Temporary housing operations: A simulation-based inventory management approach using the newsvendor model

Abstract

A greater dependence on post-disaster temporary housing has emerged following an increase in the severity and frequency of disasters and their corresponding social and economic impacts on communities. Effective operations management of temporary housing before, during, and after a disaster is critical to the recovery of communities. On one hand, lack of inventory stock increases the cost associated with emergency purchases made during disasters. On the other hand, increasing inventory stock comes at an initial investment cost before a disaster but can potentially avoid large financial losses incurred from emergency purchases, temporary housing demands, and prolonged community recovery. This study addresses the challenge of balancing temporary housing allocation before and during a disaster. The proposed approach adopts a simulation-based demand forecasting method and an inventory optimization model to identify the most cost-effective stocking inventory for temporary housing. An illustrative case study is presented, demonstrating that an optimized inventory can reduce expected losses from post-disaster temporary housing units in comparison to previous United States baseline stocking inventories.