OMEGA Int. J. of Mgmt Sci., Vol. 16, No. 4, pp. 333-345, 1988 0305-0483/88 $3.00 + 0.

00
Printed in Great Britain Pergamon Press plc

A Decision Support System for the

Courier Vehicle Scheduling Problem
AV HILL
University of Minnesota, Minneapolis, USA

VA MABERT
Indiana University, Bloomington, USA

DW MONTGOMERY
Crowe Chizek & Company, Indianapolis, USA

(Received June 1987)

The timely collection and transportation of checks from branches to the operations center is a primary
concern to bank managers. Transit cheeks need to be cleared quickly to maximize available funds to
the bank's cash managers. However, management must not over-commit resources, such as drivers
and vehicles, to improve the movement of checks from branch banks to the operations center. Bank
managers must make d i ~ t decisions regarding courier fleet size, routing, and scheduling in order
to balance these conflicting goals and to minimize overall system costs. We present a micro-computer
based decision support system (DSS) that helps bank managers make good decisions for their vehicle
courier service. This system, known as Cbexpedite, helps establish the correct number of vehieles, the
appropriate collection routes, the timing of the routes, and a view of the check flow pattern into the
operations center (back oMce check processing center). The system has been implemented at a number
of banks, indicating its value to bank management. In this paper, the logic of Chexpedite and its
database, optimization, and simulation capabilities are presented. A ease study application demon-
strates the system. The final section concludes with a discussion of Cbexpedite's strengths and
weaknesses.

I. INTRODUCTION for proof, encoding, sorting, and distribution.

MANY COMMERCIAL BANKS use
(messenger) vehicles to pick up checks and other
items, and deliver them to an operations center
for encoding, sorting, and further processing.
Courier schedules in these banks can have a
major impact on the bank's float position and
costs of operation.
The clearing activities of a typical bank with
multiple branches can be viewed as a series of
operations geographically dispersed. During the
normal course of business, checks are deposited
at branch banks throughout the day. These
checks will be picked up at certain times during
the day and transported to an operations center
Processing these checks before Federal Reserve
courier and other deadlines allows the bank to minimize
its lost availability due to transit checks. (Tran-
sit checks are items deposited at the bank but
drawn against another bank, out of the local
geographic area.)
The transit checks must be cleared by specific
deadline times to receive credit in their account.
Failure to meet the cutoff deadline delays the
availability of the funds by one or more days.
The impact on the bank's financial planning
could be substantial in today's banking environ-
ment. Most large commercial banks (Citi Corp,
Chemical, Bank of America, Seattle First, etc.)
normally clear over a billion dollars a day.
333
334 Hill et al.--The Courier Vehicle Scheduling Problem

i0:00 am -- Transit item r e c e i v e d at a branch bank

Ii:00 am -- Transit item waits for a courier at the branch

12:00 noon -- Picked up by a courier

i:00 pm -- -- Delivered to the operations center and begins encoding

2:00 pm -- Begins sorting

3:00 pm -- Transported to c l e a r i n g agent (Federal Reserve, etc.).

4:00 pm -- --

5:00 pm

6:00 p m

7:00 pm ---- Deadline for clearing

Fig. 1. Typical time line for clearing a transit check.

