CRU Computer Rental
A case on Flowtime, Inventory,
Thruput and Process costs
1
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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.
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2
What is Mr. Sarkis’ Problem?
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3
To understand the CRU operations
Make a flowchart
Customer
CRU rental’s facilities at a Mega center
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4
Flowchart with operations
Configuration
Pre-Config
Receiving
Order
parts
Customer
Diagnose
Perform
repairs
Wait
delivery
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5
Flowchart with operations
???
???????
Perform
repairs
Configuration
?????????
Customer
????
?????
To where?
????????
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Receiving
6
Flowchart with operations and inventories
???
???????
Perform
repairs
Configuration
S.20
S.24
?????????
S.42
S.40
????
?????
S.41
Ordered
Customer
To where?
S.41
Not ordered
Receiving
????????
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Receiving
7
Add flow times and costs appropriately
to inventories and delays
Flowchart with operations and inventories
???
??????
???
?????
???????
???
???????????
?????????
???
Customer
??
?
???
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???
????????
???
???????
???
8
Utilization in 1996
 Utilization=Inventory
on rent / Inventory owned
 Number of computers on rent at any time
– ???? x ???? = ????

Number of computers owned by CRU?
– Can use Little’s formula
» Inventory = Thruput x Flowtime
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9
Inventory in 1996: Completed
S.24
S.40
S.41 Not
Ordered
S41
Ordered
Customer
Receiving
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 Little’s formula.
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Total inventory owned by CRU: ????? units
Utilization=????/?????=??.?%
Utilization >= 50%. No problem.
10
Compute the profit per week in 1996
 Revenue=Inventory
on Rent x Rent per unit per week
????*????=????

Cost=Ship+Receive+Pre-Config+Repair+Depreciate
Ship+Receive=????
Pre-Config=????
Repair=????
Depreciation=????
Cost=????

Profit=????
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11
Inventory in 1997: Flowtimes and Thruputs
S.24
S.41 Not
Ordered
S.40
S41
Ordered
Customer
Receiving
Thruput
Units/wk
???
???
???
???
???
???
Inventory
Units
????
???
????
????
????
???
Flowtime
Weeks
?
?
?
?
?
?
S.42
S.20
???
???
???? ????
?
?
Keeping the same flowtimes due to competition
Adjust the thruputs
Compute inventories from Little’s formula.
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Total inventory owned by CRU: ???? units
Utilization=????/????=??.?%.
Utilization > 50%. No problem.
12
Compute the profit per week in 1997
 Revenue=Inventory
on Rent x Rent per unit per week
????*????=????

Cost=Ship+Receive+Pre-Config+Repair+Depreciate
Ship+Receive=????
Pre-Config=????
Repair=????
Depreciation=????
Cost=????

Profit=????
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13
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?
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14
Inventory in 1997 with Short term sales initiative:
Flowtimes and Thruputs
Customer
Receiving
S.24
S.41 Not
Ordered
S.40
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 Little’s formula.
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Total inventory owned by CRU: ????? units
Utilization=????/?????=??.?%.
Utilization < 50% or > 50%?
15
Compute the profit per week in 1997 with the
Short term sales initiative
 Revenue=Inventory
on Rent x Rent per unit per week
????*????=????

Cost=Ship+Receive+Pre-Config+Repair+Depreciate
Ship+Receive=????
Pre-Config=????
Repair=????
Depreciation=????
Cost=????

Profit=????
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16
Suggestions
 ???
 ???
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17
What is the fundamental problem with the
computer rental business?
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18
Do you see the same fundamental problem in
the industries below?
 Movie
rental
 Fridge rental
 Furniture rental
 Car rental
 Apartment rental
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19