Delivery Planning of Water-Treatment Chemicals in Vendor Managed Inventory Context

Abstract

This research aims to improve the operating delivery system of water-treatment chemicals by establishing a chemicals inventory policy for planning appropriate chemicals delivery to five customers in the case study. Currently the company does not exploit tradeoff between transportation cost and inventory holding cost which benefits for cost reduction in terms of inventory management and chemicals delivery. The customers demand for chemicals consumption is uncertain depending on the quality of raw water and production rate. While company has constraints such as limit of transportation truck quantity and inventory review interval by the company. Therefore, for the factors mentioned, this research uses the periodic review system which demand is uncertain as an inventory model. Data from customers chemicals consumption in 2012 is used to conduct the inventory order up to level (OUL) for planning chemicals delivery to customers. Then, the research tests the delivery plan by using Monte Carlo simulation compared to the actual operation data from January to June 2013. It is found that the proposed operating system can reduce inventory cost by up to 33%.