About 50% of these dollars are drawn against
other banks. If poor clearing procedures (inap-
propriate courier routes and schedules) reduce
the available investment funds by just 5%, up to
$25 million is lost in investment dollars each
day. At 5% annual interest, the $25 million lost
availability equates to $1.25 million in lost
interest income per year. Although electronic
fund transfer systems are growing in popularity
(especially for large dollar items), paper checks
and the associated clearing activities are
projected to continue to grow in volume over
the foreseeable future.
This paper presents a decision support sys-
tem, known as Chexpedite, which has been
found to be effective in scheduling couriers at
several commercial banks. We first present some
background on courier scheduling decisions in a
commercial banking environment. Next, an
overview of the Decision Support System
structure is outlined, with a discussion covering
the procedures used to "optimize" the courier
schedules and the simulation used to perform
the "what-if" analysis. A case study presents
the use of Chexpedite and its impact on oper-
ations at one bank. The conclusion discusses
a number of Chexpedite's strengths and
weaknesses.
II. BACKGROUND
Figure 1 illustrates a typical time line for a
check being processed through the many clear-
ing steps. The time line points out that the
majority of time that a check spends in the bank
is spent waiting for the courier vehicle. Once a
check is received in the operations center, it is
encoded and sorted relatively quickly. If all
activities are done by 7: 00 p.m. in this example,
the check will clear that day.
Bank management can control the timing of
courier schedules and the number of couriers
employed to influence the clearing function. An
opportunity for improvement in many banks is
in the area of improved courier schedules and
improved decisions related to determining the
number of courier vehicles to employ.
Several individuals have developed ap-
proaches to the courier problem. Svestka [11]
proposed and tested a two-phase approach at
Cleveland Trust (now known as AmeriTrust
Company). The dynamic program maximized
the time discounted value of transit checks
picked up in order to reduce float cost. In the
second phase, an exact M x vehicle traveling
salesman branch-and-bound algorithm [12] was
applied to develop courier vehicle routes within
each of the five periods. The implementation of
this approach at Cleveland Trust did have sub-
stantial savings, but the model fell into disuse
after Svestka left the bank.
Hill [6], Hill and McKenzie [7], Hill and
Whybark [8], and Mabert and McKenzie [9]
reported development of a heuristic algorithm
for the courier scheduling problem that at-
tempted to build courier routes one stop at a
time for each route. Stops are added to each
route in order to maximize "efficiency" where
 Omega, VoL 16, No. 4
efficiency is defined as the ratio of items picked
up to the travel time for the route. This ap-
proach has been found to be inadequate because
of its myopic approach to building routes.
Routes were often built that cross themselves
many times. This paper extends the original
concept by changing the objective function of
the building heuristic to reflect the multiple
goals inherent in the problem, adding a number
of improvement heuristics, imbedding the sys-
tem in an interactive decision support system
that runs on a personal computer, and adding
several other features such as time-of-day travel
time multipliers and mail routes.
Haas and Zoltners [5] reported a heuristic
approach that selects the next branch bank to be
added to a courier route as a function of both
travel time "savings" and check volumes. Cou-
rier vehicles are "called" back to the clearing
center whenever the inventory of checks at
the clearing center goes below a specified
value. Although the authors used test data
from several banks, no implementation has been
reported.
Davis and Swanson [4] proposed a computer
algorithm for the single-vehicle courier sched-
uling problem. This approach has since been
extended to the multiple-vehicle courier prob-
lem by Davis [1]. The procedure is somewhat
similar to that of Hass and Zoltners in that it
applies heuristic rules to select the next branch
bank for building a route and applies other
heuristic rules to call a courier vehicle back to
the clearing center. Again, no implementation
has been reported to date.
Both the Haas and Zoltners [5] and the Davis
and Swanson [4] approaches have two major
shortcomings. First, both approaches require
that several non-intuitive management control
parameters be set. Second, after finishing a
route, both approaches require that the vehicle
immediately begin a new route. Frequently, a
lower cost schedule can be developed if the next
route is delayed until more checks accumulate at
the branch banks.
Muth and Lepman [10] at Bank of America
reported a heuristic approach for the courier
problem that allows for some branch banks to
be identified as "transfer" points. Bank of
America sends 45% of its routes to transfer
points instead of a clearing center. The other
55% of the routes involve picking up checks at
transfer points or branch banks and delivering
335
them to a clearing center. The two-phase heuris-
tic begins by developing routes with a modified
assignment algorithm. If a route is not con-
nected to the clearing house or a transfer point,
it must be manually combined with one that is.
Once a set of feasible routes is developed, a
dynamic programming algorithm selects and
schedules routes so that checks arrive at the
clearing house as early in the work day as
possible. Although the algorithm appears prom-
ising for large banks with many transfer points,
it requires substantial human intervention and,
therefore, may be difficult to implement. No
implementation experience has been reported.
More recently Davis, Ceto, and Rabb [2], and
Davis, Kleindorfer, Kochenberger, Reutzel, and
Brown [3] have proposed a simulation approach
to the problem. This simulation has an imbed-
ded routing algorithm. The simulation ap-
proach was found to be useful at BancOhio
in a study of the consolidation of operations
centers.
The approach presented here is quite different
from previous approaches and is an extension of
earlier work. Chexpedite has the following char-
acteristics:
(1) Provides an interactive Decision Sup-
port System that runs on a micro-
computer that allows the user to build,
change, save, and retrieve databases.
(2) Optimizes (heuristically) courier sched-
ules.
(3) Simulates user-specified courier sched-
ules to give the user the ability to
interactively change the "optimized"
schedules and evaluate the results.
(4) Includes time-of-day travel time multi-
pliers to adjust travel times for traffic
congestion during different times of the
day between selected locations.
(5) Gives the user control over the "opti-
mized" schedules by means of a variety
of intuitive management parameters.
(6) Develops near-optimal courier sched-
ules for early morning mail delivery to
the branches. (These are "mail routes"
that do not pick up checks, but rather
deliver mail to some or all branches in
the morning.)
336 Hill et al.--The Courier Vehicle Scheduling Problem
Database
Creation and
