Inventory Optimization

Optimizing cash at a Managed ATM Services company

Finance

A close integration of Operational Improvement, Supply Chain Optimization, Advanced Statistical techniques and Machine Learning was used to generate substantial financial savings that greatly exceeded targets.

Client

ATM turn-key solutions company
60,000+ ATMs across US, UK and Canada
$1B in revenue

Business Challenge

Client provides turn-key ATM solutions. Manages over 45,000 units in the US and is responsible for stocking, maintaining and servicing ATMs
Machines were stocked at fixed frequency (daily, weekly or monthly) using third-party Armored carriers
In case of ATM out-of-cash, emergency cash-order is placed
Client pays daily interest on cash borrowed from banks
Total spend was over $50M per year in interest
Armored carrier costs (for scheduled and emergency fills) were on the rise
Our team was faced with the problem of reducing stock-outs and reducing costs at the same time

Our Approach

Reduced outstanding cash (and interest) through safety stock optimization - used forecast error in addition to historical data to compute safety stock
Reduced safety stock by reducing overall forecast error using machine learning algorithms to capture demand patterns across groups of machines
Optimized ATM Fill Frequency using linear programming model comprising interest vs fill cost using exponential smoothing and probabilistic demand modeling
Reduced Emergency cash-orders using probabilistic demand model and Executive Management Control System

Results

Reduced outstanding cash by nearly $270M while reducing stockouts by 18%
Reduced interest spend and armored carrier costs by approx. $5.8M annualized in less than six months

Key Takeaways

Our team used a blend of traditional operational improvement techniques, supply chain optimization, advanced statistics and machine learning to rapidly drive operational improvements. These improvements generated substantial financial savings in less than six months.