Source/sink inventory control for vehicle rental systems

A restocking decision is embedded into the problem, in order to determine the optimal quantity of equipment lo be periodically rebalanced between locations due to “one-way” flows.

Abstract

The problem of operating a vehicle rental system in a two-location environment is investigated. Two interdependent processes are identified as operating simultaneously. Units are rented out, ultimately to be returned to their original location. Secondly, units are rented out from one location but returned to a second location. As a result, the number of units of equipment at each location is constantly changing. In general, these “one-way” flows setup equipment imbalances which require periodic rebalancing of the system. Formulation takes the form of a multi-period dynamic program. Both transient and steady-state cases are investigated. Solution specifies the optimal number of units each location should hold on reserve in each period for “one-way” rentals. Finally, a restocking decision is embedded into the problem, in order to determine the optimal quantity of equipment lo be periodically rebalanced between locations due to “one-way” flows. Limitation of the procedure is explained. The size of the resulting dynamic program makes solution of the general multi-location problem computationally unfeasible. Approximation procedures are suggested to circumvent this limitation.