Maintenance
Route
Optimization
What-lf
Analysis
Fig. 2. Phases in the use of the Chexpedite decision support
system.
HI. THE DECISION SUPPORT SYSTEM
A Chexpedite analysis typically has three
phases as illustrated in Fig. 2. The three phases
are:
(1) Database creation and maintenance.
(2) Route optimization.
(3) What-if analysis.
Each of these three phases will be discussed in
the following sections.
Database creation and maintenance
The Chexpedite algorithms are imbedded in a
decision support system that gives the user the
ability to load databases, create databases,
change databases, save databases, optimize
schedules, simulate schedules, and print reports.
Chexpedite allows the user to create and main-
tain a database that describes the banking oper-
ations environment. The databases is divided
into five sets of data:
(1) Branch bank location data.
(2) Availability schedule data.
(3) Item requirements schedule data (at the
operations center).
(4) Travel time data.
(5) Parameter data.
Location Data includes the branch bank lo-
cation ID, name, X - Y coordinates, minimum
time between stops, maximum number of stops,
a "yes" or "no" to indicate if the location is
in the time-of-day travel time multiplier list
(to be discussed later). The X - Y coordinates
can be used to define base travel times
with modifications made because of unique
features. Locations can be branch banks or
other banking facilities that require courier
stops.
Availability Schedule Data gives the number
of items (checks, etc.) and the average transit
dollars per item by half-hour period by banking
location. This allows for individual character-
istics of branches to be maintained.
Item Requirements Schedule Data specifies the
number of items desired for processing at the
operations center in each 15-minute period of
the day. This data typically reflects the actual
item processing capacity and the desired output
necessary to improve the current float position.
Travel Time Data allows for user-specified
travel times to override the travel times calcu-
lated from the X - Y coordinates. Chexpedite
default travel times are based on X - Y coordi-
nates. These travel times can be replaced with
user-specified travel times. Travel times to or
from selected locations can be inflated or
deflated by the time-of-day multipliers to allow
for traffic congestion. This requires only a list of
locations that are in congested areas and a list
of time-of-day travel time multipliers for each
15 minute period of the day.
For trips between two locations that are in
the list of locations affected by the travel time
multipliers, the normal travel time (either user-
specified or default X-Y travel time) is inflated
or deflated by the multiplier that is on the
approximate midpoint time of the trip. If nei-
ther location is in the time-of-day travel time
multiplier location list, the multiplier is always
set to 1.0. If only one of the locations is
in the time-of-day travel time multiplier location
list, the multiplier is (1 + m)/2 where m is the
user-specified multiplier.
Parameter Data includes the average speed,
map scale factor, operations center location,
operations center delivery time, earliest time
locations open, earliest time vehicles available,
time all vehicles must be done for the day,
maximum number of stops desired per route,
minimum number of stops desired per route,
 Omega, Vol. 16, No. 4
maximum time desired per route, minimum item
volume desired per route, help option is turned
on or off, mail routes turned " o n " or " o f f " , and
the time mail routes done. In the optimization
these parameters allow for more accurate mod-
elling of the operating environment. With the
simulation option (what-if option), these pa-
rameters are used to check a user-defined route
to be sure that travel times are reasonable and
that no constraints (e.g. maximum number of
stops per route) are violated.
Route optimization
Building courier routes involves many
conflicting goals. These goals include:
(1) Supply enough items to the operations
center to keep the p r o o f area supplied
with work.
(2) Bring transit dollars into the operations
center as early as possible in the day in
order to minimize float opportunity
cost.
(3) Minimize transportation cost (fixed ve-
hicle cost and incremental cost of miles
traveled).
(4) Satisfy practical constraints on the
maximum number of stops at a branch
bank, the maximum number of stops on
a route, the maximum route time, and
the minimum number of items picked
up on a route.
Chexpedite applies several heuristics in order
to find near optimal schedules. (Note that the
term "optimal" is used here to mean optimal
seeking. The imbedded algorithms are heuristics
that do not guarantee mathematically optimal
schedules.) Chexpedite applies heuristics to first
build and then improve courier routes. Routes
are built one route at a time using the "max-
imum delay" principal which states that routes
should end as late as possible in the time
window. The longer a route is delayed, the more
items (and transit dollars) are picked up on each
route. The time window for a route begins at the
time the vehicle becomes available and ends at
the time the operations center runs out of items
to process.
In building the first route, the time window
OME. 16/4~F
337
begins at the time that the first vehicle is avail-
able and ends at the time the first items are
required by the item requirements schedule. The
second route then has a time window bounded
by the time the second vehicle is available and
the run out time for the items from the first
route.
Each route is built in the time window with
a "greedy" heuristic that finds the best insertion
of any available branch bank location into the
route to maximize the objective function value
Z (defined later). The process is repeated until
no further insertions are possible without vio-
lating the time window. Routes are always
constrained to end at the end of the route time
window.
After the greedy heuristic has built a route,
the route is improved with several additional
heuristics:
1. Exchange heuristic.
2. Drop and add heuristic.
3. Drop heuristic.
4. Reverse heuristic.
5. Greedy heuristic.
6. Move heuristic.
The exchange heuristic attempts to improve
the route within the time window by trying all
possible pair-wise exchanges of locations on the
route. The drop and add heuristic pulls a lo-
cation out of the route and tries to find a better
insertion for it in the same route. The drop
heuristic attempts to improve the route by drop-
ping a location from the route. The reverse
heuristic tries to improve the route by reversing
the direction of the route. If improvement is
found by any of the other improvement heuris-
tics, the greedy heuristic is applied again to
attempt to add another stop to further improve
the route. If the greedy heuristic finds some
improvement, all of the other improvement
heuristics are applied again. The move heuristic
moves the route to the beginning of the time
window if all of the stops on the route are "after
closing" stops. (The "maximum delay" prin-
ciple is no longer valid after closing.) The move
heuristic is always applied after all other im-
provement heuristics have been applied.
338 Hill et al.--The Courier Vehicle Scheduling Problem

