Why are barcodes so important?

3 August 2003



In this second article in our series on workwear, Mike Southwell looks at the benefits to laundries of becoming computerised and using barcodes


In a previous article we looked at the starting point for a workwear rental contract, namely, adding wearers, checking available stock, then purchasing any "top up" requirements. Once stock became available garment labelling followed, with a barcode label, or with a standard label and a transponder.

Why bother to identify each garment? What are the real benefits? It's true that many laundries manage their workwear rental with almost no computer technology whatsoever. However, they need to have a strong faith in the basic arithmetic that applies. In theory it works like this: "I charge each wearer £1.00 per week to rent a standard set of three garments. Each garment costs me £15.00 to purchase. My three-year contract will earn me £156.00, against a cost of £45.00 per wearer, giving me a gross profit of £111.00. I know I have to collect and deliver, wash and repair, but that's only an average of about £0.50 per week, adding up to £78.00, so I'm still in profit by at least £33.00."

Now let's look at what really happens.

When Acorn Services, a Manchester laundry, first installed a barcode computer system, back in 1992, one of the first contracts they added was a traditional rental contract with some 10 wearers. Sets of three garments per wearer were delivered, each being identified using the new computer. A laser scanner recorded the processing dates for each garment submitted. At the end of the first quarter they ran a report analysing the wearer send-in rates, with interesting results; almost every wearer was sending in one garment one week, and two garments the next. The chart below shows the effect of this pattern.

So what was going on? Either the wearers needed extra changes per week, or some garments were being "borrowed". As Acorn managing director Bob Grant says: "Our computer made us aware of a potential problem with this contract. Wearers were saying they were short of garments; we were washing more garments than we had contracted for; therefore some garments would probably need replacing before the three-year period was completed and the customer would clearly not wish to pay for these."

When Acorn investigated, they found that the customer had employed extra staff, who were sharing any "available" garments, rather than requesting their own sets. Bob added the extra wearers to the contract, increasing his revenue and restoring the send in rates to a "normal" level. As he said: "The benefits of unique garment recognition systems had suddenly become very obvious." He commented: "Over the next 12 months we concentrated on barcoding all our contracts. The number of free replacement garments that we issued dropped from hundreds into single figures per annum. We could also tell our customers exactly where any garment was at any given time, resulting in better customer relations as an added bonus."

What about adding extra wearers and what about leavers? Does barcoding help here?

Emphatically, yes! Let's start with a leaver. Usually, the customer phones, or sends a fax, to say: "Jim has left. Cancel his rental." With unique identification, when any of Jim's garments are scanned in, it is easy to program the tracking system to alert the operator, who would then withdraw them from circulation. Without this control it's all too easy to process and return them, ready to be used again and again possibly without any charges being levied.

With control, the laundry knows when Jim left, and which of his garments haven't yet been returned. The garment value at the point of leaving should be known and cancellation charges that are appropriate can be accurately stated.

Residual Charges?

Residual values are important and, again, garment identification is useful. Sometimes garments have to be replaced through no fault of the laundry. The issue-date of each garment and its current value should be known, and can be charged. The new garment provided in replacement would start the cycle again. Later on, should the wearer leave, the residual values for old and new garments can then be correctly stated and invoiced.

Looking at the chart above, Jim Andrews is a leaver. The contract started in week 26 of year 2001. Three garments were issued, and are now worth £7.82 each. In week 10 of 2003 an extra two garments were issued, each worth £18.92. The garments depreciate by £0.1261 per week, a value derived from the list price of the garment, divided by the contract term in weeks.

Modern laundry computer systems should provide an instant and accurate answer to the question: "How much are Jim's garments worth?" While it is possible to produce such information without a computer, it does take time, which is something that always seems to be in short supply.

Jim's garments are worth exactly £61.30 and that value may be billed. What's the worst that can happen here? Some laundries label garments as "1 of 3", "2 of 3" etc., so that they know how many are in the set. Without a tracking system, that's fine, until they add a couple of extras. These become "4 of 5" and "5 of 5".

What should happen is that the first three garments are relabelled as "1 of 5", "2 of 5" and so on. But in practice, that's impractical. What can then happen is that the three oldest garments are sent in, and the customer is probably billed for 3¥ £7.82, a total of £ 23.46. If the files are checked and it is noted that there are five garments in the set, then the invoice may be for 5¥ £7.82. Without traceability, the sum of £37.84 at worst, and £22.10 at best, may potentially be lost.

Does Barcoding help with repairs?

All laundries providing garment rental need to carry out repairs. Unique identification allows a record to be kept for each repair that a garment has. Repairs shouldn't just be "something they do in the laundry", but a process that's part of the controlled environment.

