During the last Easter holidays, I rented a car with my family in Croatia. The process itself is relatively quick, as it only takes a few minutes for you to sign a couple of papers and for the car rental company to give you the car keys along with a few instructions. However, the logistics behind what the customer sees, are much more complex, as they require decisions based on:

1. Supply

Having the correct supply of available cars at each pick up location is very important for car rental companies. If there are too many cars at one location, the holding costs will increase and some cars may not be rented. On the other hand, if there are too few cars, it will not be possible to serve all customers. In order to have the correct supply of cars at each location, car rental companies use fleeting and de-fleeting. Another option is to transfer car between locations. When transferring cars, companies have to decide if they want to transfer them one by one (more flexibility but higher costs) or transfer several of them via truck (cheaper but less flexible and more planning needed).

Right now, one big issue with the supply of rental cars in Spain is that because of travel restrictions due to the Covid-19 pandemic, turnover in the car rental industry fell by 73.3% in 2020, and most companies sold some of their cars. Therefore, now that people are traveling again, there is an estimated need for more than 200 000 cars.

2. Demand

Being able to correctly forecast demand is key in order to balance the demand and supply of cars in each pickup location. However, even if demand can be predicted in the long term (higher demand during the holiday seasons and reservations made online by customers), it is difficult to predict short-term demand with accuracy. This is because they may be delays in check-in or check-out, cars which have been returned may need some repairs, customers that have a reservation decide to cancel last minute or lots of walk-in customers with no reservation arrive.

3. Optimisation

It is important to optimise logistics in order to achieve the highest possible degree of car fleet utilisation while keeping customers satisfied. This is done through short turnaround times and by not pre-assigning a specific car to a specific customer, which allows for flexibility.

4. Partnerships

Usually, car rental companies establish partnerships with car manufacturers and resellers, in order to make car fleeting and de-fleeting easier. Partners may set a criteria for car usage such as maximum kilometers the car can travel or the maximum holding period.

5. Maintenance

Cars require maintenance, which means car rental companies have to work closely with mechanic workshops. In addition, backup cars are needed to replace those cars that are being repaired or that are scheduled for maintenance.

6. Pick-up locations

Car rental companies also need offices to operate. This pick-up places have to be strategically placed in order to attract as many customers as possible, and facilitate the access to workshops for car maintenance.

Source:https://www.sciencedirect.com/science/article/pii/S1366554505000050