Fifth Annual Contest: SM Rental
SM Rental was started as an inexpensive but friendly alternative for airport rental cars.
The company was an immediate success and was able to expand its operations to serve
the majority of the larger airports in the U.S. For a number of years, the key to success
was providing the low-cost alternative. However, in recent years, the nature of the rentalcar
business has slowly changed. Several other low-cost competitors have entered the
market, and customers are now starting to value the level and quality of service as being
at least as important as the cost of the rental.
Our quality of service has always been fairly high, and we are currently preparing to
launch a national program with an emphasis on further increasing it. The service level
(measured as the total service time) is a much more difficult problem for us to address.
Because SM Rental has been a low-cost provider, our rental counters typically are not
located on airport property. Thus, the van ride between the airport pickup points and the
rental counters is longer than that of many of our competitors. Furthermore, we typically
have fewer and smaller shuttle vans than our competitors. Even with these disadvantages,
we are committed to providing a service level to our customers that will allow us to continue
to grow our business. Unfortunately, at this point, we have no idea what is required
to increase this service level.
Thus, we have selected a medium-sized airport for implementation of a pilot system
that will yield the desired service levels. Rather than trial-and-error experimentation to
determine what needs to be changed, we have decided to have a simulation developed.
This will allow us to evaluate accurately several alternatives before we select which
system to implement.
We have extensive customer-survey data that lead us to conclude that most customers
are willing to accept reasonable delays at check in and checkout. A reasonable time for
arriving customers, from the time they arrive at the van pick-up area until they have keys
in hand, is estimated to be 20 minutes. Departing customers tend to be more hurried. So
a reasonable time, from car drop-off until they depart the van at the terminal, is estimated
to be 18 minutes.
A schematic of the airport used for the test is shown on the next page. We have vans
that are constantly circulating for transportation between the airport terminals and the
rental counter. There are two pick-up points for arriving customers, Terminal 1 and
Terminal 2. A van will first stop at Terminal 1 and pick up all waiting customers,
provided there is room in the van. The same van will then proceed to Terminal 2 for
customer pickup. Vans departing Terminal 2 go directly to the rental-counter building
2 IIE/RA CONTEST PROBLEMS
where the arriving customers exit and join a single line to wait for an available agent to
fill out the necessary forms and receive their car keys. Once empty, the van will allow
returning customers to board. The van then proceeds to the single customer-drop-off
point, located on the upper level of the airport, and serves both terminals. (If there are no
returning customers, the van proceeds directly to Terminal 1.) Once the van drops off the
customers, it loops back to Terminal 1 to repeat the transportation cycle.
The travel distances between the various points are as follows:
Rental counter to Terminal 1 1.5 miles
Rental counter to drop-off point 1.7 miles
Drop-off point to Terminal 1 0.5 miles
Terminal 1 to Terminal 2 0.3 miles
Terminal 2 to rental counter 2.0 miles
Rental
Counter
Terminal 2
Pickup
Main Airport
Building Terminal 1
Pickup
Dropoff
Although the van speed can vary, it is estimated to average approximately 20 miles
per hour for all trip segments.
Our analysis team has already collected data at this airport to support the simulation
effort. Unfortunately, these data were only collected for our peak time, from 4:00 PM until
8:30 PM, so we will confine our study to that time period. The arrival data were collected
in 15-minute time intervals for arrivals at Terminal 1, Terminal 2, and returning
customers at the rental counter. Those data, in rental-customer arrivals per hour, are
provided in Table 1.
IIE/RA CONTEST PROBLEMS 3
Table 1. Customer Arrival Rates (customers/hour)
Time Period Terminal 1 Terminal 2 Return
4:00 – 4:15 4 3 12
4:15 – 4:30 8 6 9
4:30 – 4:45 12 9 18
4:45 – 5:00 15 15 28
5:00 – 5:15 18 17 23
5:15 – 5:30 14 19 21
5:30 – 5:45 13 14 16
5:45 – 6:00 10 6 11
6:00 – 6:15 4 3 17
6:30 – 6:45 10 21 36
6:45 – 7:00 14 14 24
7:00 – 7:15 16 19 32
7:15 – 7:30 15 12 16
7:30 – 7:45 7 5 13
7:45 – 8:00 3 2 13
8:00 – 8:15 4 3 5
8:15 – 8:30 2 3 4
Although the data given in Table 1 describe the arrival of customers who want to rent
or return cars, passengers often accompany the rental customer. Our data suggest that
60% of our customers have no additional passengers. Twenty percent have 1 passenger,
15% have 2 passengers, and 5% have 3 passengers. Although this does not affect the
number of cars rented, it does require additional capacity for van transportation. In
addition, about 25% of the passengers have no baggage, 40% have 1 bag, 30% have 2
bags, and the remaining 5% have 3 or more bags. These data appear to be the same for all
three arrival streams.
