Cheapest Car Rental

Write a paper that addresses the following scenario:

Cheapest Car Rental rents cars at the Chicago 0′ Hare airport. The car rental market
consists of two segments: the short-term segment, which rents for an average of 0-5
week, and the medium-term segment, which rents for an average of 2 weeks.
Cheapest Car Rental currently rents an average of 200 cars a week to the short-term
segment and 100 cars a week to the medium-term segment-

Approximately 20 percent of the cars returned (evenly distributed across both
segments) are found to be defective and in need of repairs before they can be made
available to rent again. The remaining cars not needing repairs are cleaned, filled with
gas, and then made available to rent. On average, there are 100 cars waiting to be
cleaned- The average cost of this operation is $5 per car. Cars needing repairs spend
an average of 2 weeks in the repair shop and incur an average cost of $150 per car-
Assume that cars are rented as soon as they are available for rent, which is as soon as
they have been cleaned or repaired. Short-term renters pay $200 per week, while
medium-term renters pay $120 per week

1) Introduction.

2) Identify throughput, inventory, and flow time at each stage- What profit does
Cheapest earn per wesk with the current system?

3) Cheapest Car Rental is comparing two possible improvements: a) Decrease time in
repairs from 2 weeks to 1 week b) Decrease cost per repair from $150 per car to $120
per car while keeping repair flow time at 2 weeks.

Assume that the effort that is required in each case is the same.

4) Describe the change that you think will be most effective explains the reason for
your answer.

5) Compare and contrast Cheapest Car Rental and a competitor.

6) Discuss the importance of average inventory, average flow time, and average
throughput in relation to aggregate flow performance in the car rental industry.

7) Conclusion.





Sample Solution