Peter relaxed by his swimming pool sipping the ice-cold frapp

Peter relaxed by his swimming pool sipping the ice-cold frapp.  Earlier in the day, he had accepted the position of Vice President of Operations and Marketing at CaRent Inc. He is pleased with his decision because he now has the opportunity to manage a small business and grow it into a national chain.  Peter knows that it will not be easy, but he is ready to face the challenge.  As he watched a couple of squirrels play on a tree next to the pool, he began to think about the challenges at CaRent and what he would have to accomplish as a new VP.

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CaRent is a small car rental company in Los Angeles that started about 5 years ago.  It provides a very competitive rate compared to the big players (Hertz, Avis, etc.) and the cars, though small in numbers, are kept in excellent condition.  Since its modest beginning, the company has seen its business growing steadily.

One of the critical success factors of CaRent is its excellent customer service and its ability to keep its vehicles in top-notch condition.  CaRent sees itself as a serious future competitor of the other rental companies by satisfying the “Customers’ Moment of Value” by delivering the exact product at the correct place at the time it is needed.  So far things are working out, but some problems have started to show their ugly heads. As the customer base is growing, the company is facing a new problem, and that is of keeping information, inventory and operations in order.  There are long lines for renting and returning cars that are creating frustrations amongst the customers and they are opting to rent from CaRent’s competitors, often customers are being wrongly informed about the availability of a particular car type at the rental desk which creates more frustrations when customers cannot find their cars and which results in unnecessary free upgrades to a better car and thus loss of revenue, promotions are not targeted well, many customers are not getting their frequent flyer miles that they are supposed to get for renting with CaRent (CaRent has an agreement with most of the major airlines for crediting 500 miles to the frequent flyer account for every day of the rental).  The maintenance records on the cars are getting mixed up as well resulting in delays in meeting the regular maintenance schedules on many cars.

The promotional department of CaRent works with the local hotels, travel agencies and tour operators to get the business and a fixed percentage commission (5% of the revenue) is paid for each referral.  Recently, the referring agencies are also complaining for not getting their commission in time or sometime incorrect amount is sent to them.  CaRent also gets a lot of business through their e-mail marketing and yellow page advertising.  CaRent also does mass-mailing of coupons containing various discounts (5%, 10% and 15%).  These promotions are not targeted at all and CaRent feels that the ROI on the promotions are rather low.  It needs a system to identify the business coming from each marketing effort and better target the promotions.

Currently, the entire record keeping is done mainly on paper at CaRent.  When customers come in for renting, they go to one of the two desks in the rental area and provide all the necessary information about the customer is entered by the desk person in a pre-formatted rental agreement form in the computer.  If the customer has already made a booking then the booking details are retrieved from a paper file (created by the person who makes the bookings over the phone and files them) to see the customer’s choice of the car and other preferences. The desk person then searches the computer for available cars (the list of available cars is maintained in a database that is also updated by the return desk personnel when a car is returned), assigns a car to the customer and completes the rest of the rental agreement and print two copies. Customer signs both copies and takes one of the copies along with a card that contains the details and location of the car rented.  Car keys are typically kept in the cars so that customers can drive the cars away once they locate them. To prevent someone just taking the car away from the lot without paperwork, customer’s copy of the rental agreement is checked at the exit gate and matched against the car’s license plate and the customer’s driver license number.  This takes some time and during busy times, can create a bottleneck at the exit gate thereby causing a long queue of waiting cars with impatient customers.  The office copy of the rental agreement is filed in a file folder created for the customer and is sent to the return desk area (CaRent has their rentals and returns in two separate areas, each with two service desks) for calculation and processing of total rental charges after discounts and promotions when the car is returned.  Cars are also checked for exterior and interior damages upon return and if anything is found, customers are notified about the extra charges that need to be levied and the details are noted on the paperwork.  As mentioned earlier, customers often have to wait in long queues to return the car and get the paperwork processed.  CaRent maintains a paper master folder for each of the car it owns and that folder is updated with the completed paperwork from the return at the end of each business day.  That way, CaRent can maintain a rental history as well as maintenance and repair histories on each car.  Once a car is returned, it is taken to the cleaning area for a thorough cleaning.  An inspector checks each car after cleaning to make sure that it is rent worthy again and then places an inspection report inside the car which is later collected (after the car is parked in a numbered slot) and delivered to the return desk. Once the return desk person receives this paperwork, he/she enters the car’s license plate information in the database of available cars thereby updating the list for the rental process. Sometime, there is a delay in sending these reports back to the return desks thus creating an information delay about the availability of a particular type of car.  Additionally, this process creates extra work for the return personnel who are already overloaded during busy times.  This lack of timely updates about the availability of the returned cars give rise to unnecessary upgrades (a particular type of car may have already been returned and cleaned, but the rental desks will have no way of knowing that till the inspection reports make their way to the return desks) and loss of revenue.  The consolidation of the paperwork by the car also makes it difficult to provide any kind of after sales services to the customers (e.g. easily matching articles that may have been left in the car, crediting missing frequent flyer miles, etc.).  Commissions for referrals are calculated at the end of each month and checks are mailed to the referral agencies.

Cars with interior and exterior damages are typically sent to repair shops at the end of each week.  Cars also have regular maintenance schedules that are performed by four repair/maintenance facilities who have contracts with CaRent.  Whenever a car goes for maintenance or repair, its file and the database of available cars are updated to indicate the unavailability of the car and its expected available date.  Once the car is returned to the lot after repair/maintenance, the file and the database are updated again.  This process, while is simple, can create confusion if the paperwork is not timely updated.

Assume that the company currently has only 5 computers and three printers.  Four of the computers and two of the printers are used by the rental and return desks (two computes and one printer for each area).  The fifth computer and the second printer are used by the company secretary.  The computers are networked through a basic networking router which also is connected to the Internet through a high speed connection. The computers are relatively new and are quite powerful in terms of processing, memory, storage etc.

Peter realizes that the current operations processes cannot support future growth and knows that CaRent is losing customers to other car rental companies due to its inefficiencies.  He also knows that price cut and promotion cannot be a sustainable strategy for attracting the customer back.  He has to somehow change the process to make the customer experience at CaRent much better than its current state and possibly better than its competitors by cutting down on the paperwork and waiting time for rentals and returns.  He wants your help in laying out the processes and various interfaces to identify the points are areas of inefficiencies so that solutions can be sought out.