A Value-at-Risk (VAR) approach to routing rail hazmat shipments

- We propose a value-at-risk measure to assess rail hazmat risk.
- A bi-level optimization model is proposed.
- An efficient shortest path algorithm is proposed.
- Problem instances based on the infrastructure of a railroad operator are studied.
- Risk preference of the decision maker is used to generate routes.

Hazardous materials (hazmat) accidents are rare though the consequences could be disastrous. Given the possibility of low probability - high consequence event, a risk-averse routing hazmat shipment is necessary. We propose a value-at-risk (VaR) approach to route rail hazmat shipments, using the best train configuration, over a given railroad network with limited number of train services such that the transport risk as measured by VaR is minimized. Freight train derailment reports of the Federal Railroad Administration were analyzed to develop expressions that would incorporate characteristics of railroad accidents, and then to estimate the different inputs. The proposed methodology was used to study several problem instances generated using the realistic network of a railroad operator, and to demonstrate that it is possible to develop different routes for shipments depending on the risk preference of the decision maker.