One action Emilios could take is to stop using the external cleaning company and have its own staff do the cleaning instead. The case study states that the shop "is quiet in the mornings and sometimes Emilios' staff do not have much to do". This indicates that there is spare capacity in the workforce. By allocating the cleaning tasks to staff during these quiet periods, Emilios could eliminate the "fixed amount" paid to the cleaning company, leading to a direct reduction in its overhead costs.
This action would help reduce costs without compromising standards. As the staff are already employed, the additional wage cost would be zero, making it a significant saving. The key to maintaining standards would be to provide the staff with proper training and cleaning supplies, and to schedule the cleaning for the quiet morning periods. This would ensure the shop remains clean for customers while making better use of existing resources and improving overall business efficiency and profitability.
The case study (Item D) provides two clear opportunities for cost reduction:
1. **The Cleaning Company:** Emilios pays a "fixed amount" for cleaning. However, its own staff "do not have much to do" in the quiet mornings.
- **Action:** Cancel the cleaning contract and have the existing staff clean the shop during their paid hours.
- **Analysis:** This would directly reduce fixed costs. Since staff are already being paid and are under-utilised, this makes the business more efficient. To maintain standards, management would need to ensure staff are trained and the cleaning is done properly.
2. **Ingredient Supplier:** The cost of ingredients from the wholesaler has "increased by 25% over the last two years". A new "low-cost supermarket" has opened nearby.
- **Action:** Switch from the wholesaler to the low-cost supermarket for some or all ingredients.
- **Analysis:** This could significantly reduce variable costs (cost of goods sold). However, this comes with a risk to standards. The supermarket is known for its "cheap 'value' range". Emilios must ensure the quality of these ingredients is high enough not to compromise the taste and reputation of its ice cream, which is "made on site". A blind taste test might be needed before switching.
Expert