Using Optimisation and Machine Learning to Validate the Value of Infrastructure Investments

Abstract

When stakeholders commit to building infrastructure as part of strategic, long-term planning, the final facilities are not normally amenable to modification after completion. A consequence of this is that users are forced to operatewithin the original specifications for, at least, as long as it takes to carry out major refurbishments or retrofitting, and even then, the constraints imposed by the original layout may be inescapable.On one hand, the original infrastructure plans enhance (or limit) the users' ability to operate efficiently for years to come. As time passes and the payback period approaches, changing operating conditions and unforeseen bottlenecks in the original blueprint can, at best, affect the economic returns and, at worst, defeat the purpose of the whole project (see, for example, Castellon airport in Spain, which was built but is grossly underutilised), producing unanticipated economical, social and political repercussions. On the other hand, managers and operators (that is, those living with the consequences of the strategic planning) have some leeway to compensate for miscalculations by means of their tacticaland operational planning.In this chapter, we explore the use of quantitative techniques to, first, amend bottlenecks and uncertain market and operating conditions that affect the performance of infrastructure investments (the tactic and operational levels), and second, validate the effectiveness of the original infrastructure design (the strategic level) under these changing conditions.More specifically, we present a rail scheduling case study where we combine demand forecasting using Machine Learning techniques and formal Operations Research methods to assess and maximise the value of already-existing infrastructure.Rail scheduling is a typical optimisation problem popular in the literature, but its potential value is bounded not only by its technical properties and specifications (how good the algorithm is) but also by the accuracy of data feeding the algorithm. Such data is critical in specifying the demand thata facility will experience in the future, and the costs that will be incurred to operate it. The use of intensive data analytics and appropriate Machine Learning techniques can resolve this and provide a substantial competitive edge forinvestors and operators of rail inter-modal terminals.We anticipate that Machine Learning algorithms that predict future demand, coupled with optimisation techniques that streamline operations of facilities, can be integrated to create tools that help policy makers and terminal operators maximise the value of their current infrastructure, while meeting ever-changing demand.