Locating and Sizing Bank-Branches by Opening, Closing or Maintaining Facilities

The bank-branch restructuring problem seeks to locate bank-branches by maintaining, closing, or opening branches, to provide the service required by clients, at minimum total cost. This nonlinear problem, due to the existence of economies of scale, is formulated as a mixed binary, integer linear model. The model obtained can be solved by a ready-available software. However, due to the problem combinatorial nature, only small size instances can be solved. Thus, we also propose a local search heuristic that iteratively improves the solution obtained for a related linear problem by applying drop and swap operations. The computational experiments performed show the effectiveness and efficiency of the proposed heuristic.