CRU Computer Rental A case on Flowtime Inventory

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CRU Computer Rental A case on Flowtime, Inventory, Thruput and Process costs 1 utdallas.

CRU Computer Rental A case on Flowtime, Inventory, Thruput and Process costs 1 utdallas. edu/~metin

CRU case u What does CRU stand for anyway? u CRU is a computer

CRU case u What does CRU stand for anyway? u CRU is a computer rental company with a customer base of – ? – ? u CRU has two warehouses (Mega Centers) at ? and ? It has ? local retail centers. utdallas. edu/~metin 2

What is Mr. Sarkis’ Problem? utdallas. edu/~metin 3

What is Mr. Sarkis’ Problem? utdallas. edu/~metin 3

To understand the CRU operations Make a flowchart Customer CRU rental’s facilities at a

To understand the CRU operations Make a flowchart Customer CRU rental’s facilities at a Mega center utdallas. edu/~metin 4

Flowchart with operations Configuration Pre-Config Receiving Order parts Customer Diagnose Perform repairs Wait delivery

Flowchart with operations Configuration Pre-Config Receiving Order parts Customer Diagnose Perform repairs Wait delivery utdallas. edu/~metin 5

Flowchart with operations ? ? ? ? ? Perform repairs Configuration ? ? ?

Flowchart with operations ? ? ? ? ? Perform repairs Configuration ? ? ? ? ? Customer ? ? ? ? ? To where? ? ? ? ? utdallas. edu/~metin Receiving 6

Flowchart with operations and inventories ? ? ? ? ? Perform repairs Configuration S.

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 ? ? ? ? utdallas. edu/~metin Receiving 7

Add flow times and costs appropriately to inventories and delays Flowchart with operations and

Add flow times and costs appropriately to inventories and delays Flowchart with operations and inventories ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Customer ? ? ? utdallas. edu/~metin ? ? ? ? ? ? ? ? 8

Utilization in 1996 u Utilization=Inventory on rent / Inventory owned u Number of computers

Utilization in 1996 u Utilization=Inventory on rent / Inventory owned u Number of computers on rent at any time – ? ? x ? ? = ? ? u Number of computers owned by CRU? – Can use Little’s formula » Inventory = Thruput x Flowtime utdallas. edu/~metin 9

Inventory in 1996: Completed S. 24 S. 40 S. 41 Not Ordered S 41

Inventory in 1996: Completed S. 24 S. 40 S. 41 Not Ordered S 41 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. utdallas. edu/~metin Total inventory owned by CRU: ? ? ? units Utilization=? ? /? ? ? =? ? . ? % Utilization >= 50%. No problem. 10

Compute the profit per week in 1996 u Revenue=Inventory on Rent x Rent per

Compute the profit per week in 1996 u Revenue=Inventory on Rent x Rent per unit per week ? ? *? ? =? ? u Cost=Ship+Receive+Pre-Config+Repair+Depreciate Ship+Receive=? ? Pre-Config=? ? Repair=? ? Depreciation=? ? Cost=? ? u Profit=? ? utdallas. edu/~metin 11

Inventory in 1997: Flowtimes and Thruputs S. 24 S. 41 Not Ordered S. 40

Inventory in 1997: Flowtimes and Thruputs S. 24 S. 41 Not Ordered S. 40 S 41 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. utdallas. edu/~metin Total inventory owned by CRU: ? ? units Utilization=? ? /? ? =? ? . ? %. Utilization > 50%. No problem. 12

Compute the profit per week in 1997 u Revenue=Inventory on Rent x Rent per

Compute the profit per week in 1997 u Revenue=Inventory on Rent x Rent per unit per week ? ? *? ? =? ? u Cost=Ship+Receive+Pre-Config+Repair+Depreciate Ship+Receive=? ? Pre-Config=? ? Repair=? ? Depreciation=? ? Cost=? ? u Profit=? ? utdallas. edu/~metin 13

Short term sales initiative in 1997 u Every week, – ? ? ? units

Short term sales initiative in 1997 u Every week, – ? ? ? units rented for ? weeks u Each unit rented for ? weeks, – Brings in a revenue of $? ? /week u Each unit rented for ? weeks – Brings in a revenue of $? ? /week u u 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? utdallas. edu/~metin 14

Inventory in 1997 with Short term sales initiative: Flowtimes and Thruputs Customer Receiving S.

Inventory in 1997 with Short term sales initiative: Flowtimes and Thruputs Customer Receiving S. 24 S. 41 Not Ordered S. 40 S 41 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. utdallas. edu/~metin 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 u

Compute the profit per week in 1997 with the Short term sales initiative u Revenue=Inventory on Rent x Rent per unit per week ? ? *? ? =? ? u Cost=Ship+Receive+Pre-Config+Repair+Depreciate Ship+Receive=? ? Pre-Config=? ? Repair=? ? Depreciation=? ? Cost=? ? u Profit=? ? utdallas. edu/~metin 16

Suggestions u ? ? ? utdallas. edu/~metin 17

Suggestions u ? ? ? utdallas. edu/~metin 17

What is the fundamental problem with the computer rental business? utdallas. edu/~metin 18

What is the fundamental problem with the computer rental business? utdallas. edu/~metin 18

Do you see the same fundamental problem in the industries below? u Movie rental

Do you see the same fundamental problem in the industries below? u Movie rental u Fridge rental u Furniture rental u Car rental u Apartment rental utdallas. edu/~metin 19

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