Cru Rentals

Case: CRU Computer Rental

CRU Computer Rentals is a national computer rental company that has seen rapid growth since its inception in 1990. The company purchases computers, printers, monitors, and other peripherals and rents them out both for the long term and short term. CRU’s sales have begun to increase from the previous quarter, but profitability continued to decline. Although revenue was increasing, the decline in profit warranted further investigation into the root problem causing this occurrence. CRU management needed to take corrective measures to reverse this trend and generate some alternatives that would lead to an increase in profitability.

Most of CRU’s customers fit into one of three profiles, which differed mainly on the term of the lease. Large corporations replaced their computers every year to stay on the cutting edge of technology, thus leasing computers for a term of one year. Consulting firms and small businesses leased computers for two to four months at a time. Lastly, trade show participants rented very short term, typically for the duration of the show. Although CRU’s customers’ needs for the length of a rental differed, they all expected short lead times, usually one to two days, and quick, accurate delivery and installation of products.

CRU’s inventory consisted of older model equipment and newer model equipment that they purchased, usually at the request of a client. Since technology in this industry changes rapidly, the demand and prices for older model equipment decline quickly. This leads CRU to sell their old equipment in the open market for their used machines and purchase newer models from the money generated. CRU fortunately has been able to recover book value on these older products in the past.

CRU has two main warehouses, “Mega Centers”, located in Illinois and California and 23 local retail centers across the United States. All equipment at these locations are available to rent, with 90 percent of their inventory held at...