Inventory Model Between Manufacturers and Distributors Integrated in the Fertilizer Production Supply Chain

Abstract

Along with the development of an increasingly competitive industrial environment, it takes a disciplined supply chain management that aims to optimize the availability of products from a company. Thus, the balancing of planning, production and inventory figures of products is important in a business activity. The model of optimizing procurement and production sizes is integrated into a model that provides optimal results for all parties involved in the supply chain. This research proposes the development of a supply chain model of one manufacturer and 3 distributor components with the aim of minimizing total inventory costs (TIC) and determining the length of time of one production cycle so that producers can meet each distributor's needs and achieve the best coordination between producers and distributors so as to allow for no delays in delivery and the total amount of optimal inventory costs to each distributor. A simple algorithm is used to determine the optimal cycle time and total cost of supply to each distributor. A simple algorithm is used to determine the optimal cycle time and total cost of supply to each distributor. At the end of this study came a numerical example of the use of models that have been built based on case study data of a fertilizer industry as a producer and 3 components of distributors, namely subsidies, in-house and commercial. The results of numerical examples that have been done show that the optimal distributor is subsidized with optimal production of 274,773 units for 4 working days to run one production cycle. The optimal distributor selection is determined by the lowest TIC value of the three trials that have been conducted, namely obtained the value of TIC n = 1 of $ 1,905,651.