CRU is one of two national computer rental companies. It has seen rapid business growth since it started, in 1990. CRU purchases CPUs, monitors, printers and other peripherals and rents them out for long term leases and short term rentals. It has a customer base consisting of large corporate accounts that want to stay on the cutting edge of technology and require long term rentals, consulting firms and smaller business customers who require medium term rentals and trade show participants who require short term rentals. CRU has two main warehouses or Mega Centers at Naperville, IL and Fullerton, CA and has 23 local retail centers located throughout the country.
Problem Statement and Recommended Solutions
In 1996, CRU had revenue of $15 million when the units were being rented at the rate of 1000 units per week. The average weekly revenue per unit for rentals averaging 8 weeks was $30. But in 1997, the rental markets began to decline and in the first quarter of 1997, the demand at CRU fell to 600 units per week leading to a big drop in utilization. This came as a shock to Mr. Sarkis, General Manager for CRU Computer Rentals, who had always tried to ensure that utilization never dropped below 50%, and got him into thinking of ways to bring up the figures. After considering different options, Mr. Sarkis and the VP of sales decided to offer some customer incentives to bring up the demand and also offer extra bonus payments to the sales staff for new demand generated. This worked and in a couple of weeks CRU demand went up to 1400 units per week, with 600 of them being rented for an average of 8 weeks, bringing in revenue of $30 per week per unit and the remaining 800 being rented for an average of 4 weeks, bringing in revenue of $35 per week.…...