Recovering the costs associated with lost or damaged items often presents a special challenge for textile rental companies, because on the surface it looks a lot like an uncontrollable expense problem. To complicate matters, there are some widely accepted and outdated ways in which textile rental companies tend to deal with issues of loss and damage. Most of these fall under the heading of “the way we’ve always done it,” which is usually a flashing red light that signals ineffectiveness.
The Performance Matters team recently assisted a company in finding a new model for cost recovery. Facing limited avenues to traditional growth due to the high cost of acquiring new business, the company had settled into the mode they knew best: relying on somehow finding highly profitable new growth with only the traditional tools at their disposal. However, like many in our industry, they were finding the acquisition of profitable new customers a steep hill to climb. They were ready to think outside the box, and deciding to think differently engaged Performance Matters to deliver an effective cost recovery strategy.
Performance Matters’ methodology began with an in-depth analysis that revealed to the management team the total value of rented products as well as the annual costs for lost and damaged products. Of course, taking a keen-eyed look at what the actual “net” cost of the merchandise amounted to was merely the motivator. Where the rubber met the road involved instilling the cultural shift to effectively recover the deserved revenue. The proposed methodology successfully improved the net cost, communication and culture more than the company could have imagined.
Textile rental companies usually assume that asking customers for greater participation in loss and damage recovery risks losing business. Not so. Most customers are reasonable business people and understand that there are real costs to servicing their business, and that it’s not fair to saddle suppliers with the burden of lost or damaged products. The key challenge for clients and customers is to make the leap from rationalizing these expenses to an ongoing grass roots process that facilitates sustainable budgeting and planning. To implement such a strategy took the Performance Matters’ methodology, along with the Performance Matters tools and training to make the cost recovery process work at the route level!
Once the cost recovery process had been implemented, the company experienced an improvement of $14,288 per week in deserved revenue without losing a customer. In addition, the Performance Matters process resulted in 97.8% retention of all recovery dollars created (see chart below). The total improvement through the first 27 weeks was $387,608. To date, the client is experiencing 111.2% of their revenue improvement target, and the methodology was readily accepted by their customers.
“Performance Matters actually delivered what they said they were going to do. There was certainly work on our part, but I’ve never seen this kind of result. We’re double what our goal was.” — Company President
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