Don Desrosiers

It happens everyday in the shirt business — a competitor, a quasi-competitor, a friend in the business or just somebody else that you don’t know that has heard that you do a good job on shirts — calls and asks you to do his shirts “wholesale.”

It just may surprise you to learn that it almost never makes sense.Somehow, it looks great on

paper, but in real life, something is amiss. In order to even consider doing this “wholesale” business, you must have a very firm grasp on your cost. If you don’t, either get your accountant, yourself or someone else very qualified, on the task of determining your cost before proceeding.

Notice my use of the word “wholesale” or “wholesaler.” If you do, say, 3,000 shirts per week, but also do 500 shirts for someone else, I bet that you don’t call yourself, or consider yourself to be, a wholesaler.

Humor me here, ok? If for no other reason, consider the use of the words “wholesale” and “wholesaler” to be there for lack of a better term.

You cannot consider doing more shirts unless you know what your cost is now. Here’s why:

Let’s say you are losing money in the shirt department, and are doing 1,800 shirts per week. For whatever reason, your losses are evident and your lack of profit is obvious.

Fred, from Fred’s Cleaners across town, offers to send you his shirts and pay you $1 each. All indications point to a new gross revenue of $2,000 per month. Nice.

In a moment of ignorance, oblivion, stupidity, desperation or naiveté, you very wrongly assume that this will be largely profit.

You will repeat the mistakes of so many others and shoot yourself in the foot. Do not discount the genuine possibility that you will lose more money!

Do not discount the genuine possibility that you will lose more money! Oops! Did I say that twice? Just an ironic accident. <wink>

Those that preach that the cost per shirt is well over a dollar (or over two dollars) are effectively proved correct whenever this happens. The person to whom it happens is often simply blindsided.

I make no bones about this fact: I have done this very thing more times than I like to admit. I speak here, not with prophecy, but rather with the clear vision that hindsight so often provides.

At the risk of sounding repetitive because I know that I’ve said this before, I will say it again:

In certain situations, more volume may be a godsend, but not infinitely more volume; not any number more. Five hundred more shirts in an average week may save your life and your business; while 1,000 more may be a killer.

Further, 2,500 more shirts may be absolutely perfect. The key is simply knowing which figure is perfect and checking it as often as possible. If you do the figuring every week, nothing bad can come of that.

Once you know the magic number — the optimum number of shirts or cash dollars at which your plant runs at maximum efficiency — don’t forget it. Believe it and stick to it. But you are not done yet. Seriously consider seasonal fluctuations.

If you make x dollars during the combined busy months and lose x dollars during the combined slow months, you learn that your cost per shirt is exactly what you charge for one shirt. It makes no difference what that number is, if you retail shirts for $2.45, and you make a total profit of $20,000 during the months of March through June plus September through December but lose a total of $20,000 during January, February, July and August, your cost per shirt is exactly $2.45. Period.

The trick is, of course, accurately calculating that profit and that loss in the first place. Without knowing that, you should not and must not consider boosting volume.

I consider this previous paragraph to be one of the most important paragraphs that I’ve ever written. I suggest that you reread it, but this time make the numbers specific to you, or more realistic. Change the $20,000 figure to $2,000 — or $2,000,000. Change the retail price to $1.85 or 99 cents. Whatever floats your boat. The lesson remains and it is clear, inescapable and most important.

Most people know that profits are scarce or non-existent during the lean months, but the way that many arrive at a remedy for this situation is wrong.

Let’s say that you do 3,000 shirts per week during peak season (or whatever figure you wish to use), but only 2,500 per week during those quiet months.

That is a reduction in monthly cash flow of somewhere between $2,000 and $4,000. Knowing this, the seemingly obvious “solution” is to get an account, a “wholesale account,” that will send you 500 shirts per week. That way, the volume will never drop below 3,000 shirts per week.

This is almost always wrong! And be careful to not hastily place yourself within the confines of that comfort zone that the phrase “almost always” provides. (How’s that for diplomatic?)

There are a variety of things that can cause this new volume to be nothing more than a lateral move — not an enhancement of profits, but simply a rockier road to the same number. Not the least of which is the reduced gross price, as we are presuming that you sell the wholesale shirts at a “discount.”

