The Determination of Production and Distribution Policy in Push-Pull Production Chain with Supply Hub as the Junction Point

Abstract

The development of technology causes the needs of products and services become increasingly complex, diverse, and fluctuating. This causes the level of inter-company dependencies within a production chains increased. To be able to compete, efficiency improvements need to be done collaboratively in the production chain network. One of the efforts to increase efficiency is to harmonize production and distribution activities in the production chain network. This paper describes the harmonization of production and distribution activities by applying the use of push-pull system and supply hub in the production chain between two companies. The research methodology begins with conducting empirical and literature studies, formulating research questions, developing mathematical models, conducting trials and analyses, and taking conclusions. The relationship between the two companies is described in the MINLP mathematical model with the total cost of production chain as the objective function. Decisions generated by the mathematical models are the size of production lot, size of delivery lot, number of kanban, frequency of delivery, and the number of understock and overstock lot.