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CRU Computer Rental

A case on Flowtime, Inventory, Thruput and Process costs

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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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What is Mr. Sarkis’ Problem?

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To understand the CRU operationsMake a flowchart

Customer

CRU rental’s facilities at a Mega center

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Flowchart with operations

Customer

Receiving

Diagnose

Configuration

Pre-Config

Orderparts

Performrepairs

Waitdelivery

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Flowchart with operations

Customer

Receiving????????

Configuration

?????????

?????????

Performrepairs

??????????

To where?

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Flowchart with operations and inventories

Customer

Receiving????????

Configuration

?????????

?????????

Performrepairs

??????????

To where?

S.40

S.24

S.41Not ordered

S.41Ordered

S.20

S.42

Receiving

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Add flow times and costs appropriately to inventories and delays

Flowchart with operations and inventories

Customer

???????????????

???????????

?????????

???

???

???

???

???

????????????

????????? ??????

???

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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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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 flowchartSome of the inventory from top of p. 4Some of the flowtime from the flowchartRemaining computed by Little’s formula.

Total inventory owned by CRU: ????? unitsUtilization=????/?????=??.?%Utilization >= 50%. No problem.

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Compute the profit per week in 1996

Revenue=Inventory on Rent x Rent per unit per week????*????=????

Cost=Ship+Receive+Pre-Config+Repair+DepreciateShip+Receive=????

Pre-Config=????

Repair=????

Depreciation=????

Cost=????

Profit=????

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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 competitionAdjust the thruputsCompute inventories from Little’s formula.

Total inventory owned by CRU: ???? unitsUtilization=????/????=??.?%.Utilization > 50%. No problem.

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Compute the profit per week in 1997

Revenue=Inventory on Rent x Rent per unit per week????*????=????

Cost=Ship+Receive+Pre-Config+Repair+DepreciateShip+Receive=????

Pre-Config=????

Repair=????

Depreciation=????

Cost=????

Profit=????

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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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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 customerAdjust the thruputsCompute inventories from Little’s formula.

Total inventory owned by CRU: ????? unitsUtilization=????/?????=??.?%.Utilization < 50% or > 50%?

Inventory in 1997 with Short term sales initiative: Flowtimes and Thruputs

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Compute the profit per week in 1997 with theShort term sales initiative

Revenue=Inventory on Rent x Rent per unit per week????*????=????

Cost=Ship+Receive+Pre-Config+Repair+DepreciateShip+Receive=????

Pre-Config=????

Repair=????

Depreciation=????

Cost=????

Profit=????

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Suggestions

??? ???

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What is the fundamental problem with the computer rental business?

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Do you see the same fundamental problem in the industries below?

Movie rental Fridge rental Furniture rental Car rental Apartment rental