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Project Summary

As an employee, manager and custodian of the system, My goal has been to outline
key factors to consider when evaluating the cost effectiveness of processing (washing
& dry cleaning ) uniform in house or to outsource this facility. The decision to avail
outsourcing laundry & Dry cleaning functions requires a lot of research. There are
many advantages and disadvantages that require brainstorming as to whether
outsourcing is necessary for the organization or whether the idea is just the result of
trend. On the brighter side an outsourcing laundry function is the answer to the
need for clean cloths in less time, less cost and less effort, however market
intelligence information and data reveals that On-premise laundry is more
economical and ensured a ready supply of textiles (uniform) when needed. Apart
from carefully studying the whole document one must consider critical aspects
provided in last page which form basis of any decision.

Installed and Operational Capacity

Description Details

 Working hours per day 9 hours


 Operating Shift per day General shift
 Working days per month 26 days
 Human Resource Requirement
- Supervisor ( W1 ) 1
- Washer man ( W2 ) 3
- Press man ( W2 ) 1
 Space occupied by laundry 800 Sq.ft
 Machinery and Equipment
- Washing Machine 2
- Spinner 1
- Dryer Machine 1
 Other Equipment Iron
 Chemical used in a month
- Soap Liquid 180 Kgs
- Bleach Liquid 180 Kgs
- Washing Soda 60 Kgs
Operational Cost
Many people in organization often view that the cost of operating a laundry is based
only on two lines:
a. Labor Cost- The cost of the immediate staff in the laundry Section (Direct labor)
b. Chemical Cost- the chemical used in whole operation. ( Raw material cost )

However, to get a true picture we must consider the following :

1. Water.
We are consuming 6000 Gallon ( approx. ) per day to perform washing function. If
LIEDA water supply is available then the cost of water per month would be
Rs.15,600/- ( 6000 X 0.10 paisa X 26 ), But in case of water tanker supply is using
then this cost will be increased 160% and amount will be Rs.40,000/-

2. Fuel.
An essential cost to be borne by the whole operation is the cost of electricity and Gas.
The monthly fuel expenses are estimated for laundry section is Rs.25,000/- & Rs.
5,000/= respectively. Moreover, these utilities are not metered separately and as a
result, it is impossible to monitor their actual cost in relation to the laundry.

3. Capital Cost.
Another essential cost for running laundry & Dry cleaning is capital cost i.e
Machinery and equipment. The monthly cost is Rs. ( Total amount / life
expectancy in year /12 ).

Further, machineries and equipment are depreciated. The estimated cost of


depreciation is Rs.

4. Maintenance and Repairs.


The estimated cost of Repair and maintenance is Rs.2,000/- per month.
5. Employee Benefits.
Includes payment of social security, worker compensation, canteen and transport
facility provided by the company.
Laundry & Dry cleaning section
Costing Sheet
For the Month of October, 2015
Amount
Capital Cost
(Rs)
Machinery & Equipment
-

Equipment spare parts & Raw material inventory…………. -

Operational Cost
Labour Cost
Salary & Wages ………..………………………….
64,401
Overtime Amount…………………………………
8,800
BESSI Amount………..……………………………
3,864
EOBI Amount………..……………………………
3,864
Lunch & Tea expense ( @ Rs.99 x 26 x 5 )………

Raw Material used for washing & Dry cleaning 10,000

Depreciation of Machinery & Equipment……………..


Equipment and Machinery repair & Maintenance cost…… 2,000
Water consumption ……………………………………….
15,600

Electricity charges…………………………………………. 5,000

Gas Utility…………………………………………………. 1,000


Total Cost
115,024
Critical Factors
Judging the viability of the idea it is important to consider aspect like :

 Laundry and dry cleaning is not a capital-intensive activity.


 What happens to the space if the laundry gets outsource.? Removing
the Machines & equipment is costly. Finding someone to want to buy it
or depending on the age selling it for scrap.
 An in-house laundry ensures more hygiene and according to GMP
compliance.
 According to market intelligence information a common complaint is that on
many occasions, uniform were returned without undergoing the entire
cleaning process. Often, uniform is visually clean, is returned after rinsing
and pressing.
 Another perceived downside is when the uniforms leaves the factory. Will it
come back in the same quality it was sent out? Will it be damaged? Will it be
stolen? Who is responsible for the uniform should it get damaged while in the
possession of the launderer ? There is a belief that if the uniform is within the
walls of the plant, it is secure. Outsourcing will result in damaged or lost
uniform
 Since the outsourcing provider may work with other customers, they might
not give 100% time and attention to us. This may result in delays and
inaccurance in the work output.
 In last, there is the tough decision of what to do with the laundry staff.
Many will be long term associates. They may need to be let go: An
unfortunate reality in today’s economy.
Conclusion
In today’s modern business world, profits are driven more by cost control and cost
reduction than by increasing selling prices, However we can not compromise on
quality. The outsourcing company will be motivated by profit. Since the contract will
fix the price, the only way for them to increase profit will be to decrease expenses.
We would be unsure of the type of treatment given to clothes by outside laundries
since they use stronger chemicals and acids, which tend to weaken fabrics of
uniforms. Thus, the in-house laundry is a better choice as one can choose the right
chemicals for higher production and longer life expectancy of textiles (uniforms) and
it is a safest way to retain full control over quality and maintain on time delivery.