Keep less, make more. It's a fundamental rule of the financial industry, and it's something your midsize banking operation needs to do better when managing the essential inventory of your company's supply chain: cold, hard cash.

That's because the currency your bank borrows from the Federal Reserve System to keep your cash outlets stocked represents assets that aren't out on the street, making you money. Yes, you have to retain some hard money in your system to cover those pesky federal deposit regulations. But the smart banks have noticed that over the last decade, those deposit regulations have relaxed a bit—as has the currency policy at the Fed, which is starting to push the headaches and costs of trafficking currency back down to banks.

So borrow a page from the big banks and implement a currency optimization system. It combines classic supply chain management with a healthy dose of demand forecasting to ensure that currency moves more efficiently through your operation. Your setup will include supply chain and forecasting software modules that will pull information into a database, letting you track everything from ATM withdrawals to armored-car routes to branch holdings.

Implementing the currency optimization system will be a fairly straightforward effort. Plan to install the required software and hardware directly into your data center; you'll need to add two or three business analysts to get the most from this new data stream. The system should be up and running within three to four months, reducing excess currency at your six vaults, 600 branches and 1,200 ATMs.

You'll first start seeing results at your ATMs—easiest to track because they do little besides dispense cash—followed by the vaults. Payback on the system, courtesy of a reduction in excess currency by as much as 40%, typically comes within 6 to 12 months, says Brian Evetts, a cash logistics expert and executive vice president at Carreker Corp., a Dallas-based financial technology consultancy.

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