Combining Total Cost of Ownership and Integer Programming for 3PL Order Allocation in PT. X
DOI:
https://doi.org/10.59188/eduvest.v5i9.51244Keywords:
Total Cost of Ownership, Integer Programming, 3PLAbstract
Managing multiple third-party logistics providers (3PLs) for export shipments presents a complex challenge for large manufacturers like PT. X, involving both explicit and implicit costs that impact overall efficiency and cost-effectiveness. This study aims to develop an optimal 3PL order allocation model for PT. X's export operations by integrating Total Cost of Ownership (TCO) to capture comprehensive costs and Integer Programming (IP) to minimize these total costs. A case study approach was employed, utilizing data from PT. X, including 3PL quotations, operational records, and quality performance metrics. The TCO framework incorporated both explicit costs (e.g., shipment and service fees) and implicit costs (e.g., management and quality failures). An IP model was then formulated to allocate orders across five 3PLs while adhering to operational constraints on minimum and maximum volumes per 3PL and shipping liner. The combined TCO-IP model achieved a cost saving of Rp 1.52 billion (4.57%) compared to PT. X's previous allocation method. Sensitivity analysis revealed that implicit costs (communication and quality), while captured by TCO, had an insignificant impact on the overall allocation due to their small proportion in the total cost structure. The research demonstrates the practical value of combining TCO and IP for strategic logistics decision-making, enabling significant cost savings. It suggests that for PT. X, minimizing explicit costs is the primary driver of optimal 3PL allocation, though monitoring implicit costs remains important.
References
Abusalma, A., Oraini, B. Al, Al-Daoud, K., & Alshurideh, M. T. (2024). The impact of supply chain performance on financial performance: Dimensions of the SCOR model. Uncertain Supply Chain Management, 12(3), 1409–1416. https://doi.org/10.5267/j.uscm.2024.4.010
Anna, I. D. (2018). Multi-objective Linear Programming for Supplier Selection and Order Allocation of Raw Material. Proceedings of the International Conference on Science and Technology (ICST 2018). https://doi.org/10.2991/icst-18.2018.144
BPS. (2024). Perkembangan Ekspor dan Impor Indonesia November 2024.
Christiansen, M., Hellsten, E., Pisinger, D., Sacramento, D., & Vilhelmsen, C. (2020). Liner shipping network design. European Journal of Operational Research, 286(1), 1–20. https://doi.org/10.1016/j.ejor.2019.09.057
Dadzie, E. B., & Richard, A. (2025). Evaluating the Role of Logistics in Supply Chain Management. Dama Academic Scholarly Journal of Researchers, 10(1), 112–133. https://doi.org/10.4314/dasjr.v10i1.5
Evans, J. R. (2016). Business Analytics: Methods, Models, and Decisions (2nd ed.). Pearson.
Golden, B., Schrage, L., Shier, D., & Apergi, L. A. (2024). The unexpected power of linear programming: an updated collection of surprising applications. Annals of Operations Research, 343(2), 573–605. https://doi.org/10.1007/s10479-024-06245-5
Grant, D. B., Shaw, S., Sweeney, E., Bahr, W., Chaisurayakarn, S., & Evangelista, P. (2023). Using mixed methods in logistics and supply chain management research: current state and future directions. The International Journal of Logistics Management, 34(7), 177–198. https://doi.org/10.1108/IJLM-04-2023-0156
Guida, M., Caniato, F., Moretto, A., & Ronchi, S. (2023). Artificial intelligence for supplier scouting: an information processing theory approach. International Journal of Physical Distribution & Logistics Management, 53(4), 387–423. https://doi.org/10.1108/IJPDLM-12-2021-0536
Heidarzade, A., Mahdavi, I., & Mahdavi-Amiri, N. (2016). Supplier selection using a clustering method based on a new distance for interval type-2 fuzzy sets: A case study. Applied Soft Computing, 38, 213–231. https://doi.org/10.1016/j.asoc.2015.09.029
Hou, P., Zhao, Y., & Li, Y. (2023). Strategic analysis of supplier integration and encroachment in an outsourcing supply chain. Transportation Research Part E: Logistics and Transportation Review, 177, 103238. https://doi.org/10.1016/j.tre.2023.103238
Hugos, M. (2024). Essentials of Supply Chain Management (5th ed.). John Wiley & Sons.
