Uniform Rental Services
Uniform Rental Industry Alert: How a Uniform Rental Route Person Can Impact Your P&L
It’s 8am on Tuesday: time for the weekly uniform rental delivery at your Omaha facility.
The cheery and personable uniform route representative, Rory, enters the plant clutching the newest copy of the rental catalog in one hand, and a pen in the other.
“Got some new products I think would be great for you folks here,” Rory says to the plant receptionist, plopping the catalog on the front desk and circling each “new item” with the pen. “I already have free samples loaded on the truck—I’m going to go ahead and grab them and place them around so you can get a feel for them over the next few weeks, sound good?”
Before the receptionist can answer, Rory turns and heads out to the truck, fetching the new samples. “Oh well,” the receptionist shrugs, “Free samples can’t hurt anything.”
Do you really understand how much a route person can affect your P&L?
On the surface, it sounds like Rory is doing a favor for the folks in Omaha; they get to experience some “shiny new things” over the next few weeks—and at no charge! No harm, no foul, right?
Not so fast. Let’s see how this plays out…
“Free Trials” wind up on your invoice!
It’s one year later and you, the Category Manager responsible for uniform rental, are revisiting the program because contract expiration is approaching and it is time to negotiate a new deal. While performing your pre-negotiation analysis, you pick up a recent uniform rental invoice.
You note a bunch of off-contract charges, many of which were not in service just one year earlier.
Completing the same analysis for the 20 other sites under your purview, you find that almost all have added at least a handful of off-contract products since the contract’s start, and for some sites, this stuff represents the majority of the program.
Looking at year-over-year spend across 21 facilities, the uniform rental category spend has increased by more than 20% from three years prior (despite a contract capping annual price increases at 2%).
How did this happen? And how did the spend increases evade attention for so long? The answer is complicated—a steady stream of drips and drabs like these:
- At the Omaha site, the “samples” presented by Rory, the route person, were never removed after their “trial period” and ultimately billed out on the weekly invoices.
- The route person servicing the Dallas facility overheard two hourly employees discussing the bathroom’s smell. The route person chimed in, “You know, I can bring in some air fresheners;” and 10 were installed a week later. When presented with the invoice for signature, the front desk worker—juggling three on-hold calls and two visitors—whipped their pen across the dotted line. The front desk worker’s signature rendered the air fresheners “accepted”—and the 10 air fresheners have been included on each weekly invoice since.
- The Indy site began working on something that requires two of its workers to wear flame resistant (FR) coveralls. During the weekly delivery, the site’s HR manager tracked down the route person and explained the new requirement. The route person, happy to help, presented the HR manager with two FR coverall options—both name brand—and neglected to present the 40% less expensive non-name brand options. The HR manager approved the name brand option for these two employees.
- Still at the Indy site, a few weeks later, the other employees noticed the two employees who needed FR coveralls were wearing name brand. Now they wanted to wear name brand; suddenly, the employees started voicing myriad “problems” with their non-name brand uniforms. Overwhelmed by the constant complaints, the HR manager decided to replace the other employees’ uniforms with name brand uniforms. While the route person was honest with the HR manager about the increased costs for name brand uniforms, they didn’t disclose the variable charges that would result from the transition: new emblem and makeup fees, full buyback of the shirts, and substantially higher loss/ruin charges for items either not found or found to be damaged upon changeout.
- At the Albuquerque facility, the route person presented the “latest and greatest” premium floor mats to their contact and again offered a free trial, changing out standard mats for the fancy new ones. Buried with other priorities, the site contact thought little of it…and never checked the invoices when, a month later, the premium mats ended up on the bills—at 250% higher rates than those of the original mats.
- Up at the Detroit facility, the operations manager flagged down the route person, “We’re starting to run out of shop towels before our weekly deliveries!” The route-person took note and increased towel inventory by 20%. What was not known by the operations manager is that up to this point, out of a 10,000-towel inventory, the route person had been delivering only 30%, or 3,000 towels. However, per the contract, the supplier had been billing for a minimum 50% of inventory, or 5,000 towels. Instead of keeping towel inventory the same and actually delivering 50% of the existing inventory (as they had been paying for all along), the route person increased towel inventory to 12,000 and continued delivering only 30% (now 3,600) while billing for 50% (now 6,000). The Detroit facility ended up paying more for towels because of a higher inventory that did not need increased in the first place.
In all these cases, the true costs for the new items were never really discussed. Sometimes this was due to a “free trial” converting to a billed product (at “book price”), other times it was due to an overburdened contact approving new products or inventories without a passing thought. At best, it was a casual conversation which failed to consider the peripheral implications of the new products or services. The result was a range of new charges added to recurring invoices at margins dramatically higher than those in the original contract; margins for these new products typically exceeded 50%.
The increases bled into the account instance by instance, slowly and steadily over a three-year contract. And slowly but surely, the efforts you put into that last agreement were rendered less and less impactful.
The 20% you thought you saved three years ago is now all gone.
Commissioned route-people want to increase your spend
It should come as no surprise that when your service reps make commissions on your account, they are going to want to find ways to drive your spend up.
As the customer, you are either engaging in the ongoing “joust” over these efforts, or you are capitulating.
The problem is, in most organizations, it has become harder and harder to truly engage in the joust. Procurement departments have been leaned out, eroding not only category managers’ ability to manage ongoing costs, but also their bandwidth to engage with operations and finance to promote true expense management. All of this results in what is seen all the time in complex indirect spend categories like uniform rental: a significant gap between negotiation and execution, or a phenomenon we have come to call “Good Contract, Bad Deal.”
Don’t let the fox guard the henhouse
As is the case throughout the indirect services world, you must find a way to keep your uniform suppliers from exclusively “managing” your uniform rental program. If your people are not equipped with the expertise and resources needed to effectively manage this category, the “management” will be led by service reps with the incentive to drive your costs up and erode the efforts you put into negotiating a good deal.
This is of course true across many indirect services, but the uniform rental category is especially susceptible to the “Good Contract, Bad Deal” phenomenon due to the vast range of opportunities to drive costs up via discretionary charges and billing practices and the introduction of new, high-margin, off-contract products and services.
Find a way to engage in the indirect services joust. If you are not engaged, you are losing!