Artemis Sportswear Company (ASC) is a newly established company that is proving to be a competitor in the distribution of athletic gear throughout the United States. ASC board members have determined that there is a need to increase profit margins to allow for expansion of the company to meet an increased demand. Increasing costs of their products is out of the question, cutting operational costs is the only solution.
In an industry saturated with aggressive competition, it is vital for any business to take strategic measures to ensure that the business sustains itself into the future. ASC has proven itself to be the rising star in the sportswear market by making ...view middle of the document...
Strategic advices to aid the company in attaining sustainable long-term profits, through the streamlining of the operational processes, are proposed. This study will close a subjective analysis and conclusion on the subject, which will include the limitations of the theories that have been used in this study.
Upon initial review by the team of specialists brought in by Phoenix Enterprise Consultants, Inc., one of the main issues observed; Artemis is not operating at an efficient or competitive level in comparison to it's closest competitors. The fundamental problems that have been identified and need to be addressed before ASC can see an increase in profit margins consist of the following elements:
* Streamlining the manufacturing process
* Seasonal labor cost
Streamlining the Manufacturing Process
According to the market research conducted by the team of specialists, Artemis' closest competitor, Adidex, is on pace to closing the retail revenue gap with ASC within two years. The results for Adidex in Q3 of 2013 show a $5.85 billion revenue which is on pace for them to close the fiscal year at $7.0 billion. Adidex has shown 22% increase in revenue over the past two years. In comparison, ABC has shown a 34% increase in revenue in the past four years. ASC is being challenged as a leader in the sportswear market. In order to mitigate this development, fundamental changes have to be made in the manufacturing process to reduce operational expenses and increase revenue.
Seasonal Labor Cost
The athletic gear market fluctuates on a seasonal basis. All sports are played during certain seasons, and some sportswear is not in demand year-round. During these breaks between seasons, it is difficult to maintain a full workforce. Hours for each employee are reduced causing many to seek full time employments elsewhere. It is also extremely costly to maintain compensation and full benefits when there is a high turnover of employees during the slow portions of the season.
Historically, employees will seek new employment when their hours are cut due to down-time. Some employees will be resistance to changes in current processes. When employees walk away from the job, it creates a demand on the remaining workforce to work additional hours, creating overtime costs. A reduction in a permanent workforce will also affect the success of a new lean process. In most cases, it is the employees that are getting the higher salaries who stay employed with the company which creates higher expenses by having to pay them overtime.
When considering the cost of a direct hire employee on a part time basis, costs additional to basic wages can be extensive. The budget must include allowances for Social Security which is 6.2 percent on the first $90,000 of salary ("Social Security"). Unemployment cost is 6 percent of the first $7,000 of salary ("Unemployment Insurance Tax Topic"). If there is a high turnover rate with numerous unemployment compensation...