The General-Purpose Furniture by Gulf Creative - Case Study Example

The manufacturing process remains a single manufacturing process as it was before the introduction of the general furniture for producing both furniture types. The quality of furniture depends on the expertise and skills of individual workers and the type of wood used. More focus and priority is on the customized furniture because of their large share of sales despite the increase in sales of general-purpose furniture. The business grapples with controlling a large inventory of general-purpose furniture.

Generally, the sales volumes are large but the financials do not indicate tangible profitability.AnalysisSeemingly, the expansion into the production of general-purpose furniture by Gulf Creative Ideas was not a sound strategy. The company seems to have not put in place a continuous strategy for reducing the inventory investment while at the same time increasing the performance of the production of its two classes of furniture. What could be the most possible reason for the low levels of profitability against sales in the case of this company is that, by expanding their inventory, costs rise from additional needs.

According to Altendorfer (2013), in similar cases, the rising costs may always be because of requirements for more storage space, increased costs of labour for the additional units in their procurement and sourcing. Another issue facing Gulf Creative Ideas could be the reluctance of the management to remove the slow-moving general-purpose furniture from their product portfolio and this eats up its earnings in the additional costs that increase at faster rates than revenues into the company hence low profitability.

Question fourth single manufacturing process and additional product line without a strategic sequence for production of the two product lines have led to increased sales volumes within the company but ignored the most important factor, of controlling the inventory, leaving profitability unchecked because of high costs. For this reason, the organization’s costs have become so high eating up into the profitability of the organization because there is no proper mechanism for costs control. Question fiveThe best way of dealing with the cost issue is isolating the production of the customized furniture from the general-purpose furniture to determine the precise cost incurred in inventory and production of the two product lines.

With the proper information about the costs, incurred against profitability, Abdullah may make an informed decision on continuing with the production of the general-purpose furniture based on their profitability margin, or to stop their production if they are found to cost more to produce, hence eating up into his profitability.ReferenceAltendorfer, K. (2013). Capacity and Inventory Planning for Make-to-Order Production Systems: The Impact of a Customer Required Lead Time Distribution. Dordrecht: Springer.