Let's look at Bob Grant's laundry again. Bob was asked what benefits he had gained from using bar codes in the repair section. He replied: "We used to repair garments as part of our service. Repair costs were another nasty overhead. It wasn't easy to keep track of them, as we were 'too busy repairing garments' and had no time to keep detailed records, although lots of bits of paper floated around. Our repair centre was costing some £1,500 per month to run, made up of wages, machinery, material costs and overheads. It earned us nothing, yet many repairs should have been charged for especially those carried out to customer owned garments.

"We set up a table containing every possible repair that we do, including a cost and standard repair time. The computer gives us an option to charge for repairs, so we flagged a number of items as customer chargeable. This wasn't just for garment abuse, but covered the adding of special badges, or re-labelling at customer request, where they had changed lockers, for example.

"In the first month that we used the new system, we invoiced £740 in repair revenue. Where we had repaired garments that were customer owned, the computer automatically marked them for charging. We are now able to submit to our customers accurate lists of repairs carried out, enabling them to verify the details. Generally, our repair income averages £1,250 per month something that we would find impossible to achieve without our barcode system.

"More importantly, if a repair will cost more than the garment is worth, the computer tells us not to do it."

What about different types of contract?

I've mentioned how important it is to monitor the on-going performance of contracts. These days we see a growing trend towards "dual-charged" or "split" contracts, where the customer pays a small rental charge, plus a separate wash charge every time a wearer sends in garments. Some customers purchase their own garments and pay for launder and repair. Barcoding is almost essential here, as the scanning operation identifies the garment and its agreed wash charge, as well as recording the time and date of each presentation to the laundry. This data can then be used to substantiate a later invoice.

Customer information, ecommerce and invoices

Providing accurate information to the customer can only improve levels of confidence and trust. These days it's possible to provide a detailed breakdown of garments processed over a period, which can be further broken down to individual wearer level if required. The advent of ecommerce has generated instances of laundry customers expecting to electronically interrogate the laundry database to check wearer details, as well as making changes to the data!

In the motor trade, for example, the customer may wish to add new staff, remove leavers and move existing staff between cost centres, or make additions and reductions to garments in the wearer sets. At one large installation in Spain, data is emailed in from the customer's human resources department and uploaded into the laundry database. Picking lists are produced for new wearers and an audit trail printed at each stage. The process is entirely electronic. In the case of leavers, the garments are automatically withdrawn from circulation when next presented at the laundry scan stations.

We live in an age where customers expect invoices to be detailed and supported by additional report data, either printed or in electronic format. Invoices are often challenged. If the invoice states "Garments processed for the month of May £1,380", the customer will almost certainly ask: "How many coveralls, jackets, and trousers were processed?; what were the quantities each day?; and which wearers didn't send in garments during the month?" Laundries that provide such information are retaining their customer base, in spite of lower priced competitors.

Bob Grant stated that Acorn Services could now provide any customer with a complete analysis of every invoice if asked. "We are no longer seen as an old fashioned steam laundry, but as a hi-tech managed garment system provider," he said. "We are often an integral part of our customers' businesses, especially if they're involved in the food industry, as we can highlight any areas of concern, such as wearers with below average send-in rates, who could potentially create a hygiene problem."

The hidden benefit

Acorn Services, according to Bob Grant, make further gains from its tracking system. "Back in 1992 we were similar to other laundries in that we would probably gain renewals for about 70% of our contracts. We were the second company to install a barcode computer system, as supplied by Barcellos of Leicester.

"To start with, we were somewhat suspicious of this new-fangled technology. Some departments couldn't see the point and suggested it would be money down the drain. How wrong could they be? Today, we can contract for a service and provide exactly that. Barcoding enables us to monitor and control all departments very efficiently. We work with our customers, not against them. They are better informed and our renewal rates exceed 95%, which says it all."

Acorn added that it'd never want to go back to the "old" ways. Although their prime reason for installing a barcode system was to simply identify individual garments, there are so many areas where they benefit, from the signing of a new contract; purchasing garments; issuing and labelling; controlling; and then renewing the contract for a further term.

Final words from Acorn: "The icing on the cake comes when we renew a contract. We used to give every wearer brand new garments, as that was the easiest option for our stores controllers. Now, our database tells us, at the push of a button, which garments need replacing and which ones can carry on for a while. This softens the cost impact of contract renewal, as well as being environmentally sound, as we maximise the life cycle of our products."

Installing a computer in the laundry won't, of course, instantly provide all the answers. There are some very important steps that need to be considered as part of the overall strategy and these will be outlined in the next article. This will also look at the importance of contract revenue recording and examine the controls needed for wearer size-exchanges, or the changing of individual garments, and how computers can be useful in this area.

There is a growing trend for laundry customers to ask for contracts with zero residual charges at the normal termination date, as well as payment "holidays" when wearers are on long-term leave, so we'll look at what this means for the future of the industry.


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