Cru Rental

CRU Computer Rental case (J. L. Kellogg Graduate School of Management, Northwestern University) Questions: 1. What was the utilization achieved by CRU in 1996? 2. For 1996, calculate the average time spent by a unit in each buffer. 3. Calculate the average weekly contribution margin (revenues - variable costs) to CRU in 1996. Ignore labor and facility costs in this calculation. We assume that they are fixed. How does the contribution margin compare with the weekly depreciation? 4. What do you think about the decision to launch a sales drive in 1997? If you had a chance to advise Richard, what actions would you suggest Richard focus on to improve performance at CRU (give a concrete plan listing the resulting benefits)?

What are key performance measures that he should focus on? 5. Exhibit 2 contains the pricing scheme used by CRU. Richard has to decide on how the sales effort is to be assigned among the various market segments (represented by duration of rental). There are three options that have been suggested by the VP of sales and a decision has to be made. The three options have the following outcomes: - Capture 60% of the 4 week market, 30% of the 8 week market and 10% of the 12 week market - Capture 40% of the 4 week market, 40% of the 8 week market and 20% of the 12 week market - Capture 25% of the 4 week market, 50% of the 8 week market and 25% of the 12 week market (a) Assume that Operations will be able to ensure that all buffer sizes are the same as they were in 1996 for all three options (status 20 buffer continues at 2 weeks). Which of the three options would you recommend? Why?

(b) Assume that Operations will be able to ensure that the time spent in all buffers is the same as it was in 1996. Which of the three options would you recommend? Why?