We’re going to go a bit further down the rabbit hole of this post. There’s some redundancy below, but non-garment inventory is an important topic to dive deep into. A key component of managing your overall cost is controlling your non-garment inventories. Obvious, right? Let’s look at the components of your inventory to piece together a more complete picture. If you have hundreds – or even thousands – of points of consumption, then you’ll appreciate how even tiny inflations in inventory can have negative compounding effects.
Let’s start with separating inventory from usage. Inventory is an allotted quantity that you are renting. This number is treated as a reserved quantity. For example, if you have an inventory of 500 shop towels, your provider is “reserving” 500 in their gross inventory for you. The logic here is that you are using 250 during the week while they are cleaning the other 250. It’s likely that that 500 number was devised during a sales process that determined your inventory based on X, Y and Z. The calculation probably looked something like this:
INVENTORY = PREDICTED USAGE x SAFETY STOCK VARIABLE
Not very complex. Makes sense at face value, right? And that’s usually where everything starts and ends when it comes to determining your inventory. Are you told what the safety stock variable is? Probably not. Are you told what that variable is based on – what’s the logic behind it? Nothing? To be fair to the provider – maybe you don’t even care about those things. Fair enough. After all, you’re hiring the provider to MANAGE those things for you. But remember our note about bad service design? It applies here as well. The status quo regarding inventory in this industry is a result of bad service design. For you – the customer – that’s never a good thing.
YOU CAN’T CHANGE WHAT ISN’T MEASURED
Now the other part of the equation – predicted usage. Where does your provider get that? Old invoices? Your business type? Out of thin air? Ask them how they predict your specific usage. You’ll probably get answers like “industry standards” and “historic trends” and “statistical models” and all sorts of great number jumbo. What you likely won’t hear is actual data that pertains to your business. What you probably won’t see is real data that confirms those answers.
The inventory service design of the uniform industry leans on averages of averages of aggregations on top of assumptions. Furthermore, the most crucial piece of data is either missing or is mostly subjective. That piece of data is your usage. How much of your inventory are you ACTUALLY using? It’s likely you don’t know. Why? Ask your provider why. Without understanding actual usage, the notion of safety stock is rendered moot. How can a provider calculate safety stock if it doesn’t even accurately track your usage? And not to wander too far off topic, but the basis of inventory maintenance is also thrown into question when usage is unknown… but we digress…
ALL INVENTORIES ARE UNIQUE – IGNORE NETWORK EFFECTS
Since we love data so much, we’d be the first to admit that like items across like businesses would have similar inventories – a normal distribution, if you will. But that doesn’t help you. How do you reduce your inventories and still keep servicing your customers? There are two ways. You could guess. And then see what happens. Or, you could start demanding that your provider do a few key things that illustrate a better grip on inventory. First, tell them to put the delivery quantity on the invoice. We won’t get into the accuracy of that number in this post, but it is a sufficient start to just get it printed on the invoice. Next, ask your provider for a report showing inventory positions and usage by week by point of consumption for the past year. Notice anything odd about it?
Also, task your driver with spot audits. For three consecutive weeks, ask for the soil going out to be counted. Right there in front of you. Two weeks later, ask for the clean coming in to be counted for three weeks in a row. Does the math of the audit make sense? Or… Is this just too much to deal with? Not worth your time? Do you think it is coincidence that the service design achieves a result that leaves you confused? Your provider wants you to trust them with managing your inventory. Do you?