It’s time for a little heart-to-heart about one of the great misperceptions in the textile rental industry. This one can cloud the thinking of management, prompting people to make decisions that are not in their best interest over the long term and perhaps also sow the seeds for customer dissatisfaction that often ends in the frustration with a renewal of the service agreement or, at best, a great expense to renew that service agreement on negative terms.
We are talking about a line item called “garment cost/expense”. Next to labor, the cost of merchandise is the second highest expense in virtually every facility in the textile rental services industry. Consequently, questioning the way in which this cost is typically viewed by management is bound to raise some eyebrows and even some hackles.
For openers, the way in which that particular line item is spent is likely to call into question some deeply held beliefs we like to say about ourselves. For example, we like to say that we want to take care of our loyal, long-standing customers. But all too often, those are just words of bravado not matched by actions; in fact, our garment spend proves the opposite! Many state that garment merchandise cost excess can be relegated to the status of a ‘stockroom issue’. But the truth is that excessive garment spend is often a management failure, based on seeing only the stockroom, the tail end of a lengthy process.
It’s time to ask some hard questions. Do you really see garment spend as an investment in the expectation of solidifying and then growing your business? Or is it merely an expenditure that seems to suck money down a black hole whose purpose seems obscure and ultimately uncontrollable?
It’s an either/or situation. You’re either driving customer satisfaction and retention, or you’re driving the opposite. As we’re about to show, there is really little middle ground.
Spend Holistically or Spend, Period.
You have a choice to make. You have a limited number of dollars to spend on new garments with your existing clients or as a whole including new business. When push comes to shove, which customer is going to take priority in regards to your garment spend?
Customer A: He’s the new kid on the block. He’s a brand new account and has been with you for 3 months. There is no record of performance. There is no relationship history. You may have no idea how quickly he pays his bills (or if he even does). But the sales rep was excited; your route driver is hyped. It’s new business recently installed, after all.
Customer B: He has been with you for two decades and has multiple rental products. He has been a steady customer. He knows your team and has met your management. The credit history is documented. He’s not spectacular or new, but he’s reliable and his service agreement is up in 12 months.
Before we answer, let us look at total garment expense. Total garment spend is a pie and 10-20% of that pie is your garment spend generated by your sales team under the heading of new business.
Where garment spend is concerned on the other 80-90%, service department requests are where the rubber really meets the road. Service-generated requests can represent 70-80% of your garment spend (5-10% will be caught up with in-plant replacements). The ongoing “maintenance” of any account for any length of time is characterized by the comings and goings of personnel. After all, clients and wearers change! They hire and fire; they get thinner and heavier; clothes age and must be replaced; and interim adjustments must be continually made.
So, what about the stockroom? Well, virtually 0% of garment spend originates there. If you view garment expense as a stockroom issue, you ignore the greater holistic concerns that are at the heart of the matter. Back to the question above now – What is your process to make sure that your limited garment expenditures complement your business strategy (taking care of clients) and getting great service agreement renewals on the best possible terms?
Investment Means Empowering People.
By now, we often see that the number on which management focuses – garment spend – obscures the component numbers that might really matter. These reveal your true strategy, or lack thereof. You must focus, not on the dollar, but on what makes up the dollar. To do that, you have to ask deeper questions.
Is your new garment spend an arbitrary expense or is it directed strategically? (By the way, it can be directed strategically.)
Are you focused on giving new clothes to long-term and loyal wearers to create and maintain satisfaction as their garments age? (By the way, they have built your business.)
Do new wearers end up with the benefits of new garments bought from your limited budget? (By the way, a new wearer has never given your company a dime of business.)
STOP! Take a minute to answer these 3 questions!
If you’re truly investing, where you spend informs what you spend and helps lay a foundation for negotiating a new service agreement on your terms. Once you decide to invest in certain customers, or more to the point wearers rather than clothes, your delivery and service people must be empowered to make the decisions that matter. They are the ones who know best about employee turnover, service agreement expiration dates, accounts receivable, replacement needs, etc. The alternative to decisions by empowered and knowledgeable people are decisions by a stockroom clerk, by a computer or perhaps by a VP who is removed from the reality of the actual client’s needs.
The cornerstone of an investment philosophy is to impact agreement renewals and drive business retention. Whether or not we truly base our business model on satisfying customers and wearers will be revealed in our decisions and actions. Is your garment spend strategically directed toward long-term customer satisfaction and high business retention? How you decide on the components of each dollar of the spend will tell you.
And make no mistake: adopting or maintaining an expense view will prevent you from maximizing your opportunities in the key areas of satisfaction, renewals, customer retention and ultimately, trust.
Employ the Power of Data.
Shifting your focus from garment spending to garment investment will mean a bottom-up approach to decision-making. But chances are your people already have the technology and the data to make that shift successful. After all, most companies have accrued large pools of customer data through bar coding or RFID chipping of garments.
The question is: are you actually using that data to inform your day-to-day business decisions down at field level? If not, you are denying your company the opportunity of potential savings; and even more importantly, you are failing to fully employ your existing data in ways that maximize your opportunities of service improvements.
Of course, what is true for service is also true for sales, management and even the stockroom. Your Team should be able to use your data to direct the Sales Team where their 10-20% of the aggregate garment investment pie is best directed. Is your strategy for acquiring new accounts reflected in your data? Your plant managers and personnel also should be able to use the data on repairs and replacements to identify instances of undue wear and inform your business strategy.
Finally, you may be remiss if you are not using your data to reinforce the investments you are making in your customers to your customers, themselves – face-to-face! Chances are you promised “quality garments and upgrading as required” in your original contract. Coach your service team to use data to systematically validate your commitment to customer satisfaction with each and every account on your roster. When daily garment investment decisions are confirmed by data, it will make a valued renewal that much easier when the time comes. Your team will have laid the groundwork, week by week. Facts now replace emotions.
A holistic approach to garment investment is a strategic decision. When executed by trained service team members and confirmed by using the power of your data resources, it will beat the competition, whether large national corporation or independent, many times over. And, it will do something you may have thought impossible: improve or reduce your “garment investment” (formerly known as “garment expense” at the beginning of this article) while simultaneously boosting true customer satisfaction and renewals on your terms and not the client’s.
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