How To Control Rental Merchandise

Another key issue in merchandise control is “Loss & Abuse Recovery.” Some companies count their soil, inspect it, and charge for abuse and replacement. Other companies don’t count and simply charge an “inventory maintenance fee” to cover average losses. The bottom line on whether this is working is a simple formula as follows:

• How many pieces of are you putting in for inventory maintenance to cover your loads?
• How many pieces does your loss/abuse revenue cover (whether direct or in a maintenance charge?

The difference in these two numbers could show you the black hole of missing merchandise. If you are putting in more than you are getting paid for, and you are using the maintenance fee, it would be apparent that one or some of your accounts are abusing the system by either damaging or losing more merchandise than you are recovering through revenue. You may have to isolate these accounts and put them back on a soil count system rather than a maintenance program.

“Product ReUse” is the next consideration, and most operators do a marvelous job in this area. For instance… using your downgraded bar mops for Turk towels. Dyeing hand towels for automotive cleanup, etc. As you choose your products, it is important to consider their “second life.” Otherwise, you must measure your cost of “ragout” and choose a product and placement that can give you the longest life. If you are ragging out products directly from their first life to junk, consider a second tier product that you can introduce to reuse them. It is important to establish what the military terms “command and control” in your operation. Your merchandise is one of the most costly areas of our business, and typically the area where unknown and unaccounted for shrinkage occurs the most.

First, establish “Security” in your operation. Your flat goods should be held within a fenced crib, where only authorized employees can enter. Your backup inventory area should also be secured so that unauthorized personnel cannot get to it. Your stockroom should be secured as well, with only authorized employees allowed within. If you cannot crib your areas, then it is suggested that a bold yellow line is painted on the floor. In securing your area, it is important to post “Authorized personnel only” signs, cover this issue in your orientation documents and then reinforce your security rules at every employee meeting. Specifically, it should be completely against company policy for a route person to pull their own load or fill their own garment orders. Wanna’ see stuff disappear into the black hole? Just open up your hen house to the fox. I mean no disrespect to the fine route personnel who serve our industry. That’s where I started myself. But why would we want to dangle the carrot we don’t need to. It isn’t that route personnel typically “steal” the goods. Many times, uncontrolled merchandise ends up at your Customers, and they are not being billed for it. Any good route person worth his or her salt has extra goods on the street. We just don’t want to invite this practice.

The “Product Flow” within your operation must have a proper paper trail in order to control your inventories. This even means, if a manager is filling a “shortage,” there should be a signed document from a manager one level higher who has authorized the fill. Personally, I would authorize this sort of emergency or shortage activity only at the GM level.

All movement of merchandise to and from your operation should be secured with a properly executed inventory control document. Your plant employees should be trained to fill these orders only with proper authorization.

Many operators install video equipment and signage at all exits to monitor all merchandise movement. If this is done thoroughly and talked about in your meetings, employees will be motivated to assist you in merchandise control and understand that this is a high cost in your operation. The video equipment is certainly meant to make people think about taking unauthorized merchandise, but also a way for you to monitor the proper flow within and from your plant.

Now… one of the most misunderstood and frustrating parts of merchandise control… “Put-InManagement.” This is an area that can truly show you how much you may be losing… to customers,employees, product quality and wash/finish process. Start with any control period (week, month,quarter), and take your total starting inventory. Now add your organic growth… the invoiced increases in pieces per product, as well as new items added to accounts. Subtract your invoiced decreases in pieces by-product, as well as item cancellations from accounts. Very important now to measure and subtract your product “down-grades” and “rag-outs” from the mix, by product. The balance of this inventory exercise is what you should have in stock. Considering all this, if you are still short product to fill your loads, you have identified a black hole. Merchandise that you now have to buy and put-that has not been paid for by loss or damage charges, or that has been reconciled in any way. The amount you are out of balance in this exercise will show you whether your problem is large enough to implement some of the other operational controls discussed here.