Optimizing Logistics Operations in a Country’s Currency Supply Network

March 2017 | Geismar, Neil

We optimize a large country’s currency supply network for its central bank. The central bank provides currency
to all branches (who in turn serve consumers and commerce) through its network of big vaults,
regional vaults, and retail vaults. The central bank intends to reduce its total transportation cost by enlarging
a few retail vaults to regional vaults. It seeks further reductions by optimizing the sourcing in the updated
currency network.We develop an optimization model to select the retail vaults to upgrade, so that the total
cost is minimized. Optimally choosing which retail vaults to upgrade is strongly NP-hard, so we develop an
efficient heuristic that provides solutions whose costs average less than 3% above the optimum for realistic
problem instances. An implementation of our methodology for a particular state has generated a total
cost reduction of approximately 57% (equivalently, $2 million). To optimize the sourcing, we propose an
alternative delivery process that further reduces the transportation cost by over 31% for the actual collected
data and by over 38% for randomly generated data. This alternative optimizes the sourcing within the new
currency network and requires significantly less computational effort.

Author

Co-author(s)

  • Yiwei Huang
  • Divakar Rajamani
  • Suresh Sethi
  • Chelliah Sriskandarajah

Publication(s)

IIE Transactions

Web Link

http://dx.doi.org/10.1080/0740817X.2016.1224958