Optimizing coal blending quality through supplier selection and order allocation: A case of cement industry

Abstract

Coal combustion plays an important role in the process of burning raw mix into cement clinker. However, ensuring a uniform coal quality is quite challenging especially when cement producer adopts multi-sourcing system where different suppliers involved to supply coal demand. This research explores the optimal coal blending quality problem in SP Co., as one of the largest cement industry in Indonesia, where the coal is supplied from several suppliers characterized by heterogenous and fluctuated coal quality. In detail, the problem is to select a set of suppliers and to determine optimal order allocation of coal for supplying three cement plants distinguished by certain requirement of coal specification under some realistic constraints such as quality of coal, allocated budget of purchasing and supplier capacity. A linear programming model is proposed to solve the formulated problem and sensitivity analysis is performed to examined the robustness of the model. Using real case data, we demonstrate the usefulness and applicability of our model.