Optimizing Banknote Distribution to Reduce GHG Emissions at the Bank of Canada

One of the main responsibilities of the Bank of Canada (BoC) is to ensure that sufficient inventories of each currency denomination are maintained nationwide. To achieve this, the BoC operates 39 regional distribution centers (RDCs), each with a specified limit on the total currency value it can hold without incurring penalties. Local banks interact with these RDCs through withdrawals and deposits, and the BoC may recall currency that is no longer suitable for re-circulation or exceeding storage capacity. This creates a complex inventory management problem, requiring the BoC to balance demand while minimizing the risks of stock shortages and exceeding inventory limits. The BoC utilizes multiple modes of transportation (air and ground) for banknote distribution; however, ground transportation constitutes a small portion of these operations, with the majority relying on air transport, which produces significant GHG emissions.
The BoC employs an adapted weekly (s,S) inventory management policy to minimize the total number of shipments. This research aims to optimize this policy to reduce the GHG emissions associated with banknote distribution. This can be done by reducing shipments and employing more environmentally friendly modes of transportation where feasible.

Faculty Supervisor:

Antoine Legrain;Nadia Lahrichi

Student:

Partner:

Bank of Canada

Discipline:

Mathematics

Sector:

Finance and Insurance; Manufacturing; Public administration

University:

Polytechnique Montréal

Program: