laundering, Phillips says, although probably on a much smaller and specialized scale.
“A hospital goes through a lot of housekeeping mops,” he says. “A dust control company couldn’t get them to them fast enough. So, it makes sense to have a small washer and dryer right there.
“Your Motel 6’s and other budget hotels will always have the OPLs because their rack rates won’t support not having them. Plus, they’ve got a small volume.”
But the hotel developer who’s building new properties at a cost of $300 or $350 per square foot isn’t likely to devote some of that valuable space to an OPL, Phillips adds.
In the mid-1990s, Phillips’ company produced a seminar handout titled Seven Ways Institutional Laundry Managers Can Keep Their Jobs. On the last page were four bullet points to remember:
• Institutions will always have a need for linen.
• Those same institutions have several choices as to how that linen is processed.
• Given the choice, control and convenience of doing linen in-house is still preferred by most senior managers, even though it is not always the most economical method.
• The major issue with most institutions is whether the strength of the leadership in the laundry is better or worse than the aggravation of finding an alternative way of processing linen.
“Those statements are as true today as they were then,” Phillips says. “When I’m called in by an administrator, then I know we’ve got a problem.”

About the author

Bruce Beggs

American Trade Magazines LLC

Editorial Director, American Trade Magazines LLC

Bruce Beggs is editorial director of American Trade Magazines LLC, including American Coin-Op, American Drycleaner and American Laundry News. He was the editor of American Laundry News from November 1999 to May 2011. Beggs has worked as a newspaper reporter/editor and magazine editor since graduating from Kansas State University in 1986 with a bachelor’s degree in journalism and mass communications. He and his wife, Sandy, have two children.

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