If you’re renting low cost, non-garment items – like shop towels, bar and kitchen towels – you likely are enrolled in automatic inventory replacement. There are other names for it as well – inventory maintenance, auto maintenance, par level maintenance and inventory replenishment, to name a few. Whatever your vendor calls it, they all serve the same purpose. Your vendor is automatically replacing inventory based on an assumption that you lose X% every week. For example, if you have an inventory of 1,000 shop towels with an auto replace rate of 7%, then you will be billed for 70 lost shop towels every week. If your replacement rate is $.40, then you’ll pay $28.00 every week for lost shop towels. Lost in all of this is money – so let’s find it.
There are several aspects of automatic inventory replacement that can become problematic. Let’s focus on one: getting paid for being over-inventoried. The assumption that you’re losing 7% of your inventory is just that – an assumption. A big assumption. If you’re losing less (which is likely), your driver will end up building inventory wherever your items are stored. If this is the case, you’ve probably noticed that you have a few extra bags of shop towels or a few extra stacks of bar wipes. Did you know that you can actually get credit for that extra merchandise?
FORCE YOUR PROVIDER TO HONOR THE CONTRACT
Check your contract for particular language. Specifically, find the reference to automatic replacement. See if there is additional language along the lines of, “your route rep can check inventory, and we will buy back any overage.” Let’s break this down. Your provider charges you for lost items. You check the inventory to see if there is extra. If there is, you can make them buy it back at the original replacement rate. Using the example above, if you have two extra bags of shop towels, that’s about $40 they need to credit you. That’s likely to knock approximately 15% off that week’s invoice. Wouldn’t you use a 15% discount if you could at any given time? That might seem small, but as a percentage of total inventory cost, it’s huge. Especially over time.
There’s an important detail here, and it requires you to spot check your driver’s activity. You need to determine if your driver is gathering that extra inventory and putting it in their returns. Is your extra inventory NOT being counted as extra because the driver excludes it from the delivery quantity? It seems like an inconsequential move. It’s not. The compounding nature of paying for lost items that are not lost will add up.
VENDOR MANAGED INVENTORY ONLY WORKS IF THEY COUNT IT
As we’ve mentioned before, spot audits can chew up some bandwidth that you might want to spend elsewhere. Managing your uniform rental provider isn’t high on your list, we get it. It feels like very little return for the time you need to take. Here’s the thing, your provider probably doesn’t mind if you don’t pay attention to seemingly inconsequential changes. Perhaps your provider doesn’t care that it feels too time consuming to you. Right? The goal here is to suppress compounding cost by keeping your vendor on their toes. You do that by occasionally showing them that you know exactly what’s going on.
When you do this spot check, also be mindful of the timing of the process. You want to see how much clean product is on the shelf right before you’re serviced. Then, as the driver comes in, ask him/her the quantity of clean being delivered BEFORE they get to the delivery point. And when they’re done – right before you sign the invoice – go back to the delivery point and make sure that everything adds up. Does the count before delivery plus the delivered quantity add up to the final shelf quantity?
One final thought. Even if your contract does not contain the language mentioned above, you still have the ethical high-ground to make them buy back the merchandise. It’s simple. They’re making you pay for lost items, and you’re showing them that the “lost” items are really just sitting on the shelf.