Optimization of Subsidized Fertilizer Distribution System Design in East Java Due to Uncertainty Factors

Abstract

Objective: The purpose of this study is to optimize the optimal location and number of distribution warehouses in the face of a significant decrease in the allocation of subsidized Urea and NPK fertilizers. This research is conducted on subsidized fertilizers with multi-product characteristics (Urea and NPK fertilizers), multi-period (2021-2022), and uncertainty (government policy on allocation). The objectives of this study are produce a distribution network design model and optimize the number and location of warehouses needed to minimize total logistics costs.
 
 Methods: This research uses a quantitative approach in solving the problems faced by companies. To obtain the lowest logistics cost, optimization calculations are performed via model development. The model employed is mixed integer linear programming, which employs a combination of multi-source capacitated models, multi-product models, and multi-stage models. Furthermore, by examining storage consumption, the optimization calculation may be utilized to estimate the existing amount of storage facilities. The anticipated goal is to reduce logistical costs and enhance warehouse usage for storing subsidized fertilizer.
 
 Results: The results of this study from 43 warehouses to 33 warehouses located in East Java Province with operational savings costs that can be obtained by PT Petrokimia Gresik amounting to IDR 1,863,794,700.