The Facility Location problem with joint disruptions

Classical facility location problems do not incorporate the possibility of correlated disruptions amongst facilities and often result in solutions that are suboptimal. Existent Literature
focuses on robust or independent disruption scenarios where the probability of disruptions
is simplistic. We propose using Subordinated Markov chains to model the probability of
the correlated risk of disruptions. Parameterizing the disruption probabilities offers more
realistic and easy-to-simulate disruption distributions while using fewer parameters. We
also propose algorithms that calibrate the Subordinated Markov Chain model and optimize
for the facility location choices under correlated disruptions. Numerical Examples show
that the correlation amongst disruptions alters the optimal facility location.