Supply Chain Network Optimization Model on Cement Industry to Minimize Distribution Costs in the Sumatra Island, Indonesia

Supply Chain Management (SCM) plays an important role in maintaining operational cost efficiency and customer satisfaction. However, the challenges faced by companies in managing the supply chain are increasingly complex due to changes in the dynamic global business environment. One industry that experiences these challenges is the cement industry. To maintain supply chain performance, PT. XYZ implemented an acquisition strategy in cement companies in the Sumatra region to maintain its effectiveness in the region, but cement distribution in the Sumatra region still shows an imbalance. The main objective of this study is to minimize distribution costs from production facilities to Sumatra Island as a market. The researcher used the MILP method with Lingo 21 software to create an optimal distribution system optimization model. The results of the analysis show that the application of the optimization model can significantly improve system performance. In terms of utilization, there was a more even redistribution of production loads between facilities, as well as increased capacity utilization in facilities that were previously less than optimal. Meanwhile, in terms of costs, the total supply chain costs were successfully reduced by 4% or around 451 billion rupiah, which came from production cost efficiency of 3% and distribution of 7%. The highest efficiency was recorded in the distribution process from the cement plant to the packing plant which reached 44%.