The optimization model of the location and number of Warehouses in subsidized fertilizer distribution systems with uncertainty factors

The focus of this research is on optimizing the fertilizer distribution system design with uncertainty factors for PT Petrokimia Gresik (PG) fertilizer within its distribution area. The most significant impact on PG resulted from changes in policy to reduce subsidy allocation and changes in the policy regarding the responsibility for the procurement and distribution of subsidized fertilizer, particularly concerning the use of distribution facilities. Quantitative methods were used in this research to address the problems by solving a model using the mixed integer linear programming (MILP) model with the aim of maximizing warehouse utilization for storing subsidized fertilizer while reducing distribution costs. The study's findings led to the selection of 22 out of the 28 existing Line III warehouses rented by PT Petrokimia Gresik as effective warehouses for subsidized fertilizer. The monthly minimum cost for distributing subsidized fertilizers to all distributors through the designated Line III warehouses is IDR 9,853,345,000, resulting in cost savings of IDR 682,551,750.00 compared to previous expenses. Optimization results using MILP determined that 6 warehouses would no longer be used, saving 6.927% of the total distribution costs. To increase utilization, mapping into the normal season and peak season was needed to obtain an overview of the conditions and characteristics of the demand distribution.