A novel approach for designing rental vehicle repositioning strategies

Abstract

An important tactical decision for vehicle rental providers is the design of a repositioning strategy to balance vehicle utilization with customer wait times due to vehicle unavailabilities. To address this problem, this article analyzes alternative repositioning strategies: a no-repositioning strategy, a customer repositioning strategy, and a vehicle repositioning strategy, using queuing network models that are able to handle stochastic demand and vehicle unavailabilities. Optimization models are formulated to determine the repositioning fractions for alternate strategies that minimize the rental provider’s cost by balancing repositioning costs with customer waiting penalty costs. The nonlinear optimization problems are challenging to solve because the objective functions are non-differentiable and the decision variables (such as effective arrival rates and customer repositioning fractions) are interrelated. Therefore, a two-phase sequential solution approach to estimate the repositioning fractions is developed. Phase 1 determines the effective arrival rates by developing an approximate network model, deriving structural results, determining a high-quality solution point, and refining the solution. Phase 2 determines the repositioning fractions by solving a transportation problem. Numerical experiments are used to evaluate the efficacy of the proposed solution approach, to analyze alternate repositioning strategies, and to illustrate how the developed techniques can be adopted to create a better readiness at a depot.

Keywords:

• Vehicle rental system
• tactical planning
• repositioning
• queuing models
• transportation

Additional information

Notes on contributors

Debjit Roy

Debjit Roy is an Assistant Professor in the Production and Quantitative Methods area at the Indian Institute of Management Ahmedabad, India. He earned his Ph.D. in Industrial Engineering and an M.S. in Manufacturing Systems Engineering from the University of Wisconsin–Madison. His research interests are in design and performance analysis of automated warehouse systems, transportation systems, container terminal operations, and manufacturing systems using stochastic models.

Jennifer A. Pazour

Jennifer A. Pazour is an Assistant Professor of Industrial Engineering and Management Systems at the University of Central Florida. She holds three degrees in Industrial Engineering (a B.S. from South Dakota School of Mines and Technology, as well as an M.S. and Ph.D. from the University of Arkansas). Her research interests involve developing mathematical models to aid in the understanding and dynamics of logistics challenges and application areas include distribution center design, material handling systems, health care, military, and transportation. She is a recipient of the Young Investigator Program from the Office of Naval Research, a Research Start Up grant from the Material Handling Institute, and a Doctoral Dissertation Enhancement Project from the National Science Foundation.

René de Koster

René (M.) B.M. de Koster has been a professor of Logistics and Operations Management at the Rotterdam School of Management, Erasmus University, since 1995. He also is “Port Professor” on behalf of SmartPort and founder of the Material Handling Forum. He holds a Ph.D. from Eindhoven University of Technology (1988). Currently, he holds guest lecturing positions at four other universities. His research interests lie in warehousing, material handling, behavioral operations, city distribution, and retail operations. He is the author/editor of eight books and over 140 papers in books and academic journals. He is on the editorial board of 11 journals.