Campus Units

Industrial and Manufacturing Systems Engineering

Document Type

Conference Proceeding

Publication Version

Published Version

Publication Date

2019

Journal or Book Title

Proceedings of NY2019 New York Conferences

First Page

23

Last Page

32

Research Focus Area(s)

​Operations Research

Conference Title

The International New York Conference on Engineering and Technology (NY2019)

Conference Date

November 15-17, 2019

City

Albany, NY

Abstract

Nowadays, transportation vehicles are upfront equipped with fuel saving devices such as winglets in airplanes so as to reduce fuel consumption. By ready-made design, we mean this approaching of equipping upfront on transportation vehicles. In this article, under the reasonable assumption that the fuel cost is volatile and follows a geometric Brownian motion (GBM) process, we use the theory of stochastic optimal control (1) to determine the threshold of fuel cost to decommission such a transportation vehicle, and (2) to determine the engineering economic valuation of such a design. For the threshold and the valuation, we proceed to obtain the analytical solutions to our approach, followed by sensitivity analyses as well as the derivation of the total expected operation lifetime until decommissioning. Finally, for the managerial insights and economic implications, we present an extensive numerical example with numerous empirical data sets from publicly available sources. For instance, as the fuel cost becomes more uncertain, economically rational decision makers will defer the decommissioning of a vehicle.

Comments

This proceeding is published as Zhao, Zhuoyi, John Jackman, and K. Jo Min. "Engineering Economic Valuation of Ready-Made Design for Transportation Vehicles." In: Proceedings of NY2019 New York Conferences. Gul Dagci and Kaan Diyarbakirlioglu, editors. Regional Development Studies Institute Inc., New York, 2019. Pages 23-32. ISBN: 978-0-578-61810-4.

Copyright Owner

Regional Development Studies Institute Inc., New York

Language

en

File Format

application/pdf

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