Cru Computer Rentals Essay

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Gaxuxa Caldichoury Operations management – Spring 2015 CRU Computer Rentals Introduction CRU is one of two national computer rental companies, purchasing CPUs, monitors, printers and other peripherals and renting them out for either long or short-terms. So far CRU has generally managed to recover the machines’ book value. Last year’s revenues amounted to 15 million dollars. This year CRU has been confronted by a fall in demand due to the rental market decline. To make up for this decline, Sarkis (CRU president) and the vice president decided to offer customer incentives and bonus payment to the sales staff. Thanks to this decision, revenues and utilization (the key performance measure tracked by CRU defined as the percentage of inventory on rent compared to the total inventory owned by the company) have been brought back to a reasonable level. Profitability however did not follow the same trend and the company made even less money than before. Two main questions arise: Is utilization the best performance measure to forecast future financial performance and what alternatives do Sarkis and his team members have available to make up for this year’s loss? Understanding CRU’s rental cycle The first step in analyzing CRU’s situation is to look closer at their rental process. Appendix 1 shows CRU’s rental cycle in the form of a flowchart making it easier to understand. CRU’s situation last year Thanks to the sales drive, units were being rented at the rate of 1400 units per week this year whereas customer demand last year only amounted to an average of 1000 units per week. Logically thinking, profitability should have still increased this year then. Since that is not the case, it’s important to analyze the company’s situation last year as well as this year’s to better understand what happened and what the best alternative is. The average rental term last

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