...a group of locations that shares a fleet of vehicles. Companies usually cluster locations into pools to facilitate the entire fleet planning process by allowing each car rental location to have access to a larger fleet, thus improving the utilization of the fleet (Edelstein and Myron, 1977).

The entire fleet planning process as practiced currently in the industry, exhibits a sequential hierarchical structure composed by three phases: (i) pool segmentation; (ii) strategic fleet planning; and (iii) tactical fleet planning (Pachon et al., 2000). In the first phase all car rental locations are clustered into pools based on distances and demand load correlations among locations. The clustering of locations into pools can potentially lead to improved fleet utilization since shortages in one location can be filled with another location's slack. Once these pools are formed, the strategic fleet planning determines the total fleet size for each pool at each strategic epoch within the planning horizon. This phase involves decisions about the acquisitions and returns of fleet from and to the contracted car manufacturer, and the inter-pool moves of vehicles due to seasonalities and high peak events. After the fleet size for each pool has been determined, the tactical fleet planning is performed for each pool on a daily basis. Its function is to determine the optimal fleet levels for all locations within a pool and the required vehicle transfers among locations. As demand at different locations can peak on different days of the week, managing fleet movement in a sound manner leads to improved utilization and revenue for the pool (Lev et al., 1997).

The car rental business by itself generates more than 19.4 billion dollars per year. In the US, there are about 19 000 car rental locations with more than 1.9 million vehicles available for rent (Anon, 2000). The complexity and critical nature of the tactical fleet planning function has long been recognized by the management of car rental companies (Sherali and Tuncbilek, 1997). Sound analytical tools have not been readily available to support this function until a few years ago and decisions were made based largely on intuition with heavy reliance on sometimes distorted, manually computed averages and statistics, resulting in lower fleet utilization and performance (Carroll and Grimes, 1995). Today, car rental companies view proper planning and execution of these vehicle deployment decisions as vital for achieving a high yield.

In this paper we present a modeling framework to address the tactical fleet planning problem inspired by a series of problems as we encountered them in a major US car rental company. While in Pachon (2000), the entire decision-making process is addressed capturing the interdependencies of its modules, in this paper we focus entirely on its tactical component.

The rest of the paper is organized as follows. In Section 2, we first describe and then formulate the tactical fleet planning problem that has to be addressed for each pool. Given the complexity of the formulation we decompose the problem into two disjoint subproblems: (i) the fleet deployment subproblem; and (ii) the transportation subproblem. We proceed with developing a heuristic to reduce the gap between the optimal solution and the solution provided by the decomposition of the problem into two disjoint subproblems and then we exhibit the application of the entire solution methodology via a realistic case study for the State of Florida. In Section 3, we present three extensions of the fleet deployment model to include the costs for unsatisfied demand and fleet surplus, service level, and a general price-demand function. We provide closed-form optimal policies for all these extensions. In Section 4, we terminate with conclusions and suggested future research.

2. The tactical fleet planning problem

Under stochastic and price sensitive daily demand at each car rental location, the pool manager has to address the following questions: (i) how to spread the available pool fleet among the various locations to satisfy demand and generate maximum revenue?; and (ii) how to geographically redistribute the vehicles in response to shifts in the daily demand of the pool's locations? The available fleet in a pool is determined on a daily basis by the total fleet size of the pool, the number of vehicles on the road and the number of vehicles on maintenance.

Pool managers review forecasts, stimulate demand a few days prior to rental (by offering discounts) and control the daily inventory of vehicles. Each field car rental location is deemed a world unto itself with special customer considerations, specific business patterns and unique problems of location and size. Proper planning and execution of vehicle deployment can have a very significant impact on corporate success.

The decision to move cars among locations is driven by patterns of demand at each operating location. There are instances for which fleet redistribution is quite straightforward. For example, in metropolitan areas demand usually peaks on weekends, when customers rent cars for leisure or family related activities. On the other hand, demand at airport locations exhibit peaks on midweek days due to business travel requirements. For the company we studied, its Miami International airport exhibits midweek demand peaks, while its Miami Beach rental location has peak demands on weekends. The company policy has been to transport cars from the airport location to the Miami Beach location on Thursdays and Fridays and return them to the airport location at the beginning of the week.

Decisions for transferring cars from one location to another within a pool must further take into account issues such as market share, service level and trade-offs between the incremental revenue and the transshipment costs of cars. The tactical fleet deployment must achieve these goals while taking into account the volatility of the daily demand.

Cars offered by car rental companies range in size from two-door subcompacts to four-door luxury models. They also vary in style, including convertibles, four-wheel drive vehicles, mini-vans, and sport cars. The demand for car rental vehicles has a nested structure: the demand for vehicles of...

NOTE: All illustrations and photos have been removed from this article.



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