Inventory and Transportation Model for Decision Making in Cement Industry (Case study at PT Semen Padang)

Abstract

To survive the cement business competition, logistics strategy becomes one of the key factors. Demand fluctuations force companies to make dynamic decision. Any logistic operation decisions determine amount of total cost. Decision of production method can determine both inventory cost and stock out cost. In the other side, decision of transport order determine transport cost, inventory cost and stock out cost. PT Semen Padang is one of companies that produce and trade cement and clinker with 10,400,000 ton cement production capacity per year. Currently, most of cement production is done in Indarung (about 25,000 ton per day), in mass production to prevent stock outs. Customer demand is supplied by land routes that begins from Indarung and sea route that begins from Teluk Bayur. Cement freight from Indarung to Teluk Bayur is used bulk train and bulk truck. PT Semen Padang cooperate with PT Kereta Api Indonesia where there are transport targets for a period which if not achieved, then PT Semen Padang still has to pay a number of targets. The authors believes that there must be something that can be used to determine what should be the order of production and transportation at one time (daily), so that the optimal cost in a period is reached. The authors do the system modelling and descriptions of the required parameters so that the mathematical formulation can be compiled to be applied to the computer simulation that can be used by logistics manager to take operational decisions.