In building and improving routes, the objec- maximum route time parameter (MXRTM),
tive function used to evaluate a candidate route and/or the minimum route volume parameter
is as follows: (MNRVL).
D Each time a route is changed it is simulated
Z = - - backwards from the end of the route time
TPIP2P3 window in order to calculate the objective func-
Where, tion value Z. This simulation calculates the stop
time for each location based on travel times
D = Total transit dollars picked up on the
modified by the time-of-day travel time multi-
route.
pliers. Item volumes and transit dollars for each
stop are also calculated.
T = Total travel time required for the route.
Some banks schedule early morning routes to
drop off mail at all locations. In this situation
PI Penalty function for having less than
the user is most interested in getting very
the minimum number of stops
efficient travel time routes. If the user instructs
(MNNSTP) or more than the max-
Chexpedite to build multiple vehicle mail routes
imum number of stops (MXNSTP).
before a certain time in the day, the greedy
This function is defined as:
heuristic is applied to all routes to build routes
for all vehicles simultaneously. These routes are
[max(MNNSTP--NS, NS
then improved with the improvement heuristics.
- - M X N S T P , 0)]2 -~- 1 The objective function here is the same as before
except that before opening time the route transit
where, NS is the number of stops on the dollars is fixed at 1. (In other words we are
route. applying standard multi-vehicle traveling sales-
man heuristics to develop these "mail routes".)
P~= Penalty function for the route being The user can select which branches are to be
greater than the maximum route time included in the mail routes.
(MXRTM). This function is defined as: The user can "optimize" the number of vehi-
cles by optimizing the schedules with 20 vehi-
max[(T--MXRTM)/IO.,O.] + 1 cles, 19 vehicles, 18 vehicles, etc. until a satis-
factory balance between the number of vehicles
where T is the route time in hours and and operations center idle capacity is found.
M X R T M is the maximum route time in One interesting study is to run Optimize Routes
hours. with an unlimited number of courier vehicles
(e.g. 99) to get an idea of the maximum number
P~= Penalty function for the route having of items that can be brought into the operations
less than the minimum number of items center.
(MNRVL). This function is defined as: In selecting a schedule, the user will have to
make many economic and practical tradeoffs.
max[(MNRVL-VL)/25.,0.] + 1 Economic issues include vehicle costs (lease, gas,
maintenance), driver costs, proof costs, and
where VL is the total item volume for float-related costs. Although Chexpedite can
the route and M N R V L is the user develop "optimized" schedules that deal with a
specified minimum desired route vol- large number of practical issues (maximum
ume. number of stops per location, etc.), it does not
explicitly evaluate vehicle costs, proof costs, or
The D/T ratio reflects our desire to have float costs. It was judged that the data collection
maximum "efficiency" routes that provide the effort required to accurately measure these costs
maximum number of transit dollars per unit was practically impossible. For example, float
travel time. The penalty functions P~, P2, and P3 costs require information on the sending point
serve to deflate the objective function value mix and dollar value of items by branch bank
whenever a route violates the minimum number by time of day. We find that the pragmatic
of stops per route parameter (MNNSTP), the approach is to simply evaluate schedules on a
 Omega, Vol. 16, No. 4
relative basis (e.g. in our current environment
we will have $2,000,000 of transit items pro-
cessed by 1:00p.m. and in our "optimized"
environment we will have $10,000,000 of transit
items processed by the same time with no
additional vehicle cost).
If the bank has multiple operations centers,
each location must be assigned to a single
operations center. Chexpedite then handles each
problem separately. If the bank has multiple
collection points that are later picked up by
couriers to be delivered to an operation center,
each collection point is treated as a separate
Chexpedite operation center to develop a sched-
ule. A " m a c r o " Chexpedite schedule is then
solved to pick up items from the collection
points.
Sometimes we find that the user-specified item
requirements schedule demands more items
than can possibly be brought in from the branch
bank locations. When this occurs the time win-
dow for a route becomes so small that not even
one stop will fit into the time window. In this
case the time window heuristic will schedule
fifteen minutes of out-of-work time to make the
time window larger. The route building heuris-
tics are again applied to attempt to build a route
in this new enlarged time window. The time
window is made larger until the minimum
number of stops (MNNSTP) will fit on the
route.
What-if analysis
The What-if analysis is a deterministic simu-
lation of the bank's courier system. In order to
use this option, the user defines the courier
schedules with the help of the interactive Chex-
pedite DSS. Chexpedite will suggest travel times
to help the user build a schedule. Once the
schedule has been defined, Chexpedite will sim-
ulate in order to estimate the number of items
and the transit dollars picked up at each stop
as well as the projected item inventories and
out of work times at the operations center.
Caution messages are printed if the user-
specified travel times are unreasonable or if any
of the maximum or minimum parameters such
as the maximum number of stops per location
are violated.
The What-if and Optimize Routes selections
can work together. After the routes have been
"optimized" with the Optimize Routes selec-
tion, the user can study the routes with the
339
Reports selection and change any route with the
Change Routes Data selection. For example,
after Optimize Routes has been run the user
may want to change the order of two locations
in a route. The user should select Change
Routes Data option to change the routes, What-
if to simulate the new alternative, and Reports
to print the results for evaluation.
Chexpedite allows the user to save a Chex-
pedite data file with a route structure. The user
may test a large number of alternative scenarios
with the What-if option, save each one in a
Chexpedite data file, and then retrieve and print
the file with the best solution.
IV. AN E X A M P L E
Chexpedite is designed around a decision
support system framework to facilitate ease of
use. To demonstrate this system, we wish to
present a short case study based upon our
experience with commercial banks dealing with
multiple branch check clearing. Many of the
exhibits presented during this discussion come
directly from the Chexpedite reporting system.
Middleton National Bank is a small commer-
cial bank with a main office and fourteen
branches. Management is concerned about
clearing the maximum transit dollars each
day and is considering changes to the trans-
portation department (adding another vehicle)
and/or adjusting capacity within the Check Pro-
cessing Department (CPD) to improve the
bank's clearings each day.
To address these types of banking decisions,
it is important that a database be developed
containing the appropriate information on lo-
cation of branches, traffic patterns within
branches, transit dollars collected in branches,
travel time between branches, etc. Such a data-
base presents the heart of Chexpedite. Travel
time data can be one of the more difficult items
to collect. To facilitate travel time data col-
lection, one can take a standard street map and
plot the locations of the branches as shown in
Figs. 3 and 4. Using scaling factors that convert
map distance to approximate travel times, the
initial travel times can be estimated between all
locations. Occasionally, direct travel time esti-
mates may be necessary to reflect unique travel
conditions (one way streets, highways, etc.). The
user can specify these travel time pairs directly.
The normal travel time (not modified by the
340 Hill et al.--The Courier Vehicle Scheduling Problem

