DETERMINATION OF THE ORDER-UP-TO INVENTORY LEVEL AND LOCATION POOLING TO HEDGE OVERSTOCKING IN A DISTRIBUTION NETWORK

• Main Author: Meiko Rosanne, Sandra
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/76387
• Institution: Institut Teknologi Bandung

In today's economy, the business environment is becoming more and more competitive. One of the ways to gain competitive advantage for companies in the Fast Moving Consuming Goods (FMCG) Industry is to strive for efficiency. PT X is one of the FMCG companies in Indonesia facing the same situation. Supply chain management is one of the ways PT X can improve their competitiveness, yet they have been having problems of overstocking of goods in their Distribution Centers (DC). This leads to incurring extra fees that are unfavorable for PT X. This research aims to introduce PT X to an inventory model, different from their existing system. PT X has been experiencing overstocking of inventory in their DCs. A trend chart of the overstocking for some of their Stock Keeping Units (SKU) show that this is not a random occurrence. PT X wants to rid the costs that are associated with having this issue. The research introduces PT X to order-up-to inventory model for their respective DCs. The model gives erasure to overstocking as there is a somewhat fixed base level compared to PT X’s existing ever-changing maximum stock threshold. Ordering frequency is also considered to best suit the economical interest. With PT X’s vast distribution network, modified location pooling strategies to hedge demand uncertainty is also introduced, and thus the research proposes a distribution network. Results show that these three methods will be economically beneficial compared to PT X’s existing system. A sensitivity analysis is also performed for changes in demand. The DCs with close proximity from the Central DC is more sensitive to changes as the decision variables show different result based on the parameter.