Prepositioning supplies in preparation for disasters

In this paper, we examine the decision of where to preposition supplies in preparation for a disaster, such as a hurricane or terrorist attack, and how much to preposition at a location. If supplies are located closer to the disaster, it can allow for faster delivery of supplies after the disaster. As a result of being closer, though, the supplies may be in a risky location if the disaster occurs. Considering these risks, we derive equations for determining the optimal stocking quantity and the total expected costs associated with delivering to a demand point from a supply point. We provide a sensitivity analysis to show how different parameters impact stocking levels and costs. We show how our cost model can be used to select the single best supply point location from a discrete set of choices and how it can be embedded within existing location algorithms to choose multiple supply points. Our computational experiments involve a variety of relationships between distance and risk and show how these can impact location decisions and stocking levels.