11.5

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11.0 Birmingham

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RoseviLte
~armington Madison
St CLair
HiLLs Shores
LSouthfieLd
o 10.5
I

Livonia
HighLand
Redford
Township ~ r a ! c k
10.0

Detroit
Dearborn
WestLand Gardencity Height~
Dearborn
9.5 Windsor j
j • / ]
// "1 I I I
5.0 5.5 6.0 6.5 7.0 7.5
X-AxTs
Fig. 3. Branch locations.

travel time multipliers) for this example is
shown in Fig. 5. Branch bank locations in
highly congested areas will have incoming and
outgoing travel times inflated or deflated by the
time-of-day travel time multipliers. Figure 4
indicates which locations were judged to be
affected by the travel time multipliers.
Data on arrival patterns of items and transit
dollars are required to estimate available work
for collection during the day at each branch
bank location. Figure 6 lists the estimated ar-
rival pattern (Availability Schedule) for one
branch (Location L1), plus a summary by half
hour for all fifteen branches. Most banks do not
find it necessary to collect detailed information
on the transit dollars per item by half hour and
simply set the transit dollars per item to $1.00.
In addition to branch information, Chex-

MULTI-
MAXIMUM MINIMUM PLIERS
LOCATION NUMBER TIME AFFECT
LOCATION COORDINATES STOP OF STOPS BETWEEN TRAVEL
ID NAME -X- -Y- TIME PER DAY STOPS TIMES

LI SMITH STREET 6.70 10.20 7 MIN 5 STOPS 30 MIN Yes

L2 MAIN BRANCH 6.50 9.90 7 MIN 5 STOPS 40 MIN Yes
L3 NORTH SIDE 7.30 10.40 5 MIN I0 STOPS 30 MIN Yes
1,4 HILL STREET 7.10 10.20 4 MIN I0 STOPS 30 MIN Yes
L5 LJC STREET 6.90 10.40 5 MIN i0 STOPS 30 MI N No
L6 HYLAND CREEK ROAD 6.50 i0.40 5 MIN i0 STOPS 30 MIN Yes
L7 94TH STREET 7.00 i0.00 5 MIN i0 STOPS 30 MIN Yes
L8 NORMANDALE BLVD. 7.20 i0.i0 5 MIN i0 STOPS 30 MIN Yes
L9 HIGHWAY I00 6.70 11.20 5 MIN i0 STOPS 30 MIN Yes
LIO HIGHWAY 494 - SOUTH 6.90 10.50 5 MIN i0 STOPS 30 MIN Yes
LII PENN AVENUE 6.70 10.90 5 MIN i0 STOPS 30 MIN Yes
LI2 FRANCE AVENUE 6.90 10.20 5 MIN i0 STOPS 30 MIN Yes
LI3 HUMBOLDT AVENUE 6.70 i0.i0 5 MIN i0 STOPS 30 MIN Yes
LI4 XERXES AVENUE 5.20 9.90 5 MIN i0 STOPS 30 MIN No
LI5 MCKNICHT ROAD 4.80 I0.i0 5 MIN I0 STOPS 30 MIN No

Fig. 4. Location data.

 Omega, Vol. 16, No. 4 341

An asterisk (*) indicates a user-specified travel time. Other travel times

are calculated from X-Y coordinates, average speed, and map scale factor.

FROM LOCATION L1 SMITH STREET

L1 0 MIN L2 10 MIN* L3 13 MIN 1.4 8 MIN L5 6 MIN

L6 6 MIN L7 i0 MIN* L8 I0 MIN L9 20 MIN LI0 7 MIN

LII 14 MIN LI2 5 MIN* LI3 5 MIN* LIA 31 MIN LI5 38 NIN

FROM LOCATION L2 MAIN BRANCH

LI 7 MIN L2 0 MIN L3 19 MIN L4 13 MIN L5 13 MIN

L6 i0 MIN L7 i0 MIN L8 15 MIN L9 26 MIN LI0 14 MIN

LII 20 MIN LI2 i0 MIN LI3 6 MIN LI4 26 MIN LI5 34 MIN

FROM LOCATION L3 NORTH SIDE

LI 13 MIN L2 19 MIN L3 0 MIN 1.4 6 MIN L5 8 MIN

L6 16 MIN L7 I0 MIN L8 7 MIN* L9 20 MIN LIO 8 MIN

LII 16 MIN LI2 9 MIN LI3 13 MIN LI4 43 MIN LI5 50 MIN

FROM LOCATION 1.4 HILL STREET

L1 8 MIN L2 13 MIN L3 6 MIN L4 0 MIN L5 6 NIN

L6 13 MIN L7 4 MIN L8 8 MIN* L9 22 MIN LI0 7 MIN

LII 16 MIN LI2 4 MIN LI3 8 MIN LI4 38 MIN LI5 46 MIN

FROM LOCATION L5 LJC STREET

LI 6 MIN L2 13 MIN L3 8 MIN 1.4 6 MIN L5 0 NIN

L6 8 MIN L7 8 MIN L8 8 MIN L9 16 MIN LI0 2 MIN

LII Ii MIN LI2 4 MIN LI3 7 MIN LIA 35 MIN LI5 42 MIN

Fig. 5. Travel time data.

