Dynamic conditional value-at-risk model for routing and scheduling of hazardous material transportation networks

This paper illustrates a dynamic model of conditional value-at-risk (CVaR) measure for risk assessment and mitigation of hazardous material transportation in supply chain networks. The well-established market risk measure, CVaR, which is commonly used by financial institutions for portfolio optimizations, is investigated. In contrast to previous works, we consider CVaR as the main objective in the optimization of hazardous material (hazmat) transportation network. In addition to CVaR minimization and route planning of a supply chain network, the time scheduling of hazmat shipments is imposed and considered in the present study. Pertaining to the general dynamic risk model, we analyzed several scenarios involving a variety of hazmats and time schedules with respect to optimal route selection and CVaR minimization. A solution algorithm is then proposed for solving the model, with verifications made using numerical examples and sensitivity analysis.