Canada’s Cleaners, Inc., has been in the dry cleaning business since 1987. We take pride in providing a quality cleaned and pressed shirt at reasonable cost from stores in convenient locations. These are Canada’s Cleaners’ competitive advantages. Lately, however, customers have complained about flaws in their shirt pressing. This cannot continue or it will cost us business. There are bigger competitors. We need to beat them on the quality of our shirt pressings. The problem seems to be in our current pressing machine, which is now 22 years old. It is requiring us to touch up 70% of the shirts after they come out of the machine, as well as hand finishing all “dark” shirts.
The recommended, most feasible solution is to sell our old pressing machine and buy a new pressing machine, the Shantoka. This machine will allow us to make bigger profits than ever, more than compensating for its cost. It will reduce the number of touch-ups and hand finishes to near zero. The fine quality pressing produced by the Shantoka will allow us to increase our charge for a cleaned and pressed shirt from $1.85 to $2.25 each. Please do not be concerned about your jobs or work hours. As word spreads about the fine quality that we will now be able to produce, we will expand operations in order to increase the convenience of our locations throughout the London, Ontario area.
To implement this plan, we will be selling the current machine. As soon as it is moved, we will move in the new machine. Delivery and setup are included by the Shantoka company with our order, and their experts on site will have the new machine set up in no time. They will then train you to operate the new machine.
This is an exciting change for us. Our old machine has been holding us back.
Canada’s Cleaners, Inc., has been providing dry cleaning in London, Ontario since 1987. Compared to competitors in the area, especially the bigger dry cleaners, Canada’s Cleaners provides high-quality cleaning and pressing for dress shirts. The quality of the pressing is particularly important, as a wrinkled shirt is not a professional shirt.
Lately, there have been complaints about pressing, which have been traced back to the pressing machine. As it stands, employees touch up 70% of the shirts after pressing and hand finish 10% “dark” shirts, which require pressing with a lighter touch. Even so, a few wrinkles have slipped through the manual inspection process. If we can afford it, it is time for a new pressing machine.
The current pressing machine is 22 years old. It probably has three more years of life left in it. This machine can press 40 shirts per hour for a total of about 300 shirts per day, which is how many pressed shirts we sell per day presently. Utility costs have been very reasonable at $2000/year for this machine. However, repair costs have skyrocketed to $4000/year and are likely to remain at that level for this old machine. Furthermore, employee time and labor is substantial, with 70% of shirts needing touch-ups after coming out of the pressing machine, and 10% of “dark” shirts, which require more delicate pressing, needing hand finishing. Currently, however, an offer to buy this machine for $22,000 has created an opportunity to buy a new machine, where we can use that $22,000 toward the purchase price. The remaining amount of the price can be financed over the life of the machine. There are three machines with the potential to replace the current pressing machine while offering not only as good, but actually a superior shirt pressing. A head to head comparison of the various machines has resulted in the decision to buy the Shantoka.
The Shantoka costs $57,000 and is expected to last for 12 years. It has some new flexibility in that additional pieces can be purchased later to add on additional capacity. It looks a bit delicate, but repairs are predicted to cost only $1500/year. The slight increase in annual utility costs to $2200 is minimal. The pressed shirts have such fine quality, with excellent pleats, that a per-shirt charge of $2.25, up from our current $1.85, is more than justified. Our current business may decrease to 275 per day instead of the current 300, if a few customers think the shirts are no longer affordable, but overall this is a better deal for the company. Shirts will have better pleats. The biggest advantage for the Shantoka is that it will require virtually no touch-ups and virtually no hand finishings. The Shantoka can press 60 shirts per hour, a 50% increase in capacity. Our employees will be put to better use elsewhere in our operations. If everything works out, we will further expand operations in the future.
The Halter would cost $51,000, last 15 years, is projected to cost $2500/year in utilities and $1000/year in repairs. It can also press 60 shirts per hour, but these would require touch-ups 10% of the time and hand finishings 4% of the time. For the superior pressing, we could charge $2 per hour with no loss of customers.
The Universal is considered a “Cadillac” pressing machine, but I am not impressed. It would cost $67,000, last 18 years, is projected to cost $2500/year in utilities and $2000/year in repairs. It can press 50 shirts per hour, also requiring 10% touch-ups and 4% hand finishing. For these too, we could charge $2 per hour with no loss of customers.
Sell the current pressing machine, use the money as a down payment on the new machine, finance the remaining balance to pay off over the life of the machine. The machine with the most beneficial cost-benefit ratio is the Shantoka, as can be seen in the accompanying table. Although our industry has had some challenges in the past 20 years, with changes to more casual business wear and the use of home “dry cleaning,” we are not likely to see further changes. In fact, as more people realize the poor quality of home products for effective cleaning, and people become too busy to want to do their own cleaning, and wages rise coming out of the recession, the dry cleaning industry will increase. Furthermore, by offering a quality product including perfect pressing, we can make further inroads against the competition, a business that in our London, Ontario area adds up to $13 million Canadian every year.
Implementation will be relatively simple. The buyer of the current machine is responsible for removal and delivery to his new business. The manufacturers of the Shantoka offer delivery and expert installation included in the price. We should be able to change over during a long weekend, with little or no interruption in service.
We will track sales and quality issues. We will keep employees in place in the short term to check the shirts carefully as they exit the machine. Assuming that the Shantoka will perform as delivered, we can then switch them to other operations in our dry cleaning establishments, with only spot checking of the pressed shirts. This will allow us to handle more customers as word of our quality spreads.