Portland Case

Case A:

Case B:

1) The flow-sheets and the operational measures are depicted above. Littles Law has been used at each stage to calculate (R,I,T). 2) PCSs financial performance (weekly profit) can be computed through the above flow diagram Revenue = Number of units being rented out * rent amount = 8000 *30 = $24000 (at any point of time, there are 8000 units on rent, which is generating $30 per week)

Cost: Shipping Cost= $ 25*R*2 (To and Fro) Material Cost= $4*(0.7*0.85*R) (to convert a unit from CAT-W to CAT-O) Repair Cost= $150*(0.3*R+0.15*0.7*R) (Cost of repairing a damaged unit) Depreciation Cost = Total Inventory in the system*Depreciation Cost per unit of inventory Depreciation Cost per Week = 1000*7/(365*3) (straight line depreciation over 36 months=3 years=3*365 days) Profit= Revenue- (Shipping Cost+ Material Cost+ Repair Cost+ Depreciation Cost) Profit in Case A= $34783/week and Case B = $ (10799)/week, ( ) indicating negative value Recommendations to the company: Inventory Level is the main contributor to cost. The company has to decrease its inventory level to increase its profits. Specifically, the inventory build-up (higher processing time) at the stage of conversion from CAT-W to CAT-O. This, in turn, is linked to the availability of Rental Prep Technician. The company can keep an additional Technician at this place. An additional technician can bring this time (and hence inventory level) to half, and hence the weekly profit increases by $4794.5. The weekly wage for this additional technician should be less than this number. If the processing time for Part Request Sheets (for which order is yet to be placed) is reduced by, say half, the profit increases by $1598 If demand increases, the cost of inventory goes up. Hence the price must go up as well to generate profits.