CASE DESCRIPTION

•  Aggressive mail promotion with low introductory

interest rates is used by Yeager National Bank
• There is a large base of credit card customers
for Yeager National Bank
• Daily payments are sent by all customers to
corporate office at Charlotte, NC​
• Average daily collections are $600000.​
• It has been estimated by YNB that it makes about
15% on its fund (profit)​
• It takes more than 1 day for payments to reach the
bank wallet and hence the bank losses that
many days worth of interest income. e.g. if it takes 5
days for a payment to be credited to a bank account,
5 days worth of interest income is lost since the
payment is processed for some days​
• To reduce these processing days to reduce the
amount of interest income 4 new locations have
been proposed to set up regional collection centers
• Customers  are divided into 4 groups and they will
directly pay to these collection centers
 BINARY INTEGER LINEAR PROGRAMMING MODEL
Objective :
Minimizing the daily interest loss by examining
1) No of lockboxes to be opened
2) Which lockboxes to be opened
3) Region-wise allocation of lockboxes
Objection Function :
48*NWP + 24*NWS + 48*NWA + 48*NWB
+ 27*SWP + 40.5*SWS + 54*SWA +
81*SWB + 112.5*CP + 67.5*CS + 67.5*CA +
90*CB +135*NEP + 108*NES + 81*NEA +
54*NEB +60*SEP + 90*SES + 30*SEA +
45*SEB
Decision Variables:
P: 1 if a lockbox is constructed in Phoenix or else 0
S : 1 if a lockbox is constructed in Salt Lake City or else 0​
A : 1 if a lockbox is constructed in Atlanta or else 0​
B : 1 if a lockbox is constructed in Boston or else 0​
NWP: 1 if Phoenix is allocated to the Northwest region or else 0
NWS: 1 if Salt Lake City is allocated to the Northwest region or else
0
NWA: 1 if Atlanta is allocated to the Northwest region or else 0
NWB: 1 if Boston is allocated to the Northwest region or else 0
SWP: 1 if Phoenix is allocated to the Southwest region or else 0
SWS: 1 if Salt Lake City is allocated to the Southwest region or else
0
SWA: 1 if Atlanta is allocated to the Southwest region or else 0
SWB: 1 if Boston is allocated to the Southwest region or else 0
CP: 1 if Phoenix is allocated to the Central region or else 0
CS: 1 if Salt Lake City is allocated to the Central region or else 0
CA: 1 if Atlanta is allocated to the Central region or else 0
CB: 1 if Boston is allocated to the Central region or else 0
NEP: 1 if Phoenix is allocated to the Northeast region or else 0
NES: 1 if Salt Lake City is allocated to the Northeast region or else 0
NEA: 1 if Atlanta is allocated to the Northeast region or else 0
NEB: 1 if Boston is allocated to the Northeast region or else 0
SEP: 1 if Phoenix is allocated to the Southeast region or else 0
SES: 1 if Salt Lake City is allocated to the Southeast region or else 0
 CONSTRAINTS

Each region will be allocated one lockbox Regions will not be allocated any lockbox unless is constructed
NWP + NWS + NWA + NWB = 1; NWP-P<=0;
SWP + SWS + SWA + SWB = 1; NWS-S<=0 ;
CP + CS + CA + CB =1; NWA-A<=0;
NEP + NES + NEA + NEB =1; NWB-B<=0;
SEP + SES + SEA + SEB =1; SWP-P<=0;
SWS-S<=0 ;
SWA-A<=0;
SWB-B<=0;
IF k is the number of lockboxes that is CP-P<=0;
decided to be constructed CS-S<=0 ;
CA-A<=0 ;
P+S+A+B= 2 CB-B<=0;
NEP-P<=0;
NES-S<=0 ;
NEA-A<=0;
NEB-B<=0;
SEP-P<=0;
SES-S<=0 ;
SEA-A<=0;
SEB-B<=0;