Stochastic Optimization of a Cash Supply Chain

  • Hector Hernán Toro-Diaz
  • Andres Felipe Osorio-Muriel
Conference paper

Abstract

Banks and other financial institutions operate a supply chain with only one product moving across the network. Financial transactions involving cash behave randomly, and therefore the cash flows are random variables. Although the cash is kept in several nodes to attend to the demand of final customers, keeping it available carries an opportunity cost related to its investment options. The process of planning the inventory level of cash that should be maintained across the network is closely related to transportation decisions. Cash transportation has a high cost, associated with the high risk of theft. Increasing the inventory available at every branch can reduce the need for transportation, but the opportunity cost can be very high. Furthermore, the cash inventory is also related to the service level perceived by final customers; therefore, a low money inventory can cause high costs due to stockouts. The aim of this work is to find optimal decisions related to cash inventory and transportation across the network, trying to balance the cost of the service and user’s perception of quality, taking into consideration the stochastic behavior of the cash demand series.

Keywords

Supply Chain Cash Flow Central Bank Inventory Level Historical Simulation 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2012

Authors and Affiliations

  • Hector Hernán Toro-Diaz
    • 1
  • Andres Felipe Osorio-Muriel
    • 2
  1. 1.School of Industrial Engineering and StatisticsUniversidad del ValleCaliColombia
  2. 2.Department of Industrial EngineeringUniversidad IcesiCaliColombia

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