There are several ways worth considering improving the current situation, such as by using a collocation of adopting different rental terms of 4 weeks, 8 weeks, and 12 weeks. However, the proportions of the rental terms need to be chosen carefully. Below are three options for consideration: •

Option A: capture 60% of the four-week market, 30% of the eight-week market, and 10% of the twelve-week market; or •

Option B: capture 40% of the four-week market, 40% of the eight-week market, and 20% of the twelve-week market; or •

Option C: capture 20% of the four-week market, 50% of the eight-week market, and 25% of the twelve-week market. Two factors are also added as the prerequisites for better analysis: 1)

Assume that operations will be able to ensure that all buffer sizes are the same as they were last year for all three options (status 20 buffer continues at two weeks) 2)

Assume that operations will be able to ensure that the time spent in all buffers is the same as it was last year For a 4-week rental term, there would be $40/unit revenue per week with market demand of 1,500 units per week. For an 8-week rental term, there would be $30/unit revenue per week with market demand of 1,000 units. Finally for a 12-week rental term, there would be $25/unit revenue per week with market demand of 600 units per week. Therefore, the detailed calculation for the two situations can be shown below: Computer rental units per week:

Option A: 0.6*1500+0.3*1000+0.1*600= 900+300+60= 1,260

Option B: 0.4*1500+0.4*1000+0.2*600= 600+400+120= 1,120

Option C: 0.2*1500+0.5*1000+0.25*600= 300+500+150= 950

1) If the buffer sizes are the same as they were last year, it is easy to find that: OPTION A

Customer

Receiving

Status 24

Status 40

Status 41

Status 42

Status 20 Flow Rate (Units/Week)

1260

1260

750 (1260*0.7*0.85)

510 (1260*0.3+1260*0.7*0.15)

510

510

1260 Inventory (Units)

8000

500

1500

1000

905

500

2520

Flow Time (Weeks)

6.35

0.4

2

1.96

1.77

0.98

2

OPTION B

Customer...

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