Inventory optimization of airport perishable emergency supplies with replacement strategy facing stochastic occurrence time by CVaR approach

Abstract

Due to difficulties in accurately predicting not only the timing and magnitude of civil aviation disasters but also dealing with the serious expiration problems that exist in perishable emergency materials, this study combines the development of risk-averse stochastic models with a material replacement strategy to design and develop a perishable emergency supplies inventory system for airports. In this regard, a lifetime-based replacement strategy and a quantity-based replacement strategy are derived from the uncertainties on occurrence time and demand quantity. As part of our model development, we determine the conditional value at risk (CVaR) to be our primary means of evaluating risk, while the issues of emergency demand and aviation accident occurrence time form the two stochastic parameters used in the study. The effective boundary conditions of both replacement mechanisms and the CVaR method is demonstrated through a comparison of risk-neutral and non-replacement models. From our analysis, we find that airports are able to derive significant benefits by utilizing our proposed replacement strategies, with the risk-averse models providing a relatively efficient means from which more robust solutions may be obtained. Moreover, we find that the effects of uncertainty in occurrence time is also not linear for CVaR models.