Buy, Rent and Sale: Chasing better cash flows

Abstract

This capstone project optimizes the inventory levels of a rental car company and improves the cash-to-cash cycle. The solution approach is a Mixed Integer Linear Program (MILP) model, considering a multiple-period inventory. The model provides purchasing and selling plans and cash and vehicle flow in the system for each quarter and each type of vehicle for five years. The analytical model was created to maximize the company’s gross margin, considering revenues from renting and sales, cost buy, opportunity cost, and general cost (maintenance, holding, and others). Moreover, it considers an initial inventory and helps the company manage these assets in the best way possible to meet the demand. The result shows an optimal solution of 3.3 billion Colombian pesos (COP) for five years in the base case scenario. Afterward, a sensitivity analysis for different perspectives related to renting period, budget, depreciation rate, and exchange rate impact was carried out. From that perspective, it is possible to understand that the primary trigger to create revenue is extending the renting period. Moreover, the sponsor company can interpret how factors in the market affect the total result success and create an action plan to anticipate these risks.