The Effect of Supply Disruptions on Customer Service Levels: a Case for Delivering Fertilizer Products using Maritime Transportation

Abstract

Delivering a product to customers can have a series of activities. It starts with the production of the product and then transporting it to the customers. However, uncontrollable and undesirable chance of disruption can occur during the delivery either at the production facility/supply side or in the process of transporting the product. Many researches has been conducting in the process of delivering the product. However not many considers these disruptions, although the disruptions has negative impacts on company such as reduce the profit, produce unbalanced inventory, and affect its reputation. This research will focus on the effect of supply disruption on customer service levels in the maritime transportation problem in order to maintain inventory level both in the supply and destination warehouses during predetermined planning horizon. The system considered consists of one loading port and two discharge ports for distributing one product. By using discrete event simulation, the result showed that supply disruption affects unbalanced inventory in the destination warehouses so that it will also influence company’s service level. The results show that there is a significant decreasing both in delivery service level, about 14%, and production service level, about 15% when the disruption occurs. A scenario to increase production rate is simulated to improved the service level.