pedite needs an Item Requirements Schedule.
This schedule reflects the bank management's
desired average flow pattern into the operations
center. Figure 7 provides the current hourly and
cumulative Item Requirements Schedule for the
Middleton National Bank CPD as well as the
newly proposed Item Requirements Schedule
for this department. The current Item Require-
ments Schedule has the CPD's staff equally
scheduled during the day from 12:45p.m. to
8:45p.m. for a total of 64,000 items. Since
much of the check volume does not arrive until
later in the afternoon, a new staff schedule has
been proposed that keeps the current total item
requirements schedule to 64,000 items but short-
ens the overall work day to 7:30p.m., with a
larger staff present during the late afternoon.
It was hoped that this new schedule would
improve clearings of the department.
Middleton National Bank uses three vehicles
to travel between the main office, which has the
Check Clearing Department, and the fourteen
branches. Each day messengers pick up checks
at the branches and deliver them to the central
office for clearing. Like all commercial banks,
Middleton is sensitive to the deadline time es-
tablished for clearing transit checks. Given their
past experience, all checks received by 6: 00 p.m.
at the main office will normally be processed
through the check clearing stages and be ready
for transmission. Using Chexpedite to evaluate
the current Item Requirements Schedule for the
CPD and three vehicles, one sees (Fig. 8) that
the maximum transit dollars that can be re-
ceived by 6:00 p.m. are $16.11 million. (Figure
9 provides a sample of two routes that
have created the arrival of checks presented in
Fig. 8).
342 Hill et al.--The Courier Vehicle Scheduling Problem

