A System Dynamics Approach for Optimizing Shipping Delivery Strategies under Demand Uncertainty: A Case Study of the Fertilizer Industry

Abstract The subsidized fertilizer industry faces significant supply chain costs, especially in logistics. Various specific issues require attention and resolution concerning the distribution of fertilizers. These challenges include high shipping costs, uncertain demand, limited funds, and a mismatch between requests and deliveries, which change according to need and are included in the entire supply chain. The supply chain for subsidized fertilizer is designed to be flexible and efficient, allowing for quick adjustments to changes and disruptions in plans and operations. There are complex interactions among the variables in the supply chain, wherein changes in one variable can affect others, leading to dynamic and complex situations. Due to its complexity, the research will utilize the dynamic system method to create an optimal delivery strategy. Two methods will be used: clustering for delivery location and system dynamics. Causal loop diagrams will determine the relationship between variables that influence the system, and stock and flow diagrams will be used to determine delivery routes. The output of this research compares the total cost, responsiveness, and reliability by considering two delivery scenarios: single-trip and milk-run. The results of this research successfully calculated the three outcomes and determined whether to use single-trip or milk-run for the delivery.