The rise in cotton prices has reached crisis level, so TSA called this special meeting to examine the impact on the industry and through a forum suggest possible lines of action.

Opening the event, Phil Hicks of Montpellier PR, which is helping TSA to organise its campaign, outlined the background to the crisis. He then explained the plans make sure that the main users of rental services were fully aware of the crisis and its potential impact and to ease discussions between linen rental companies and their customers.

The starting point had been “the Cain report” published at the beginning of 2011, which gave a thorough analysis of the situation, its effects and suggested ways of mitigating the impact for both customer and rental provider.

This had already received extensive coverage in the hospitality press, on social networks websites such as Facebook and Twitter and in LCN.

Future action included regular updates, a presence at the Workwear and Corporate Clothing Show and reports for other sectors such as healthcare.

Terry Sheldon, chairman of the textile supplier Tonrose, traced the pattern of cotton pricing and produced a graph that showed how pricing had changed since the 1980s – rises over the last couple of years resulted in a nearly vertical line upwards.

Reasons for the sudden change included flooding in important production areas such as Pakistan and Australia, energy shortages Pakistan and Bangladesh and political instability in Egypt (again a major cotton producer).

Changes of land use were also affecting cotton supply as land that had been used for cotton was being switched to crops such as corn and soya.

At the same time as these factors were affecting supply, demand was growing, particularly from China. The effect of 1.2m Chinese each buying an extra pair of trousers would be to increase world cotton consumption by 3%.

Manufacturers faced problems. Extra cashflow was required to cover the rising costs, spinners and weavers demanded payment upfront but the banking sector was withdrawing support and as a result mills were closing, exacerbating supply shortages.

Increased stock values make security especially important and linen is now becoming a target for organised theft.

Bob Dulieu of Capcon investigations explained some measures that would help to prevent and/or reduce losses and while these were general rather than linen specific, they were nonetheless helpful.

Capcon’s figures for the hotel sector showed that shrinkage represented between 2 and 5% of total sales. Dulieu stressed that any reductions in shrinkage would go straight to improving the business’s bottom line. “Depending on margins, a 50% reduction in shrinkage could improve EBIT (earnings before interest and taxes) by a significant multiple – in some cases 10% or more,” said Dulieu.

Prevention is the best course of action and he recommended the following measures

  • Businesses should have an embedded policy that says fraud or theft will not be tolerated. That has to come from the top and apply right across the company.
  • There should be pre-employment screening for all staff. This is simple and relatively inexpensive.
  • A business must adopt an effective policy to encourage whistleblowing and make sure that all staff are aware of this.

He underlined the importance of investigating all suspicions and taking suitable action where they are proved – disciplinary, civil or criminal proceedings.

Dulieu pointed out that CCTV was not necessarily the right answer to the problem of reducing theft and the use of covert cameras could have legal implications. If CCTV was used, Dulieu advised integrating the system with intruder alarms.

Paul Danby of Wearwell, the UK workwear supplier, pointed out the implications of the cotton-pricing situation for the supplier. Fabric supply has two main elements: pricing, including costings and quotations, and availability, which affects orders and deliveries.

Lead times are getting longer but prices were moving daily. Danby said that the result was that potentially orders were placed without a clear idea of the price that would be paid, while delivery times were also becoming uncertain. There was a need to build this into contracts.

An open forum followed the formal presentations. David Stevens, of Paragon led the discussions raising specific concerns and returning to some of the presentation topics in greater detail.

Summing up TSA’s Murray Simpson said it was essential that the textile rental industry sent out a consistent message that its costs had risen to such an extent that prices would have to go up, although the level would be a matter for individual companies.

TSA agreed to set up working parties on three areas.

Linen security, which would include raising awareness of its increased importance and the possibility of setting up a hotline;

Contracts, with the aim of preparing a guide to drawing up a linen rental contract

The cost index, reviewing the elements covered, the weighting and the sources used.