DESIGNING INTEGRATED SUPPLY CHAIN NETWORK AND DISTRIBUTION PLANNING TO MINIMIZE TOTAL COST IN TWO-ECHELON SUPPLY CHAIN SYSTEM

Abstract

Since supply chain management has been an important issue to be considered to give value advantages for companies. Supply chain management should be improved in order to compete and survive in the globalization era. Unfortunately, PT. S (principle), a manufacturer of Fast Moving Consumer Goods (FMCG), and its distributors have not considered supply chain management as important factor to bring customers’ satisfaction. The network system is still disintegrated. Each of company in the system only considers their own company. Besides that, there are no companies in the system which use appropriate inventory management. They do not realize that inventory is a huge cost. In this thesis, centralized system has been conducted to integrate two-echelon supply chain system from principle to distributors. Moreover, Wagner-Whitin algorithm and Distribution Requirement Planning (DRP) as ordering and scheduling decision making which is applied in centralized network could lead into minimization of total supply chain cost. It has been approved that by applying centralized system, the total cost could be reduced up to 2.8%. The reduction of total supply chain cost could be achieved up to 28.12% when Wagner-Whitin algorithm and DRP is applied in centralized system.