National Clothesline

nother new year is here and what a great year it will be for the drycleaners who become proactive and run their businesses by the numbers. For those who prefer to hide with your head in the wheel and pretend that costs are not going up, 2004 will be even more painful than last year.

Drycleaning is all about one piece at a time. To be successful you have to manage your pieces. Managing your pieces requires you to manage your employees.

Looking forward to 2004, what can this industry expect in terms of volume and costs?

Volume: As the economy continues to gain strength, we can expect a slight uptick in the demand for drycleaning services. Unemployment has leveled off at 6 percent and is expected to decrease during the year. The 23 million small businesses in America are hiring faster than the large corporations. By the way, small businesses provide more than 50 percent of the private sector, non-farm jobs in America and continue to be the backbone of our economy.

Costs: In 2004, costs will continue to increase. Your costs for; utilities, supplies, insurance, bank fees, labor, etc. will be going up. There are three places to find the money to pay for these higher expenses:

1. Your customers.

2. Your employees.

3. Your pocket.

To get your customers to pay for your higher costs you must increase your prices. This is at a time when the drycleaning market is soft; some of your competitors are lowering their prices to attract more customers; and low one-price cleaners are opening up all over the country. Improve the quality of your work and service and increase your prices by 5 percent. This will help keep you in the black.

The second area in which to find the money to cover higher expenses is through your employees, which requires that they become more productive. The US Department of Labor recently reported an increase in productivity — the amount employees produce per hour of work — of 9.4 percent. This was for the third quarter of 2003 and is the best showing since 1983.

To improve productivity you must first determine how productive your employees are now. Begin with your drycleaning finishers. Count each presser’s pieces by placing a colored ring on each hanger, giving a different colored ring to each presser.

Measuring productivity

Example: When I count pieces in the drycleaning finishing department, it is not unusual to find that the pressers are processing as few as 16 pieces per hour. Everyone who has been reading this column for a while knows that well-trained pressers, as a team, can produce an average of 30 quality pieces per hour per operator.

Let's assume that pressers average somewhere between 16 and 30 pieces per hour. You measure their performance and you find that yours are averaging 20 pieces per hour. Now, the question is: Can you increase their productivity, reward them for this increase and make more money for the company?

There are two standards used to measure productivity in every department in a cleaning plant:

1. Pieces per operator hour.

2. Labor costs as a percentage of sales.

When measuring the productivity of your employees you must compare their numbers to the industry standards for pieces per hour and labor costs as a percentage of sales. This will allow you to reward increases in productivity and ensure that you are not over or under compensating your employees.

The labor cost standard for drycleaning finishers-pressers is 11 percent of drycleaning sales. In our example, the pressers are being paid an average of $9 per hour. At 20 drycleaning pieces per hour, your cost is $.45 per garment. This, by itself, tells us nothing. We must also know the average price per drycleaning piece.

The average price per piece in this example is $3.60. By dividing our labor cost per piece by our average price per piece, we find that our drycleaning pressers cost the company 12.5 percent of drycleaning sales.

Our goal in this example is for the drycleaning pressers to cost no more than 11 percent of drycleaning sales. To accomplish this we can:

• Increase prices.

• Reduce the pressers hourly wage.

• Increase the pressers’ productivity.

The following exhibit shows what happens to labor costs as productivity increases. When productivity increases to 25 pieces per hour, your cost goes down to $.36 per piece which is 10 percent of sales. At this point you can begin to pay your pressers a bonus of 50 cents per hour and continue to keep your labor costs for pressing below 11 percent.


	Bonus Schedule

As demonstrated in this exhibit, as productivity continues to increase you can afford to pay a larger bonus while reducing costs. Increasing productivity is the key to financial success in the drycleaning business.

In the game of business the more you know the better you can play the game.

Alan Robson is a private consultant dealing with the specialized needs of the drycleaning industry. Contact him by telephone at (941) 408-8819 or send e-mail to him at: alan@bizbuilderonline.com or visit the Biz Builder web site: www.bizbuilderonline.com.