Multi-objective optimisation with stochastic discrete-event simulation in retail banking : a case study
CITATION: Scholtz, E., Bekker, J. & Du Toit, D. 2012. Multi-objective optimisation with stochastic discrete-event simulation in retail banking: a case study. Orion, 28(2):117–135, doi:10.5784/28-2-116.
The original publication is available at http://orion.journals.ac.za
The cash management of an autoteller machine (ATM) is a multi-objective optimisation problem which aims to maximise the service level provided to customers at minimum cost. This paper focus on improved cash management in a section of the South African retail banking industry, for which a decision support system (DSS) was developed. This DSS integrates four Operations Research (OR) methods: the vehicle routing problem (VRP), the continuous review policy for inventory management, the knapsack problem and stochastic, discrete-event simulation. The DSS was applied to an ATM network in the Eastern Cape, South Africa, to investigate 90 different scenarios. Results show that the application of a formal vehicle routing method consistently yields higher service levels at lower cost when compared to two other routing approaches, in conjunction with selected ATM reorder levels and a knapsack-based notes dispensing algorithm. It is concluded that the use of vehicle routing methods is especially beneficial when the bank has substantial control over transportation cost.