Engineering Economic Valuation of Ready-Made Design for Transportation Vehicles

Thumbnail Image
Supplemental Files
Date
2019-01-01
Authors
Zhao, Zhuoyi
Major Professor
Advisor
Committee Member
Journal Title
Journal ISSN
Volume Title
Publisher
Authors
Person
Jackman, John
Associate Professor
Person
Min, K. Jo
Associate Professor
Research Projects
Organizational Units
Organizational Unit
Industrial and Manufacturing Systems Engineering
The Department of Industrial and Manufacturing Systems Engineering teaches the design, analysis, and improvement of the systems and processes in manufacturing, consulting, and service industries by application of the principles of engineering. The Department of General Engineering was formed in 1929. In 1956 its name changed to Department of Industrial Engineering. In 1989 its name changed to the Department of Industrial and Manufacturing Systems Engineering.
Journal Issue
Is Version Of
Versions
Series
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.

Description
Keywords
Citation
DOI
Source
Copyright
Tue Jan 01 00:00:00 UTC 2019