This paper proposes a model of integrated supply chain network for allocating subsidized Liquefied Petroleum Gas (LPG) in a closed distribution system. Subsidized LPG is selected as case study due to its specific product in Indonesia. Since 2007, the Indonesian government makes policy, namely energy conversion from kerosene to LPG. The main purpose of converting kerosene to LPG is to reduce subsidies on fuel oil. The distribution system consists of several of filling stations, distributors and retailers. Curently, the distribution of subsidized LPG, does not flow smoothly, there will be a shortage or excess tubes in retailers mainly because it uses a closed distribution system. A closed distribution means that people who are eligible to buy subsidized LPG will be given cards identifying that they are legal receivers of the LPG. The developed model has been able to establish the allocation of filling stations that will supply a particular distributor. The model has also been able to establish which distributor that will supply a particular retailer. Based on the developed model, and by using a numerical example as a case study, it can be determined the allocation of LPG from filling station to the distributor and from the distributor to the retailer with minimum distribution costs. LPG in some specific retailers is supplied by only one distributor which is authorized to distribute subsidized LPG on the retailers. However, this model has limitations to arrange the route filling and distribution route.
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