Final Research Paper
This proposal is designed to assist Artemis Sportswear Company in cutting their operational expenses to increase profit margins, while considering the effect on workers and productivity.
Background
“In the 1970s, athletic sportswear began to evolve from a product line aimed at small and unique markets into a mainstream fashion product” (Clean Clothes Campaign, 2004). Artemis Sportswear Company has helped transform sport shoes and apparel into a fashion statement. Today the “total worth of the athletic apparel and footwear market is estimated at over 58 billion US dollars” (Clean Clothes Campaign, 2004).
Key Problems
In recent years Artemis Sportswear Company has been experiencing a decrease in sales due to the current economy. Artemis now wishes to assess operational expenses and find ways to increase profit margins. After assessing their budget we have found that the key problems of this company are wasted labor costs, office supply expenses and employee productivity.
Alternative Solutions
Labor Cost
In order for a company to survive, increase its revenue and reduce its operational costs, it may need to cut down labor. Labor is considered to be the highest cost within many companies. Artemis has a lot of pressure on its shoulders to cut down the operational costs. As a business, Artemis can cut down the operational costs by down-sizing the labor force so the company can compete with other sportswear companies. There are two ways a company can down-size the labor costs, one of these is down-scaling the direct labor, and the other one would be to relocate the labor and obtain cheaper labor force. Artemis does not only want to reduce the costs, but to remain an ethical company with a good reputation. The only good way for Artemis to achieve this is to down-scale direct labor. The most common way to down size labor is to terminate employees; however, this may affect the productivity of the remaining employees and affect their morale. By affecting the productivity of the remaining employees, Artemis would not increase its profitability; it would result in a profit loss. Thus to avoid such a scenario, Artemis should consider other alternative methods of down-sizing that will cut labor costs and use termination only in cases where it cannot avoid the situation (Manson, 2000). Rather than spending funds and time devising a plan on how to cut labor, Artemis should focus on its current employees and their talent. The management should survey the employees and evaluate their multiple skills. Recognize the talent and retain the multi talented employees. Now, instead of having two positions, they can be combined into one. Motivating these employees is important for them to remain engaged and focused. Allen, president and chief operating officer of an administrative service and HR company, recognizes that rewarding employees with incentives, such as promotions, keeps them engaged and motivated. Allen (2009) stated, “If employees are afforded the chance to learn new skills and advance in their careers, they are more likely to remain committed to the company and be more content with their jobs, even when more is expected of them” ( Natural attrition: The ‘organic’ way to downsize a company, para. 17). A lot of work, especially new work, can tire and wear out employees. This possible problem has to be immediately recognized by Artemis and immediately be solved. Recognition events, rewards, and challenges are all a good way to keep employees motivated. Genuine smiles and a well-deserved thank you go a long way as well.
Office Supply Expenses
There are several ways for Artemis Sportswear Company to cut operational expenses to increase their profit margin. They could start by switching from name-brand office supplies to generic. Generic office supplies are often the same quality as name-brand office supplies, and many times come in a larger quantity. Artemis could have their letterhead or business cards printed in bulk, as most print shops offer a discount for having something printed in mass quantity. Some shops will even store the bulk of the order and ship it at no extra cost as the business needs it (Kahn, 2007).
Employee Productivity
Another way Artemis Sportswear Company can cut expenses is to evaluate their employees’ efficiency. The employees should be directed to spend their time on the things that bring more profit and add more value to the company.
Also, the company could outsource tasks that do not add value, which would free up more of the employees’ time and enable them to focus on the company’s marketable items or services. Artemis can constantly evaluate their practices and procedures and cost-effectively experiment with new strategies that could potentially bring in more profit and/or cut operational expenses. They should also avoid constant fluctuations in their pricing and stick to prices that will remain nearly the same for longer periods of time: this will lead to a more loyal and trusting clientele. Keeping the pricing steady will also help ensure that the company’s financing remains stable. The prices should be fair, but high enough to keep the company from losing money or barely scraping by. Also along the lines of pricing, Artemis should choose their prices based on the ideal consumer cost. Lastly, the Artemis Sportswear Company should focus on the future. A plan for future products and equipment should perpetually be in the works. The demand from the consumers is constantly evolving, so Artemis needs to always be a few steps ahead of the consumer demand. They should anticipate the needs of the consumers and constantly be thinking of ways to improve on those needs. The company’s best resources and brightest minds should be distributed across the company, with the majority of them focused on the future and on improving the product line, (Killeen, 2011).
Proposed Solution
When looking for ways to cut costs, most managers reach for the head-count hatchet and the markets usually roar with approval, but a company can almost always create far more sustainable value by rigorously evaluating the small ticket capital items that often get rubberstamped. Three areas where closer scrutiny can result in reduced operational expenses and increased profit margins; a close review of small-ticket items, a close review of small investment items, and a close review of the budget and budget proposals.
Within the corporate budget, big-ticket items are of the first things that are reviewed when considering budget cuts. As unlikely as it may seem, big-ticket items usually only make up about 20% of the capital budget. Small-ticket items are often redundantly ordered, over-stocked, and purchased with unnecessary bells and whistles.
Close review of small investment items often doesn’t occur because managers do not want to be blamed for the company not having the right equipment or for a negative reflection on the company. Many companies routinely spend excessive funds on new equipment versus maintaining service on existing equipment for fear of the equipment failing. Managers sometimes approve requests for storefront dealers when the cost of the investment should fall on the dealer instead of the corporate office. Managers often fear purchasing sub-standard products when it comes to environmental, health, and safety issues, so they opt for the “gold-plated” versions. Managers should compare expenditures of similar items at other companies and avoid overspending.
Scrutinizing the budget and budget proposals is where the senior managers can cut costs before cutting jobs. Multiple requests for the same items from different departments often find their way onto the budgets. Many times short term capital investments make their way onto a budget without research on the long term cost alternative. The most blatant spending problem among larger companies is termed budget massaging. This involves shuffling expenditures to avoid showing a dramatic reduction in year-to-year spending to prevent a reduction in the future budget (Copeland, T 2000).

References
Clean Clothes Campaign. (2004). Sportswear Industry Data and Company Profiles.
J., A. (N.D.). Natural Attrition: The organic way to downsize a company. Retrieved May 15, 2011, from The online Houston Business Journal: http://www.bizjournals.com/houston/stories/2009/02/16/smallb4.html
Kahn, A. (2007, November 28). How to cut operational expenses: Useful tips for the small business. Retrieved May 8, 2011, from Small business informer: HYPERLINK "http://www.sbinformer.com/guides/managing_your_business/your_basic_bookkeeping/articles/071127howtocut.html" http://www.sbinformer.com/guides/managing_your_business/your_basic_bookkeeping/articles/071127howtocut.html .
Killeen, J. A. (2011). Finance & accounting: Increase your company's profit margin. Retrieved May 8, 2011, from MasterCard: HYPERLINK "http://www.mastercard.com/us/business/en/smallbiz/resources/industry/finance-accounting/articles/0925ProfitMargin.html" http://www.mastercard.com/us/business/en/smallbiz/resources/industry/finance-accounting/articles/0925ProfitMargin.html .
Manson, J. (2000). Downsizing Issues: The Impact on Employee Morale and Productivity. London, UK: Taylor & Francis Publishers .
Steven H. Appelbaum, S. L.-S. (1999). "Downsizing: measuring the costs of failure". Journal of Management Development , Vol. 18 Iss: 5, pp.436 – 463.