Ferguson Car Rental Essay
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 …show more content…
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 Receiving Status 24 Status 40 Status 41 Status 42 Status 20
Flow Rate (Units/Week) 1120 1120 666 (1120*0.7*0.85) 454 (1120*0.3+1120*0.7*0.15) 454 454 1120
Inventory (Units) 8000 500 1500 1000 905 500 2240
Flow Time (Weeks) 7.14 0.45 2.25 2.2 2 1.1 2
OPTION C Customer Receiving Status 24 Status 40 Status 41 Status 42 Status 20
Flow Rate (Units/Week) 950 950 565 (950*0.7*0.85) 385 (950*0.3+950*0.7*0.15) 385 385 950
Inventory (Units) 8000 500 1500 1000 905 500 1900
Flow Time (Weeks) 8.42 0.53 2.65 2.6 2.35 1.3 2
So total inventory units then would be:
Option A: 8000+500+1500+1000+905+500+2520=14,925
Option B: 8000+500+1500+1000+905+500+2240=14,645
Option C: …show more content…
Then we could get the profits for each option as below:
Revenue Variable Cost Depreciation Extra inventory cost Profit
Option A 2418000 (900*40+300*30
+60*25)*52wk 142500(shipping1260*25*2 +cleaning for “24-20”750*4 + Repair 510*150) 95673 (14925*1000/3*52) 520*1000 $1,659,827
Option B 2028000 (600*40+400*30
+120*25)*52 wk 126764(shipping1120*25*2 +cleaning for “24-20”666*4 + Repair 454*150) 93878 (14645*1000/3*52) 240*1000 $1,567,358
Option C 1599000 (300*40+500*30
+150*25)*52 wk 107510(shipping950*25*2 +cleaning for “24-20”565*4 + Repair 385*150) 91699(14305*1000/3*52) -667*100 {667=(1000-1000/36*12)*100} $1,466,491
With the above results, we find that if next year the company could keep the buffer size steady as the previous year, Option A is a great choice to win the profit.
2) If the flow times are the same as they were last year, it is easy to find
• 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 …show more content…
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 Receiving Status 24 Status 40 Status 41 Status 42 Status 20
Flow Rate (Units/Week) 1120 1120 666 (1120*0.7*0.85) 454 (1120*0.3+1120*0.7*0.15) 454 454 1120
Inventory (Units) 8000 500 1500 1000 905 500 2240
Flow Time (Weeks) 7.14 0.45 2.25 2.2 2 1.1 2
OPTION C Customer Receiving Status 24 Status 40 Status 41 Status 42 Status 20
Flow Rate (Units/Week) 950 950 565 (950*0.7*0.85) 385 (950*0.3+950*0.7*0.15) 385 385 950
Inventory (Units) 8000 500 1500 1000 905 500 1900
Flow Time (Weeks) 8.42 0.53 2.65 2.6 2.35 1.3 2
So total inventory units then would be:
Option A: 8000+500+1500+1000+905+500+2520=14,925
Option B: 8000+500+1500+1000+905+500+2240=14,645
Option C: …show more content…
Then we could get the profits for each option as below:
Revenue Variable Cost Depreciation Extra inventory cost Profit
Option A 2418000 (900*40+300*30
+60*25)*52wk 142500(shipping1260*25*2 +cleaning for “24-20”750*4 + Repair 510*150) 95673 (14925*1000/3*52) 520*1000 $1,659,827
Option B 2028000 (600*40+400*30
+120*25)*52 wk 126764(shipping1120*25*2 +cleaning for “24-20”666*4 + Repair 454*150) 93878 (14645*1000/3*52) 240*1000 $1,567,358
Option C 1599000 (300*40+500*30
+150*25)*52 wk 107510(shipping950*25*2 +cleaning for “24-20”565*4 + Repair 385*150) 91699(14305*1000/3*52) -667*100 {667=(1000-1000/36*12)*100} $1,466,491
With the above results, we find that if next year the company could keep the buffer size steady as the previous year, Option A is a great choice to win the profit.
2) If the flow times are the same as they were last year, it is easy to find