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344 Hill et al.--The Courier Vehicle Scheduling Problem
As indicated earlier, Middleton's manage-
ment was interested in evaluating whether the
new proposed Item Requirements Schedule for
the Check Processing Department could im-
prove the clearance of transit dollars. Also
under consideration was the possibility of ad-
ding another vehicle to pick up checks at the
branches. Chexpedite provides a powerful tool
to help evaluate these alternatives and assess
their impact on the operations of Middleton.
Using the Optimize Routes capabilities of
Chexpedite, one can evaluate the current and
proposed CPD Item Requirements Schedule,
plus whether three or four vehicles should
be employed. The following is a summary of
transit dollars cleared by 6 p.m. for the different
alternatives.
Transit dollar clearing summary
Three Four
vehicles vehicles
Current item schedule $16,119,297 $16,442,878
Proposed item schedule $17,366,208 $18,176,468
One can see from the data in the above table
that the proposed Item Requirements Schedule,
with four vehicles, allows the most transit dol-
lars to be available at the CPD by the 6: 00 p.m.
deadline time. Almost a $2 million increase in
transit dollars occurs per day, which increases
investable funds. With this information avail-
able, bank management can now collect the
other expenses associated with these alterna-
tives, such as the cost of additional vehicle, an
additional driver, extra maintenance, adjust-
ments in check processing work schedules, etc.,
to evaluate the total cost implications. Many
other alternatives (such as a different Item
Requirement Schedule for the CPD) can also
be conveniently evaluated by Chexpedite for
management's consideration.
V. IMPLEMENTATION
Since its creation, Chexpedite has been adop-
ted by a number of banks (i.e., First National
Bank of Atlanta, BayBanks (Boston), and First
National Bank of Maryland) in the United
States. Even though Chexpedite utilizes a gen-
eral design to facilitate easy use, there are
always unique situations that are present. This
section presents the experience at National
Westminster Bank of New York with 140
branches.
National Westminster's branches were
grouped into one of six sectors with approxi-
mately 30 branches per sector. Each sector had
a hub from which the couriers were dispatched
and items were consolidated for movement to
the check processing center. A study utilizing
Chexpedite was conducted in four of the six
sectors to improve operations.
The estimated times to each branch were
entered into the model to initialize the database.
Because of the inconsistencies in New York
traffic, and because foot messengers, subways,
helicopters, and cars were being used to deliver
items, the travel time data created the major
challenge with using Chexpedite. It was neces-
sary to modify the time-of-day multipliers and
lower the travel times considerably from the
initial estimate to obtain reasonable values.
With the information in place, the routes were
optimized using Chexpedite while considering
the minimum and maximum stops per branch,
minimum number of items to collect on any
stop, and exchange schedules at the hubs to the
check processing center. The optimized routes
were reviewed and revised to meet internal bank
policies, such as mail delivery times.
Chexpedite was one phase of a larger two
year work-flow/transportation project. The
Chexpedite phase, which lasted approximately
one year, had an estimated annual savings of
approximately $90,000 in the four regions used.
The total project had savings of approximately
$250,000 resulting from reduced number of
drivers, messengers, and mileage. These savings
did not include the better clearance of transit
checks that also resulted.
Discussions with the bank's users indicated
the recognition that travel times did not have to
be exact. Having reasonable approximations
was more than adequate for Chexpedite to build
good messenger routes.
VI. CONCLUSIONS
Chexpedite has proven to be an effective DSS
for several large commercial banking institu-
tions because it has a number of advantages
over current approaches to route development.
First, it provides a structured approach to ad-
 Omega, Vol. 16, No. 4
dress a complex problem. The interaction of
branch arrival patterns, vehicle travel times,
C P D process capacity, unique restrictions, etc.,
influence the appropriate routes and timing.
Second, since Chexpedite is a micro based DSS,
it can develop reasonable routes quickly for user
evaluation. The system provides a user-friendly
approach to developing sophisticated models of
branch bank check collection systems. Third,
