A Logistics Solution to ATM Problem

February 20, 2023

We are entering week 3 after demonetization and the ATM problem is still not solved. There are essentially following problems:

  • WHERE AND WHEN : There is no way to know when and where an ATM is working and has cash. Some sites claim to show the same but reality is- no one knows.
  • WHETHER: If you do spot an ATM that has cash (easier to spot a tiger in Periyar!) and you are in queue, you do not know whether you will get cash when your turn comes
  • WHAT: Even if you do get your turn (neighbors\' envy, owner\'s pride takes a new meaning !!), you do not know what you will get. You may get those dreaded Rs. 2000 notes and not those much sought after Rs.100 or ever elusive Rs. 500 notes

So how do we solve this for 200,000 ATMs in the country? This is essentially a Logistics issue and solution too lies in REALISTIC logistics.

  • First-ACCEPT LIMITATION that it is NOT possible to refill ALL ATMs everyday. ATMs are designed assuming one in hundred account holder will use it everyday and today five to ten are trying.
  • Next- do a pin-code wise PARETO analysis- 20% of ATM will account for 80% of volumes and value- banks have that data. So identify those 40,000 high rush ATMs pin-code wise.
  • These ATMs will typically be bank branch ATMs or at Railway Stations or at hospitals. Configure them to dispense all types of notes (I guess this is already done by now)
  • PUBLICIZE- Inform public about these 20% of ATMs. on bank sites, on RBI site, may be a dedicated ATM locator app, in newspapers etc.
  • Next- Operation ABHAY VACHAN- an ASSURANCE that these 20% ATMs will ALWAYS have cash. Line up a cash van near to these ATMs so that once they run dry, they are refilled in 20-30 min.
  • Stock them with ALL denominations so that user is ASSURED that he will get 100s, 500s (few) and 2000s (for bigger withdrawal)

Above will ensure:

  • You only need to serve 20% of ATMs, so less logistics runs and better fill ratios. For big branch ATMs, possible to stock currency in strong rooms to replenish.
  • User is assured that he WILL get money at a given ATM- so he stops wild goose chase of ATMs and goes straight to designated ATMs
  • User is assured that he WILL get his turn and does not have to go back empty handed- so he can chose to invest his waiting time at designated ATM. This will get \"Any Time\" part of ATM working again and confidence back.
  • Over weeks, 20% can go up to 30% then 40% and so on. We have to accept that normalcy is at least 2 months away.

As anyone in logistics industry will attest:

  • ASSURANCE OF DELIVERY is much more prized than TIMELINESS of delivery.
  • Better to reduce service level (SLA) and meet the same CONSISTENTLY rather than promise the moon and deliver only craters
  • Even if cost is not a criteria, no amount of money can design a PHYSICAL system that can be ramped up 10X in short term. Better deploy the money to run what you can, but run it WELL

I am sure smart people at RBI and FinMin have thought of many of above, but no harm in looking at all suggestions !!