The cost of miscalculating PPLH

Some industry analysts will tell you that you should be aiming for 25 shirts processed for each and every shirt department labor hour that you buy. This is commonly called pieces per operator hour and generally referred to by the acronym – PPOH. I adopted this method years ago because this is the best way for me to get a snapshot of someone’s plant. A few decades ago, I renamed this and now call it PPLH. The “operator”, the “O”, sounds too much like a machine operator; a shirt presser. I think that this led some down the wrong path. You would not call the shirt washer an “operator,” it doesn’t sound right. But you know that the shirt washer is an employee that you need to pay. They are working Labor hours, hence the “L”. PPLH levels the playing field. I have no idea what that comes to in labor cost percentage. Labor cost percentage is useless to me because I have clients all over the United States and many foreign countries, that charge between 90 cents and $27 to launder and press a shirt. The gross income, of course, radically alters the percentage figure. PPLH allows me to compare workflow patterns at laundries regardless of what they have to pay for a shirt presser and regardless of what they can sell their service for. It is a good barometer for you too because it will keep you from getting a tainted view of your individual situation. For instance, suppose you are relying upon a percentage figure and yours is higher than you’d like or higher than that of your peers. You may hide behind the fact that you must pay higher wages because of your community standards or that you can’t charge enough on average because of your wholesale accounts. In reality if using PPLH to compare, you may find that you’ve developed a highly efficient plant or that your profit margin is being lost in inefficiency. The biggest sin, I will prove to you, is calculating it incorrectly.

It happens to be a fact that 25 PPLH very rarely achieved. About 95 out of every 100 cleaners that call me for advice have a PPLH 16 and 18 in their shirt department. Some cleaners are below 12 PPLH. Miscalculating PPLH makes my list of common goofs that cost you money with ease and is probably the biggest cause of declining profits in the industry, by far. Let me explain, but first let’s make sure that we all understand that labor is your biggest expense. No surprise there, right? Still, we love to beat up our supplier for a dollar on a case of hangers. Why? Because labor does not appear to be out of line. Everybody is working, and when there is one person out sick, pandemonium rears its ugly head. We certainly conclude that our labor is at rock bottom. We essentially prove it when we have a skeleton crew. When we hear about PPLH, even before we figure out what ours is, we conclude that we are surely within the envelope of respectability because of the very obvious fact that we have few employees and all of them work and, in fact, work very hard. Perhaps we think that we understand how to calculate it, but we just may second guess ourselves later.

Let me illustrate with an example. Let’s imagine a double-buck shirt unit operated by 2 employees. This unit feeds two other “post-press” employees – an inspector/touch-up and an assembly person. They, in turn, send off completed orders to be bagged. The girl that bags drycleaning does the shirts as well. Our hypothetical plant does 2500 shirts per week. They average 80-85 shirts per hour and work about 37 hours per week. To complete the fantasy, let’s say that you’ve just returned from your local DLI affiliate’s Holiday social where they talked about PPLH and stressed 25 as a good goal in the shirt department. When you figure out yours in the manner that was explained, you are flat out floored. It simply can’t be. Then you begin backing out certain labor hours until you have a palatable number – one that you won’t be embarrassed to admit to your peers. The truth is that you are lying to yourself. Here are a few ways to improperly calculate PPLH, and then I’ll show you how to do it correctly.

An honest PPLH number is never a spike, it is a global average. A common mistake then, is to actually include all of the labor hours that you should but select a small window of time to calculate it. Let’s say that the plant that we described a minute ago has an equipment failure during the week. Consequently, there are still 220 shirts to do at two o’clock on Friday afternoon. Your employees are used to going home at that time, but they hang in there and press like they have had way too much coffee. They finish at 4, they’ve done a good job on the shirts, and they have finished much earlier than mathematics led you to believe at 2 PM. You are pumped up from a combination of too much coffee yourself, last night’s pep talk about PPLH and the fact that your pressers finished an hour earlier than you thought that they would. They’ve pressed at the rate of 110 shirts per hour. 2 pressers plus 2 support people, each working 2 hours (between 2pm and 4pm) for a total labor hour usage of 8. 220 shirts, using 8 hours of labor is 27.5 PPLH (220/8= 27.5 PPLH). You may reason: “Hmm, 27.5 PPLH! Excellent! Nobody that I’ve talked to is doing that well. Well, actually, I’m not doing 27.5. My pressers really kicked butt this afternoon. If they pressed at their normal rate, I’d probably be at 25 PPLH.” The next time that someone asks you about PPLH, you will probably tell them that you are right at 25, maybe a hair under, “…but we do a quality shirt…” Everybody says that.
There are so many things wrong with this all too common scenario.

• PPLH is a global average. Sighting the performance during a small window of time is inaccurate. It only serves to allow you to justify clutching onto a money-wasting system and never allows you to see the desperate need to make a serious change.
• It is remarkably easy to calculate PPLH, but so often the accepted formula yields a truly offensive number. The conclusion is that “you did it wrong”. The result of that, remarkably, is to tweak the formula until its product is more like what the guys at the meetings tell you it should be. Nothing could be more wrong. Nothing could be more costly.
• Let’s go back to our hypothetical plant with 2 pressers and two other employees for a minute. Who washes the shirts? Who marks them in? Who packages the completed orders? If these tasks are being done for “free”, then you and I need to have a heart to heart meeting. Commonly, one reason that these chores are done by someone else and therefore their labor cost is not relevant or the task itself is done for “free.” This is wrong. First, let’s consider the packaging duties. They are being done by the girl that bags the drycleaning. Half of her labor hours MUST be charged to the shirt department. Disagree? How can it possibly make sense to charge her labor to the drycleaning department? It doesn’t matter that “that department can afford it.” You are only kidding yourself. If the labor cost belongs to shirts, it belongs to shirts. Period. You could argue that if she didn’t bag shirts, she’d still have to be there all day, so therefore it’s being done for free. That’s not such a foreign thought. But that is when you would have to play manager and combine the drycleaning bagging duties with another “part-time” job that takes all day, like perhaps inspection. Only you can answer that because it will differ in virtually every plant. In any case, packaging labor can not be ignored, even if for no other reason than to compare yourself with your peers. If your total number of shirts is approximately equal to your number of drycleaning pieces in any given time frame, then half of the bagger’s hours must be charged to shirts. All of these words are also true for washing labor (which may be done by your drycleaner/spotter) although it may be only 5-10 hours per week. I look at mark-in labor from the other side of the fence, however. It is generally considered acceptable to charge the cost to tag or mark-in to the customer service department. The best justification for doing so is that, for the purpose of comparison with your peers, everybody does it that way. Arguably, shirt productivity is being measured and shirts have not begun their time in “production” until they have arrived at the washing arena. If you wish to compare yourself to a peer that has a central mark-in area, like perhaps a wholesaler, you should attempt to figure the amount of time that your customer service staff actually uses to mark-in shirts. An accurate figure will be tough to tabulate. But never consider mark-in to be free. If you need to prove this to yourself, you will do so if you invest in one of those fancy tagging machines that will require you to perform central mark-in. With that, you will not save labor. You will create a new job instead. When I had my last wholesale shirt laundry, I was at 28 pieces per operator hour – but that had to include mark-in, as all of the business was wholesale. I now have clients that have a PPLH of over 30 (my own personal drycleaner, for instance, is at 31). In order for me to compare his performance to my own, I would need to recalculate my historical figures and exclude the mark-in hours. He has a couple of stores where the counter personnel do the mark-in chores. Incidentally, suppose you have a full-timer plus a part-timer at a store (say, 8 hours plus 4 hours), and you are able to calculate that 1/3 of their time is used to mark-in shirts. That is probably far too many hours, but it serves to illustrate this point. Would that then mean that if they did not mark-in shirts, you could then eliminate the part time position? Very unlikely. Much more likely is that the part-timer is there to keep customers from waiting during the busy time between 7am and 11am. In the final analysis, it is perfectly acceptable, in fact recommended, that mark-in hours not be counted, unless central mark-in is the rule. In which case, the mark-in hours would be backed out only for the purpose of comparison with others.
• At our hypothetical plant, how can they be averaging 80-85 shirts per hour if they work for 37 hours? You argue that you pay them for breaks and rest room visits and maybe even lunches. Nice try. That dog don’t hunt. The fact is you are paying for 37 hours per employee. Like it or not, you are doing 67.5 shirts per hour. Mortified? You should be. Defensive, perhaps? No surprise. You explain that they actually do process 80 shirts per hour, it’s just that they have to help the assembly people or fold shirts after they’re done pressing. That doesn’t fly. The fact is, we are not calculating how many shirts we can press per hour, we are calculating a productivity figure. Press a thousand shirts per hour if you wish, but they aren’t ready to return to the customer until all of the necessary processes are complete. Or, press a thousand shirts per hour if you wish, but if you need a hundred people to do it, you will be broke before you finish reading this publication.
• So whether you like it or not, our hypothetical plant isn’t even close to the 25 PPLH that he may brag about. In actuality, he has 2 pressers that each work 37 hours (74), two post-press people that likely work a little more than that (but we will be conservative and count them as 74 hours, too, for a sub-total or 148). 7 hours for washing labor (155) and let’s say 16 hours for bagging. That is a total of 171 hours for 2500 shirts. The PPLH is simple to calculate: 2500 divided by 171 labor hours = 14.6 PPLH. Ouch!

This hypothetical plant may or may not illustrate your plant, but I think that you get the picture. Can it be saved? Of course it can! But it requires that scary thing that we call management. The pressers are probably not lazy; likely they simply have not been trained to effectively produce 90-100 shirts per hour while maintaining top quality. Good chance that the workflow rhythm in the plant is such that it generates relative confusion in the inspection and assembly theater and the need for two people rather than one. Even without added production from the shirt unit, shirts per hour remaining at a lowly 67.5, PPLH would be increased to 18.6 with the reduction of one employee. As much as that is – a savings of over 25% in labor dollars or roughly $13,500 per year – it is still a far cry from what is possible. In fact, it is easy to actually double those savings without increasing shirts per hour from the shirt unit even one bit! A reasonable goal, by the way, would be 29 PPLH for this scenario. And this is done everyday, at efficient plants. The hazard, and the point of this column, is that if you miscalculate your PPLH and think that you are already at 27.5, you will do nothing about it because you will mathematically deduce that you are as efficient as you can be, when in fact you are merely at 14.6 PPLH. You are leaving a whopping $29,120 on the lunch table for your employees to take.

That is the cost of miscalculating pieces per operator hour.

“If you do what you’ve always done, you’ll get what you always got.”