This is the second in a five-part series exploring common examples of ineffective FRC practices that have real costs—and practical solutions. In our first post we reviewed common scenarios that signify opportunity for savings. In this post, we explore how to realize savings by transitioning out of rental or lease, and in our next posts we will examine three additional cost saving strategies: eliminating retail spend, streamlining procurement procedures, and spend avoidance.
As organizations look to reduce costs – either as part of an industry downturn, or simply to streamline procurement – transitioning out of rental/lease for flame resistant clothing (FRC) can help companies realize as much as 30-50% or more in direct cost savings! In fact, by transitioning from a rental program to a Tyndale managed direct purchase program, Stallion Oilfield Services cut spending by more than 50%!
How Rental Programs Work
Similar to leasing a car, industrial laundry rental programs are sold as a simple and economical approach to putting workers into flame resistant clothing (FRC):
In theory, the costs are straightforward: for example $10 per week x 52 weeks per year = $520 per employee. It sounds simple on the surface, but in reality leasing clothing is anything but simple. Charges and challenges inherent in rental programs can – and often do – double anticipated company spend!
Rental Program Charges and Challenges
There are a variety of unexpected costs—above and beyond the rental charges—that accompany the vast majority of uniform rental programs:
Also, the cost of outerwear is generally not included in the weekly cost. Accounting for outerwear can often cost in excess of $200 per employee annually.
Industrial laundry rental programs typically have complicated invoicing procedures:
When administrative support is unable to review and verify weekly charges, the provider will generally suspend service – leaving the organization with no option but to pay the full amount.
Plus, the organization is invoiced when employees lose items and request replacements, and items that are worn-out are frequently invoiced as damaged and abused.
And, generally every item issued to the organization is also invoiced at its weekly laundry rate for the duration of the contract, regardless of vacation, sick time or training.
Remember our initial estimate of a straightforward $520 per employee per year? When all is said and done, companies in rental programs typically pay more than $1,000 per employee per year thanks to charges, fees, and administrative costs. Making matters worse, as many as 50% of employees in a rental laundry program choose not to even leverage the service their company pays for!
Contract Termination Challenges & Costs
In a rental contract, the supplier owns the clothing and it must be returned at the end of the contract — leverage that rental suppliers use to keep companies in undesirable contracts. The reality is that transitioning to a direct-purchase program can be done effectively and efficiently, if proper planning is in place. Collecting the legacy garments and coordinating delivery of the newly purchased FRCs will substantially minimize contraction termination costs. For example, Stallion Oilfield Services was able to minimize their contract termination costs to 10% of their annual contract cost – an expense that was recouped in a direct-buy program three times over in the first year!
Leveraging Savings with Direct Purchase
As you can see, FRC rental is an area of significant opportunity for companies to stretch budget dollars and unlock savings. How much savings can you expect? What alternate program options are available? Consider this:
In addition to direct cost savings, your organization will increase service levels – product choice, customer service, fittings services, and more – all while maximizing end user satisfaction and compliance!
Learn more about the benefits your organization can expect from transitioning away from rental/lease—at both the management level and the employee level.
Case Study: Stallion Oilfield Services
Formerly in a rental program, Stallion Oilfield Services experienced garment quality issues, service issues – including garment cleanliness and odor concerns, significant investment in administrative oversight, and hidden charges. “Our employees had lost faith in the system, and it became apparent that they did not even want to participate [in the rental program],” said Todd Mucha, QHSE at Stallion. Employees stopped turning in clothing to get laundered – laundering it at home instead, and repairs weren’t being made. “The complete program fell apart due to the fact that we weren’t getting the kind of service we had thought we originally signed up for,” he said.
Stallion Oilfield Services transitioned from a rental program to an allowance-based direct purchase program and cut spending by more than 50% in the first year alone! “We dramatically changed our cost and we dramatically changed perception – from not only management but from our people,” Mucha said. “We stopped wasting money…[and] the biggest benefit to our employees was ownership.” By owning the clothing, employees could purchase what they wanted and were motivated to follow proper care and maintenance guidelines to maintain an appearance they could feel good about.
The roll-out of the allowance program was staggered to allow for collection and return of the rented garments.
Sign up for Tyndale’s webinar series to hear directly from Stallion Oilfield Services about their real-life experience with the transition process—and its outcomes.
Ready to get started?
Contact Tyndale today at 800-356-3433 x679, or request a complimentary consultation to help identify opportunities to streamline your program.