Strategic Material Shortfall Risk Mitigation Optimization Model

The Defense Logistics Agency Strategic Materials office recommends strategies to Congress for managing risk arising from shortages of strategic and critical materials that could occur during military conflicts. Strategies typically considered include material stockpiling, substitution, and spot market purchases. Heuristic methods traditionally used to select strategies do not allow for their optimization under budgetary or nonzero expected risk constraints. The authors have developed linear and nonlinear programming models to identify strategies that minimize expected total risk subject to upper bounds on expected total cost (budget) and upper bounds on expected risks for individual materials.