In today’s economy – one characterized by constant change and daily challenges – it’s everyone’s business to squeeze unnecessary costs out of both products and processes. However, that’s often easier said than done especially when long-established ways of doing things and even seeing things block our ability to objectively identify alternatives.
Institutional bias is something that happens in every organization. Sometimes, it’s desirable to have another external set of eyes reviewing and analyzing one facet or another of our operations.
The result can be an eye-opener for everyone, from top to bottom.
The Challenge
Not long ago, a situation at an independent and family-owned textile rental & linen service doing business in a Midwestern state was brought to the attention of the Performance Matters team. The issues revolved around the stockroom, and the company had come to realize that their efforts in addressing known deficiencies were not producing the desired effect.
What made the problem unsustainable were rising garment costs. As costs continued to escalate, the need to address this area of their business became more pronounced. Yet, like so many organizations, the operational philosophy had adopted habits and trends that had existed within the organization for years.
What once had been policy had become a mantra familiar to many in our industry: “We’ve always done it this way and it is not working.” Even when it wasn’t verbalized, the unspoken theme became prevalent in day-to-day decision-making. This approach, along with unmonitored garment order request procedures from the Service Department and a lack of visible data compounded cost inefficiencies, locking sunk costs into the operating process.
The Solution
After completing another successful initiative with Performance Matters, the client asked for a comprehensive assessment of all aspects of their stockroom operation. The assessment revealed that a number of opportunities for cost compression could be realized by implementing a Garment Optimization methodology in a “holistic” manner.
Garment Optimization is like looking at a familiar subject through a new and more powerful lens, enabling everyone in the system to see the constraints of standardized thinking. It involves the art of utilizing the client’s assets – the investment in garments – for the long-term benefit of the client’s customers. These benefits from a garment optimization methodology flow to customers, to employees and to the company.
As a first order of business, the Performance Matters team proceeded to create a roadmap, outlining the steps needed for improvement over the ensuing 12 months. It was an entirely cooperative process, which not only reassured the client about where the methodology would take them but also showed them how it would deliver the promised results. Why? It was of critical importance to all parties involved to create sustainable results without inducing “shocks to the system” and creating dissatisfied clients.
With Garment Optimization, the results aren’t long in coming. The Performance Matters team quickly began clearing out unnecessary costs up front for the client while building the foundation for further improvement. In other words, Performance Matters and the client operated on two simultaneous tracks – 1) making cost effective moves early and 2) building a foundation for sustainability. The client clearly understood the need to “purge” their stockroom strategically of useless and obsolete garments to make room to operate efficiently. However, they did not understand all of the hows to accomplish this. The client understood the need to invest routinely in a wearer’s/client’s satisfaction yet had difficulty in getting to that proactive step and process. The client also acknowledged the need to not give all new garments to a client as a way of getting an agreement renewal but needed a roadmap to avoid those unnecessary high costs in exchange for that renewal. The client wanted and needed savings quickly without hurting their business, and Performance Matters had to help deliver all the above including those savings while simultaneously building the foundational methodology for sustainable long- term success. That was no easy task!
It’s important to note that Garment Optimization is holistic; it ultimately involves sales and service, plant and stockroom, even administration. It requires a garment investment vision and setting goals. However, the payoff is significant: solid short- and long-term benefits and sustainable reductions in this previously high variable cost in this key area.
The Results
For this particular client, instituting Garment Optimization on the Performance Matters model resulted in year-over-year savings during the first year of $293,180.
That’s not all. As a percentage of garment weekly revenue, the garment investment in the previous year represented 22.5%. Jointly, the client and the Performance Matters team set what was believed to be an attainable first- year goal of reducing the investment percentage to 18.5%. However, after the first year, the actual year-end average investment as a percentage of weekly revenue had fallen to 11.8%, and they are sustaining a similar percentage in 2015 – 17 months after initiation!
Just as important, all was accomplished organically without “shocking the system.” The client was able to continue providing the highest quality garments to their customers, without repeating inefficient spending habits that had plagued them in previous years.
By committing to Garment Optimization, the client was able to not only realize this savings, but also to adopt a holistic approach to garment investment and management that will continue to deliver value and show sustainable results for the clients’ operations. They also possess a world- class stockroom with optimal garment organization and new machinery that was paid for and then some with those savings.
And isn’t that what wringing cost from your system is really all about?
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