Lean Consumption & Transportation

Here’s another example of the Lean Consumption model at work. The business model of car sharing is increasingly gaining momentum in North America. Including both for-profit and not-for-profit companies and organizations there were a reported 15 car sharing programs operating in the US as of December 2004. There are another 10 in Canada.

These links provide additional information on the business of car-sharing which started in Switzerland back in 1987.

http://www.metrotimes.com/editorial/story.asp?id=8589

http://www.carsharing.net

http://www.via-car.com

The basic concept provides an alternative to owning a vehicle. There are many slight variations to the model, but all seem to be membership based. For a small yearly fee (around $75), members are able to use a vehicle when they need it, while only paying for what they use. Via-Car likens the payment process to a pay-as-you-go mobile phone plan.

Cars are being made available at many downtown lots, some condo and apartment complexes, gas stations and other community locations. Reservations are usually necessary, but sometimes 15 minutes is the most notice required (providing the vehicle in your area is not already in use). The most sophisticated systems use satellite technology to unlock and enable the ignition in the vehicles remotely.

Fees for use of the vehicle also vary, but are not great when it is considered that insurance, maintenance and fuel are included. The customer pays one fee and only for the transportation value they use.

While not a perfect match, here’s how car-sharing stacks up against the 5 major Principles of Lean Consumption presented in Womack and Jones ‘Lean Solutions‘:

1. Solve my problem completely – assuming the problem is the need to have transportation, having access to an automobile remains the preferred solution over many forms of public transportation in most areas. This is especially true if you have luggage or shopping bags to lug around with you.

2. Don’t waste my time – consumers of care-share services don’t waste any time performing maintenance, acquiring license stickers or shopping for insurance. Also, unlike normal rental agreements, reserving a vehicle takes no more than a simple phone call.

3. Provide exactly what I want – car-share services provide all the advantages of operating a car. Consumers can use the vehicles to drive wherever it is they need to go, without being constrained by public transportation routes and schedules.

4. Exactly where I want – there is likely a lot of work to be done here as there are relatively few locations where cars are available to be picked up. The perfect solution would be at your doorstep; though this level of service would likely increase costs enough to destroy the business model.

5. Exactly when I want – this can only be satisfied assuming that one of a limited number of vehicles is always available when needed.

Car-share models all aim to provide value when and where it’s needed. As more and more consumers take advantage of this alternative to meet their transportation needs it’s generally accepted that the service will also improve. With more customers, providers should be able to offer more cars in more locations and come closer to the perfect balance of supply and demand without excess waste in the form of inventory (i.e. cars not in use!).

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Luke Van Dongen

Luke, an auto industry engineering veteran, blogged here from 2005 to 2006.

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2 Comments on "Lean Consumption & Transportation"

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  1. Chuck Yorke says:

    The Freedom Boat Club, a Sarasota, Fla.-based company does a similar thing with boats. People join the club and can schedule use of one of their boats.

  2. Mark Graban says:

    I also saw a show about a Manhattan car club that you join for $55k (lifetime membership) and then you get to borrow and drive (and not maintain) a whole host of old or exotic cars.

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