solution: henry clements car rental agency case study

Project Description:

mgmt 524 capstone case study
henry clements car rental agency

directions: carefully read through the following case study and answer all of the case study
questions. include supporting calculations and screenshots. save your document with an
appropriate file name that includes the activity number and your name (example:
john_smith_capstone). submit your document through the capstone case study activity link in
the exams area in blackboard.

henry clements is a friend of yours who has a car rental agency in a major
metropolitan area. although his is an independent company, henry works closely with
three other independent companies in the metro area. they share information and each
week they forecast the number of cars each will need the following week. then, if
needed, they will transfer cars between location on sunday when none of the agencies
are open. if they have to go and get a car during the week, it will cost $75 per car,
considering the lost time and good will of making the customer wait. moving on sunday
gives the customer the option to return the car to any of the four locations and it has
allowed henry and the other agencies access to extra cars to meet their needs.
everyone is happy with this arrangement.
henry reviewed his company’s performance and he believes there is room for
improvement. he has obtained records for the last three months. the data he collected
are shown below. it is friday and he has to input his forecast for the number of cars
needed tomorrow. he knows you have been taking a class in quantitative analysis and
has asked you to review his data and help with his forecast to determine what else he
might to do increase his performance. as you discuss the situation with him, you learn
that he wants to be able to meet the customers’ requirement for a vehicle 95% of the
time. he says he rarely ever gets complaints if the exact model is not available, as long
as he has a vehicle available, so he does not try to anticipate particular size or model
requests and lets randomness take care of that. w eekly demand is as follows:
page 1 of 4

week
1
2
3
4
5
6

demand
126
200
243
167
132
211

week
7
8
9
10
11
12

demand
243
167
131
208
251
171

in the past henry has used the average number of cars as his basic number and adjusted to
meet his goal of 95% service. he asks you about some other methods he has heard about.
1. what should his forecast be using this method?
2. what would the forecast be if he used regression analysis?
3. what about time-series forecasting?
4. what will you tell him about which is the best option?
henry has two people who can check cars out for a rental. one works at the service
counter and the other works in the office and can come out to help if needed. henry has
determined that people arrive following a poisson distribution. rentals average about 24 per
day and the service person takes about 15 minutes to process a customer for a rental. henry
sees that the agent at the service counter in not busy all the time so he is contemplating not
keeping the office person trained and leaving only the service counter person.
5. is this a wise move?
6. what is the average time the customer takes from when he/she arrives until he/she has
a car?
currently, when the office person in serving customers, a second line forms in front of the
counter.
7. is that how henry should set up the waiting area or is there a better way?
when a car is returned to his location, henry has three employees who prepare the car
for the next rental. as a car arrives, one of the employees takes the car and washes, cleans,
vacuums, and inspects it, prepares the paperwork for the next rental, and returns the car to the
lot. the employees each take a car in sequence. henry has observed the process and has
page 2 of 4

observed the time each takes to complete each step. the information about the times (in
minutes) is as follow:
employees
beverly
cameron
tina

wash
22
15
19

vacuum
13
17
19

inspect & return
11
20
14

8. is there is a better way to organize this part of the operations?
each rental requires two agreement forms, one for when the car is checked out and one
when it is checked in. henry orders these forms from a local printer. the printer charges henry
$40 to set up the printer. the forms cost 50cents each. because of the damage to the forms
and the forms becoming obsolete, it cost henry 25% to store the forms. the printer will only
accept orders in multiples of 100.
9. if the three months of data collected and presented above is indicative of all demand,
how many forms should henry order?
the printer offers henry a 10% discount if henry orders 5000 or more form at a time.
10. would this be advantageous to henry? how much money would it save, if any?
henry is now ready compute what do with the cars on sunday. the other locations
report the following on-hand and needed cars. henry will have 150 cars on-hand saturday
night.

on-hand
needed

location north
165
195

location east
160
160

location south
200
190

based on past experience, the cost to move cars is:
between
henry
henry
henry
location north
location north
location east

and
location north
location east
location south
location east
location south
location south

page 3 of 4

cost
$12
$22
$17
$7
$28
$14

11. how many cars will need to be moved and what will the total cost of the move be?
12. based on all the above computations, what would you recommend to henry about his
operation and what changes would you propose (if any)?
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