users can insert unique conditions/requirements
and test these conditions. These models include
travel times that can be adjusted by the time of
day, multiple vehicles, morning mail routes,
and m a n y other practical issues. And fourth,
Chexpedite's decision logic focuses on both the
available items at branches and the C P D capa-
bility to process. This coordinated decision
making assures that the m a x i m u m dollars are
cleared. The schedules can be either optimized
(heuristically) or simulated.
The challenges of using Chexpedite include
the data collection effort, the modeling effort,
and the implementation effort. The data col-
lection challenge is significant. The most
difficult data to collect is the item and transit
dollar availability schedule data for each branch
bank. Few banks have found it worthwhile to
try to break down the average transit dollars per
item for each half hour of the day. Most banks
have found it useful to simply estimate an
arrival profile (pattern) in terms of percent of
total items that come in each half hour and
multiply this times the total expected for each
day of the week. Although this approach may
not satisfy the precision of most accounting
functions, it serves the operations requirements
for this application quite well. The philosophy
behind Chexpedite is to make the data col-
lection effort as simple as possible. Pareto's
80-20 law suggests that 80% of the benefit
can be achieved with only 20% of the data
collection effort.
The modeling challenges arise when the bank
has multiple operation centers, m a n y non-
branch activities for couriers, or other unusual
situations which must be modeled. We have
found that the optimization can still provide
satisfactory "first cut" schedules for m a n y of
these problems. These "first cut" schedules can
then be refined to meet all of the organizational
requirements with the simulation (what-if)
model.
The implementation challenges are many.
345
Chexpedite by its very nature cuts across or-
ganization lines of the branch administration,
check processing, and transportation areas. It is
not clear who should be in charge and who
should make the tradeoffs between float, trans-
portation, and check processing related costs. It
is clear, however, that Chexpedite can provide a
useful tool for making these decisions.
ACKNOWLEDGEMENTS
The authors would like to thank the many individuals and
organizations who contributed to the development of Chex-
pedite over the past ten years. These include Professor Clay
Whybark, Mr K Edward Elverud, Mr Phil McKenzie,
North Carolina National Bank, Ernst & Whinney, and
Crowe Chizek & Company.
REFERENCES
I. Davis SG (1978) Float reduction through the scheduling
of commercial bank branch messengers by heuristic
programming. Unpublished doctoral dissertation, Syr-
acuse University.
2. Davis SG, Ceto N and Rabb JM (1982) A comprehen-
sive check processing simulation model. J. Bank Res. 13
(3), 185-194.
3. Davis SG, Kleindorfer GB, Kochenberger GA, Reutzel
ET and Brown EW (1986) Strategic planning for bank
operations with multiple check-processing locations.
Interfaces 16 (6), 1-12.
4. Davis SG and Swanson LA, (1978) A computerized
operations scheduling model for the reduction of com-
mercial bank float. J. Opl Res. Soc. 29 (6), 559-564.
5. Haas G and Zoltners AA (1977) A computerized bank
check collection vehicle routing system. J. Bank Res. 8
(3), 148-158.
6. Hill AV (1977) Structuring and solving the bank mes-
senger vehicle scheduling problem. Unpublished doc-
toral dissertation, Purdue University.
7. Hill AV and McKenzieJP (1977) A computer algorithm
for messenger vehicle scheduling at Ohio National
Bank. Proceedings of the AIIE Systems Engineering
Conference, American Institute of Industrial Engineers,
Norcross, U.S.A.
8. Hill AV and Whybark DC (1982) CHEXPEDITE: A
Computer-based Approach to the Bank Courier Prob-
lem. Decis. Sci. 13 (2), 251-265.
9. Mabert VA and McKenzie JP (1980) Improving bank
operations: a case study at BancOhio/Ohio National
Bank. Omega 8 (3), 345-354.
10. Muth MB and Lepman RT (1980) Achieving prod-
uctivity gains in Bank of America's branch network.
Paper Presented at TIMS/ORSA Joint National Meet-
ing, May. Washington, DC.
1I. Svestka JA (1976) A system model for controlling the
operations of check processing in a branch bank net-
work. Interfaces 7 (2), 69-79.
12. Svestka JA and Huckfeldt VE (1973) Computational
experience with an M. Salesman traveling salesman
algorithm. Mgmt Sci. 19 (7), 790-799.
ADDRESS FOR CORRESPONDENCE: Professor VA Mabert,
School of Business, Indiana University, Tenth and Fee
Lane, Bloomington, IN 47405, USA.