Although there appears to be a fair amount of variability on the time required for a
customer to board and exit the transportation vans, the average time is 12 seconds for
boarding and 6 seconds for exiting.
Any rental agent can service both arriving and returning rental customers. A limited
amount of data for check-in and checkout times have been collected, but not analyzed.
These data can be found in the files Check_In.DAT and Check_Out.DAT.
From the simulation study, we would like to learn what configuration of vans and personnel
(drivers and rental agents) would provide the most cost-effective solution for this
peak time. Because we do not want our current operating policy to influence your decision,
we have chosen not to provide you with information on the current configuration.
To aid in this analysis, you should be aware that our total labor costs are estimated to
be $12.50 per hour for drivers and $11.50 per hour for rental agents. There are three
types of vans that could be used for this operation, differing by their customer capacity.
The operating cost varies significantly depending on the type of van used (e.g., the larger
the van size, the greater the fuel consumption, and the current fuel cost is $1.19 per
4 IIE/RA CONTEST PROBLEMS
gallon). In determining which van best suits our needs, it is important to consider all
costs, which include acquisition, operation, and maintenance. The total cost for these
vans is estimated to be 48 cents per mile for a 12-seat van, 73 cents per mile for an
18-seat van, and 92 cents per mile for a 30-seat van. Our policy is not to mix van types at
any airport, as it can confuse the customer, and it greatly increases the maintenance
costs. However, our surveys did reveal that customers tend to prefer the larger vans.
For now, you can assume that the number of vans and rental agents will be constant
for the 4.5-hour time period. Although our surveys suggest that all customers would like
to have service in less than 20 minutes for arrivals and less than 18 minutes for
departures, we are aware that this might be difficult to achieve. In addition, there is that
occasional customer who just takes longer to serve. Thus, we are willing to accept an
85% customer satisfaction rate for our base analysis. However, it would be helpful if you
could also provide the requirements for a 90% customer satisfaction rate.
Of course, if we are successful in developing an economical configuration for this
airport, we estimate that this increased service level, accompanied by advertised
incentives, could increase our patronage by as much as 20%. What changes would be
required to meet this additional demand? Please include a cost estimate of configurations
considered with your proposal based on an operating cost per day.
Fifth Annual Contest: SM Rental
SM Rental was started as an inexpensive but friendly alternative for airport rental cars.
The company was an immediate success and was able to expand its operations to serve
the majority of the larger airports in the U.S. For a number of years, the key to success
was providing the low-cost alternative. However, in recent years, the nature of the rentalcar
business has slowly changed. Several other low-cost competitors have entered the
market, and customers are now starting to value the level and quality of service as being
at least as important as the cost of the rental.
Our quality of service has always been fairly high, and we are currently preparing to
launch a national program with an emphasis on further increasing it. The service level
(measured as the total service time) is a much more difficult problem for us to address.
Because SM Rental has been a low-cost provider, our rental counters typically are not
located on airport property. Thus, the van ride between the airport pickup points and the
rental counters is longer than that of many of our competitors. Furthermore, we typically
have fewer and smaller shuttle vans than our competitors. Even with these disadvantages,
we are committed to providing a service level to our customers that will allow us to continue
to grow our business. Unfortunately, at this point, we have no idea what is required
to increase this service level.
Thus, we have selected a medium-sized airport for implementation of a pilot system
that will yield the desired service levels. Rather than trial-and-error experimentation to
determine what needs to be changed, we have decided to have a simulation developed.
This will allow us to evaluate accurately several alternatives before we select which
system to implement.
We have extensive customer-survey data that lead us to conclude that most customers
are willing to accept reasonable delays at check in and checkout. A reasonable time for
arriving customers, from the time they arrive at the van pick-up area until they have keys
in hand, is estimated to be 20 minutes. Departing customers tend to be more hurried. So
a reasonable time, from car drop-off until they depart the van at the terminal, is estimated
to be 18 minutes.
A schematic of the airport used for the test is shown on the next page. We have vans
that are constantly circulating for transportation between the airport terminals and the
rental counter. There are two pick-up points for arriving customers, Terminal 1 and
Terminal 2. A van will first stop at Terminal 1 and pick up all waiting customers,
provided there is room in the van. The same van will then proceed to Terminal 2 for
customer pickup. Vans departing Terminal 2 go directly to the rental-counter building
2 IIE/RA CONTEST PROBLEMS
where the arriving customers exit and join a single line to wait for an available agent to
fill out the necessary forms and receive their car keys. Once empty, the van will allow
returning customers to board. The van then proceeds to the single customer-drop-off
point, located on the upper level of the airport, and serves both terminals. (If there are no
returning customers, the van proceeds directly to Terminal 1.) Once the van drops off the
customers, it loops back to Terminal 1 to repeat the transportation cycle.
