CRU Computer Rental

1
CRU Computer Rental

• A case on Flowtime, Inventory, Thruput and
  Process costs

2
CRU case

• What does CRU stand for anyway?
• CRU is a computer rental company with a customer
  base of
• ?
• ?
• ?
• CRU has two warehouses (Mega Centers) at ? and ?
  It has ? local retail centers.

3
What is Mr. Sarkis Problem?
4
To understand the CRU operationsMake a flowchart
Customer
CRU rentals facilities at a Mega center
5
Flowchart with operations
Configuration
Pre-Config
Receiving
Order parts
Customer
Diagnose
Perform repairs
Wait delivery
6
Flowchart with operations
Perform repairs
??? ???????
Configuration
?????????
Customer
???? ?????
To where?
Receiving
????????
7
Flowchart with operations and inventories
Perform repairs
??? ???????
Configuration
S.20
S.24
?????????
S.42
S.40
Customer
S.41 Ordered
???? ?????
To where?
S.41 Not ordered
Receiving
Receiving
????????
8
Add flow times and costs appropriately to
inventories and delaysFlowchart with operations
and inventories
????? ???????
??? ??????
???????????
???
???
?????????
???
Customer
?? ?
???
???????
????????
???
???
???
9
Utilization in 1996

• UtilizationInventory on rent / Inventory owned
• Number of computers on rent at any time
• ???? x ???? ????
• Number of computers owned by CRU?
• Can use Littles formula
• Inventory Thruput x Flowtime

10
Inventory in 1996 Completed
Customer Receiving S.24 S.40 S.41 Not Ordered S41 Ordered S.42 S.20
Thruput Units/wk ???? ???? ??? ??? ??? ??? ??? ????
Inventory Units ???? ??? ???? ???? ???? ??? ??? ????
Flowtime Weeks ??? ??? ??? ??? ??? ??? ??? ???
Thruput from the top of p. 4 and the
flowchart Some of the inventory from top of p.
4 Some of the flowtime from the
flowchart Remaining computed by Littles formula.
Total inventory owned by CRU ?????
units Utilization????/???????.? Utilization gt
50. No problem.
11
Compute the profit per week in 1996

• RevenueInventory on Rent x Rent per unit per
  week
• ????????????
• CostShipReceivePre-ConfigRepairDepreciate
• ShipReceive????
• Pre-Config????
• Repair????
• Depreciation????
• Cost????
• Profit????

12
Inventory in 1997 Flowtimes and Thruputs
Customer Receiving S.24 S.40 S.41 Not Ordered S41 Ordered S.42 S.20
Thruput Units/wk ??? ??? ??? ??? ??? ??? ??? ???
Inventory Units ???? ??? ???? ???? ???? ??? ???? ????
Flowtime Weeks ? ? ? ? ? ? ? ?
Keeping the same flowtimes due to
competition Adjust the thruputs Compute
inventories from Littles formula.
Total inventory owned by CRU ????
units Utilization????/??????.?. Utilization gt
50. No problem.
13
Compute the profit per week in 1997

• RevenueInventory on Rent x Rent per unit per
  week
• ????????????
• CostShipReceivePre-ConfigRepairDepreciate
• ShipReceive????
• Pre-Config????
• Repair????
• Depreciation????
• Cost????
• Profit????

14
Short term sales initiative in 1997

• Every week,
• ??? units rented for ? weeks
• ??? units rented for ? weeks
• Each unit rented for ? weeks,
• Brings in a revenue of ??/week
• Each unit rented for ? weeks
• Brings in a revenue of ??/week
• Note the discounting for the longer term rentals
• What is the average number of weeks a computer
  stays with a customer?
• 6 or 8 weeks or something else?

15
Inventory in 1997 with Short term sales
initiative Flowtimes and Thruputs
Customer Receiving S.24 S.40 S.41 Not Ordered S41 Ordered S.42 S.20
Thruput Units/wk ???? ???? ?? ?? ????? ?? ?? ???
Inventory Units ?? ?? ? ? ? ??? ?? ???
Flowtime Weeks ? ? ? ?? ?? ? ??? ?
Keeping the same flowtimes except for the
customer Adjust the thruputs Compute inventories
from Littles formula.
Total inventory owned by CRU ?????
units Utilization????/???????.?. Utilization lt
50 or gt 50?
16
Compute the profit per week in 1997 with
theShort term sales initiative

• RevenueInventory on Rent x Rent per unit per
  week
• ????????????
• CostShipReceivePre-ConfigRepairDepreciate
• ShipReceive????
• Pre-Config????
• Repair????
• Depreciation????
• Cost????
• Profit????

17
Suggestions

• ???
• ???

18
What is the fundamental problem with the computer
rental business?
19
Do you see the same fundamental problem in the
industries below?

• Movie rental
• Fridge rental
• Furniture rental
• Car rental
• Apartment rental