System Dynamics Model to Improve Logistics Cost Efficiency in Fertilizer Distribution outside Java (Gresik - Medan)

Abstract

Within the vast development of globalization, companies are encouraged to increase competitiveness level, in order to survive in the market. One certain way to stay competitive and retain customers is to provide such products with reasonable selling prices. Supply chain costs have a great influence upon the cost of the final product; therefore, companies are suggested to continuously improve supply chain processes regarding reducing overall costs. One industry indicated with high supply chain costs is the fertilizer industry, referring to the fact that it has a nationwide distribution system. For countries which regulate fertilizer as a subsidized product, companies must be able to provide fertilizer at an efficient price to maintain prevalence in the market. Currently, the problem faced by one of the fertilizer companies is an indication of expensive logistics costs for fertilizer distribution outside Java. The most expensive logistics costs are owned by the Medan area with variations in bulk transportation. This problem can be solved if there are alternative economic scenario designs in accordance with capabilities. The purpose of this research is to provide alternative scenarios, simulate those scenarios, and choose the most efficient scenario. The method used in this research is system dynamics and 12 scenarios were generated in this paper. Selection of the appropriate ship size and type of heavy equipment for loading and unloading cargo from those scenarios can impact in energy saving/fuel consumption and minimize operational costs. Beside cost, fertilizer deficit is also a consideration in scenario selection. From the result, scenario 3 has the lowest distribution costs with a total cost is Rp. 241,513 and the total fertilizer deficit is 0 tons, so scenario 3 is the selected alternative scenario to minimize operational cost.