The travel distances between the various points are as follows:
Rental counter to Terminal 1 1.5 miles
Rental counter to drop-off point 1.7 miles
Drop-off point to Terminal 1 0.5 miles
Terminal 1 to Terminal 2 0.3 miles
Terminal 2 to rental counter 2.0 miles
Rental
Counter
Terminal 2
Pickup
Main Airport
Building Terminal 1
Pickup
Dropoff
Although the van speed can vary, it is estimated to average approximately 20 miles
per hour for all trip segments.
Our analysis team has already collected data at this airport to support the simulation
effort. Unfortunately, these data were only collected for our peak time, from 4:00 PM until
8:30 PM, so we will confine our study to that time period. The arrival data were collected
in 15-minute time intervals for arrivals at Terminal 1, Terminal 2, and returning
customers at the rental counter. Those data, in rental-customer arrivals per hour, are
provided in Table 1.
IIE/RA CONTEST PROBLEMS 3
Table 1. Customer Arrival Rates (customers/hour)
Time Period Terminal 1 Terminal 2 Return
4:00 – 4:15 4 3 12
4:15 – 4:30 8 6 9
4:30 – 4:45 12 9 18
4:45 – 5:00 15 15 28
5:00 – 5:15 18 17 23
5:15 – 5:30 14 19 21
5:30 – 5:45 13 14 16
5:45 – 6:00 10 6 11
6:00 – 6:15 4 3 17
6:30 – 6:45 10 21 36
6:45 – 7:00 14 14 24
7:00 – 7:15 16 19 32
7:15 – 7:30 15 12 16
7:30 – 7:45 7 5 13
7:45 – 8:00 3 2 13
8:00 – 8:15 4 3 5
8:15 – 8:30 2 3 4
Although the data given in Table 1 describe the arrival of customers who want to rent
or return cars, passengers often accompany the rental customer. Our data suggest that
60% of our customers have no additional passengers. Twenty percent have 1 passenger,
15% have 2 passengers, and 5% have 3 passengers. Although this does not affect the
number of cars rented, it does require additional capacity for van transportation. In
addition, about 25% of the passengers have no baggage, 40% have 1 bag, 30% have 2
bags, and the remaining 5% have 3 or more bags. These data appear to be the same for all
three arrival streams.
Although there appears to be a fair amount of variability on the time required for a
customer to board and exit the transportation vans, the average time is 12 seconds for
boarding and 6 seconds for exiting.
Any rental agent can service both arriving and returning rental customers. A limited
amount of data for check-in and checkout times have been collected, but not analyzed.
These data can be found in the files Check_In.DAT and Check_Out.DAT.
From the simulation study, we would like to learn what configuration of vans and personnel
(drivers and rental agents) would provide the most cost-effective solution for this
peak time. Because we do not want our current operating policy to influence your decision,
we have chosen not to provide you with information on the current configuration.
To aid in this analysis, you should be aware that our total labor costs are estimated to
be $12.50 per hour for drivers and $11.50 per hour for rental agents. There are three
types of vans that could be used for this operation, differing by their customer capacity.
The operating cost varies significantly depending on the type of van used (e.g., the larger
the van size, the greater the fuel consumption, and the current fuel cost is $1.19 per
4 IIE/RA CONTEST PROBLEMS
gallon). In determining which van best suits our needs, it is important to consider all
costs, which include acquisition, operation, and maintenance. The total cost for these
vans is estimated to be 48 cents per mile for a 12-seat van, 73 cents per mile for an
18-seat van, and 92 cents per mile for a 30-seat van. Our policy is not to mix van types at
any airport, as it can confuse the customer, and it greatly increases the maintenance
costs. However, our surveys did reveal that customers tend to prefer the larger vans.
For now, you can assume that the number of vans and rental agents will be constant
for the 4.5-hour time period. Although our surveys suggest that all customers would like
to have service in less than 20 minutes for arrivals and less than 18 minutes for
departures, we are aware that this might be difficult to achieve. In addition, there is that
occasional customer who just takes longer to serve. Thus, we are willing to accept an
85% customer satisfaction rate for our base analysis. However, it would be helpful if you
could also provide the requirements for a 90% customer satisfaction rate.
Of course, if we are successful in developing an economical configuration for this
airport, we estimate that this increased service level, accompanied by advertised
incentives, could increase our patronage by as much as 20%. What changes would be
required to meet this additional demand? Please include a cost estimate of configurations
considered with your proposal based on an operating cost per day.
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