Stochastics in transportation and logistics – some modeling issues
Stein W. Wallace
Professor of quantitative logistics
NO-6402
www.himolde.no/~wallace
Abstract: Most decisions are made under some uncertainty about the future. Most models do not take that explicitly into account. Is that a minor issue or a major problem? The purpose of this lecture is to illustrate how deterministic models, even combined with sensitivity analysis, what-if-sessions or other similar tools, can lead to rather bad decisions. Using examples from logistics we show how solutions from deterministic models differ from those of stochastic models in systematic and (sometimes) recognizable ways. We also try to show ways forward in terms of capturing these differences without solving (unsolvable) stochastic optimization problems. So the overall goal of the underlying research is to find good (if not optimal) solutions to stochastic optimization problems without solving such problems.