Essay about Cru Computer Rentals

1622 Words Jun 26th, 2012 7 Pages
CRU Computer Rentals
(Operational Management Assignment)

Executive Summary
CRU is one of the two national computer rental companies. They purchase CPU, monitor, printer and other peripherals and rent them out for long term leases and short term rentals. The case covers the problem faced by the company in 1997 when the rental market started to decline and the efforts by the company to bring up the sales plunged the company to losses.
Problem Statement
In 1996, they had a revenue of 15 million$ and the average number of units that were on rent was at 1000 units per week.
But at the beginning of 1997, the rental market began to decline and the demand fell down to 600units per week at CRU. This was a matter of grave concern to CRU
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Hence special offers can be provided to clients who return back the units in good condition compared to those who return back goods in the faulty state. 3) As the throughput increases, inventory also increases if the flow time is kept constant. In 1997 when the sales drive was attempted, the flow time was kept constant. As a result, when the throughput increased, the inventory increased. This increased the total depreciation cost and that brought down the net profits.
Little’s law states that Inventory = Throughput * Flow Time. Hence flow time needs to be reduced whenever throughput is increased to bring down the Inventory and thus reduce depreciation costs. 4) Reduce different buffer sizes to the minimum so that the overall cost of depreciation decreases and profit increases.

Alternatives (Question2)

1) Assuming that operations will be able to ensure that all buffer sizes are the same as they were in 1996 for all the three options.
(a)Option 1 (Capture 60% of 4 week market, 30% of 3 week market, 10% of 12 week market) | Customer | Receiving | Status 24 | Status 40 | Status 41 | Status 42 | Status 20 | Throughput (units/week) | 900+300+60 = 1260 | 1260 | 882 | 378+132 = 510 | 510 | 510 | 1260 | Inventory (units) | 6720 | 500 | 1500 | 1000 | 905 | 500 | 2520 | Flow Time (weeks) | 5.33 | .4 | 1.7 | 1.96 | 1.77 | .98 | 2 |

Number of units

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