Most often, a plant needs an extra person during the busy season and, although not needed during the slow season, he or she is kept around to avoid the need to re-hire and retrain in April. I understand this thought process. It just doesn’t make sense on the P&L. This probably explains why I have never visited a plant that wasn’t overstaffed. Imagine that.

Furthermore, this extra body sets a new standard. Now the 2,500 shirts “requires” a staff of increased size — four instead of three, or three instead of two, or five rather than four. Management has unofficially endorsed “padding” the time clock. Risky business.

Have you ever considered this? Try to figure out how to be profitable at the production rate and the volume you are at right now. You’ll need a plan of action for your slow season as well as your busy season.

This is the answer rather than whisking more volume into the mix. So often volume gives us a false sense of security —�a feeling that we must be profitable because we are so busy.

I’ll bet that reading such a simple sentence looks unreal and ridiculous, but in actuality some folks actually feel that way, although perhaps subconsciously.

If you look around your plant and see that you have more clothes than any reasonable person would expect to see in such a small place, you think one of two things:

“I do more work than anybody. If money can be made in this business, then I’m making it. If I’m not making money, then it can’t be made.”

Or: “I’m not making money, but when I get around to it, I’ve got to sit down and figure out a way to cut my overhead. If I cut my costs, I’ll be making lots of money as I certainly have the work.”

Good chance you will never find the time. This is common because many plant owners believe that getting the business is the hard part and finding profit in the gross revenue is much easier. The reciprocal is true.

Possibly, the most common issue with seasonally fluctuating volume is “lose money during the slow season, but make up for it during the busy times.”

If this is your goal, you truly must aim higher. If it is simply what you have come to expect and accept, I urge optimism for there is hope, but it must be combined with some management savvy.

The first rule is that the plant should always run exactly the same way regardless of volume fluctuations.

If you’ve just muttered under your breath that this isn’t possible, consider the possibility that you are incorrect and rethinking this may change your life. But it doesn’t come without a price. You will need to be ready, willing and able to do certain things differently.

Let’s say that you do 400 shirts in one day. It takes two employees eight hours to accomplish this. Shirts per labor hour is calculated as such: 400 shirts divided by 16 labor hours (2 employees x 8 hours each) = 25 shirts per labor hour. Acceptable by my standards, extraordinary by others.

You decide whether this is more like your busy season, or more like your slow season.

Let’s say it’s your busy season or just a busy day of the week. If you are not capable of maintaining that 25 shirts per labor hour when you do 350 shirts, or 300 shirts, you will be hard-pressed to make money in the shirt business.

You must proportionately reduce the expenditure of labor hours to maintain at least 25 shirts per labor hour. Yes, that means that on slow days, employees work less than eight hours and on busy days, they work more.

That is the job. That is the nature of the business. If you fail to micro-manage your labor costs, you will breed a monster.

If you allow employees to pad the time clock in order to get a full week’s pay, you will eventually learn the hard, expensive way that you need to undo that and it will be tough to put it mildly.

Chances are good that employees that used to do 400 shirts in eight hours, but now can only do 300 shirts in those hours will convince you that in order to get 400 shirts done in a day, you need a third person. History shows that they are generally successful at this.

This is how it comes to pass that shirt departments are virtually all overstaffed. Have you ever heard of two people on a single buck unit doing a mere 40 shirts per hour? This is how it happens.

I show my full-service clients how to figure their cost per shirt every, single day — never miss a day.

It is a simple, two-minute job once the preliminaries have been done.

This way, there is never a surprise. What good does it do to learn, from historical numbers, that you lost money last month?

Doesn’t it make immeasurably more sense to learn, today, that you lost $100 yesterday? This way you’ll have weeks to keep that from turning into a $3,000 loss for the month.

If you continue to do the same things, those same things will yield the same results. If these are not the desired results, then change something!

So then, once you get a firm handle on your cost — and how it fluctuates day to day, week to week and season to season —�you learn how important it is to control your labor costs. You will learn to keep labor hours directly proportional to the number of shirts that you produce.

Once you have control of that, then you can consider doing more shirts “wholesale.” The problem will then be to justify getting less money for those extra shirts.

That will make sense, if, and perhaps only if, you run at a higher number of pieces per labor hour when you have more shirts. This is possible under some, but not all circumstances. Determining if yours is one of the circumstances is key to your success.



						Thinking wholesale? Think again
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