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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 operations


Make a flowchart

Customer

CRU rentals facilities at a Mega center


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Flowchart with operations


Configuration
Pre-Config
Receiving
Order
parts

Customer

Diagnose
Perform
repairs

Wait
delivery
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Flowchart with operations


???
???????

Perform
repairs

Configuration

?????????

Customer
????
?????

To where?

????????

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Receiving

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

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 Littles formula
Inventory = Thruput x Flowtime

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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 Littles formula.

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Total inventory owned by CRU: ????? units


Utilization=????/?????=??.?%
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+Depreciate
Ship+Receive=????
Pre-Config=????
Repair=????
Depreciation=????
Cost=????

Profit=????

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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 Littles formula.

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Total inventory owned by CRU: ???? units


Utilization=????/????=??.?%.
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+Depreciate
Ship+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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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 Littles formula.

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Total inventory owned by CRU: ????? units


Utilization=????/?????=??.?%.
Utilization < 50% or > 50%?

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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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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?

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Movie rental
Fridge rental
Furniture rental
Car rental
Apartment rental

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