Why Your CFO Cares About Automated Laundry Operations
Why are CFOs in the gaming and hospitality industries giving a single thought to the laundry business? Because the cost of keeping linens clean can significantly affect a property’s profitability. And, high-tech UHF-RFID laundry automation can give a healthy boost to the bottom line. Running the numbers in the following example offers a dollars-and-cents explanation.
Safeguarding a six-figure investment from five-figure losses
Casino Property A is a 400-room, high-end, full-service gaming property with an inventory of 40,000 linens valued at approximately $500,000. This includes items such as towels, sheets, and table cloths for guest rooms, outlets, and catering facilities. The property also maintains a $150,000 inventory of 5,000 uniforms for several hundred employees.
Because linens and uniforms are continuously reused, a significant percentage of the property’s inventory is cleaned every day. The business uses an outside laundry service, as do most similar properties, to clean about 8,500 items each day at an annual cleaning cost of approximating $1,000,000. Billing errors of only one or two percent can result in overcharges of $10,000-$20,000 a year.
The property distributes $150,000 worth of linens and uniforms seven days a week: $35,000 in uniforms go to employees; $15,000 in uniforms and $100,000 in linens go to the laundry service. The huge volume of laundry items creates loss rates that frequently surpass 10 percent, which adds up to $75,000 annually. This is considerably greater than any hotel can justify as “normal shrinkage.”
It is not surprising that controllers and CFOs demand accountability for laundry activity. Casinos and hotels have tried various methods over the years to gain some semblance of control.
In the past, accountability for uniforms has been successfully addressed by attaching barcode tags to them in order to track individual garments and ensure that employees and the laundry facility returned uniforms to the property. In 2007, Casino property A implemented InvoTech’s GIMS™ barcode Uniform System for apparel tracking and to improve the overall uniform operations. Control has been established and losses have been largely eliminated by individually scanning the roughly 1,000 garments handled by the uniform department daily.
For linens, hand counts cannot keep up
Barcode tracking is not practical for linens because of the large number of items processed daily. To gain better control, Casino Property A manually sorts and counts soiled linens, recording how many items in each category go to the laundry. When clean linens are returned, items are again hand-counted and recorded to reconcile whether all items sent were returned. To refine the analysis further, the property also periodically takes a physical inventory of linens in its numerous housekeeping storerooms.
The entire process is labor intensive and inherently inaccurate due to human error both in counting and data keying. To complicate matters, laundry deliveries consist of items picked up over several days. Suspected discrepancies are difficult, if not impossible, to validate, which often leads to disputes between the hotel and the outside laundry facility. Laundry mix-ups are also a problem. This is clear because the property frequently receives linens belonging to other businesses and other properties mistakenly get its laundry.
The property’s manual linen control efforts do limit inventory losses. But it still loses about $20,000 in linens annually after spending $40-$50,000 in labor costs for counting, recording, reconciling, and disputing errors.
Ultra-high frequency (UHF) technology cuts loss to virtually zero
Today, advances in ultra-high frequency RFID technology make laundry processing much more efficient. UHF-RFID laundry tags are easily attached to uniforms and linens and with them, inventory can be automatically read in bulk bins by UHF-RFID processing stations. When uniforms and linens are sent to the laundry and returned, the system automatically records each item as full laundry carts or racks of uniforms move past specialized UHF-RFID bulk processing readers. When employees pick up their uniforms, the system automatically records that event to further improve accountability and reduce losses.
A UHF-RFID system would reduce the property’s uniform and linen losses to virtually zero and eliminate the labor associated with manual counting and data entry. The result would be a projected savings of at least $70,000 a year in operating expenses for the life of the installation. Annual savings would increase with the rise in linen, uniform, and labor costs. This gets a CFO’s attention.
For Casino Property A, the UHF-RFID system has an ROI of less than 12 months and brings the added benefit of more accurate information about the hotel’s inventory. For example, Hotel A would have the ability to forecast on-going linen and uniform purchases and track each article’s aging to assure the hotel’s quality standards are maintained.
The numbers make a clear case
Hotel operators do not often see this kind of positive investment opportunity. The numbers make it easy to understand why CFOs are looking to the laundry room for increased profits through implementing automated UHF-RFID uniform and linen processing.
By Harvey Welles, president of InvoTech Systems.