Iskandar, T., & Arifin, R. (2023). Navigating Indonesia’s Logistics And Supply Chain Challenges: A Data-Driven Analysis Of Logistics Performance Index. Jurnal BPPK: Badan Pendidikan Dan Pelatihan Keuangan, 16(1), 110–123. https://doi.org/10.48108/jurnalbppk.v16i1.820
Jiang, F., Isa, F. M., Ng, S. P., & Bhatti, M. (2023). The Impact of Supply Chain Integration to Supply Chain Responsiveness in Chinese Electronics Manufacturing Companies. Sage Open, 13(4). https://doi.org/10.1177/21582440231219070
Jovčić, S., & Průša, P. (2021). A Hybrid MCDM Approach in Third-Party Logistics (3PL) Provider Selection. Mathematics, 9(21), 2729. https://doi.org/10.3390/math9212729
Kandil, N., Hammami, R., & Battaïa, O. (2022). Insourcing versus outsourcing decision under environmental considerations and different contract arrangements. International Journal of Production Economics, 253, 108589. https://doi.org/10.1016/j.ijpe.2022.108589
Kementerian Perdagangan. (2025, January 20). Neraca Perdagangan November 2024 Lanjutkan Tren Surplus Bulanan 55 Kali Berturut-Turut. Https://Www.Kemendag.Go.Id/Berita/Pojok-Media/Mendag-Indonesia-Catat-Surplus-Perdagangan-Usd-3104-Miliar-Pada-2024.
Kunwar, R., & Sapkota, H. P. (2022). Introduction to Linear Programming Problems with Some Real-Life Applications. European Journal of Mathematics and Statistics, 3(2), 21–27. https://doi.org/10.24018/ejmath.2022.3.2.108
Lin, J., Naim, M. M., & Tang, O. (2024). In-house or outsourcing? The impact of remanufacturing strategies on the dynamics of component remanufacturing systems under lifecycle demand and returns. European Journal of Operational Research. https://doi.org/10.1016/j.ejor.2024.01.006
Maaz, M. A. M., & Ahmad, R. (2022). Impact of supply chain performance on organizational performance mediated by customer satisfaction: a study of dairy industry. Business Process Management Journal, 28(1), 1–22. https://doi.org/10.1108/BPMJ-05-2021-0292
Render, B. (2018). Quantitative Analysis for Management (13th ed.). Pearson.
Settanni, F., Ponzetto, F., Veronesi, A., Nonnato, A., Martinelli, F., Rumbolo, F., Fimognari, M., Martinasso, G., & Mengozzi, G. (2021). Total Value of Ownership and Overall Equipment Effectiveness analysis to evaluate the impact of automation on time and costs of therapeutic drug monitoring. Analytica Chimica Acta, 1160, 338455. https://doi.org/10.1016/j.aca.2021.338455
Sugiono, A., Rahayu, A., Wibowo, L. A., & Hurriyati, R. (2023). Analysis of Incoterms and Relational Resources to Improve Competitive Advantage: A Study of Freight Forwarders Company in Indonesia. Asian Journal of Logistics Management, 2(2), 64–91. https://doi.org/10.14710/ajlm.2023.20288
Sutcu, M. (2020). Effects of total cost of ownership on automobile purchasing decisions. Transportation Letters, 12(1), 18–24. https://doi.org/10.1080/19427867.2018.1501964
Tukamuhabwa, B., Mutebi, H., & Kyomuhendo, R. (2023). Competitive advantage in SMEs: effect of supply chain management practices, logistics capabilities and logistics integration in a developing country. Journal of Business and Socio-Economic Development, 3(4), 353–371. https://doi.org/10.1108/JBSED-04-2021-0051
Valashiya, M. C., & Luke, R. (2023). Enhancing supply chain information sharing with third party logistics service providers. The International Journal of Logistics Management, 34(6), 1523–1542. https://doi.org/10.1108/IJLM-11-2021-0522
Vlachos, I., & Polichronidou, V. (2022). The role of Third-Party Logistics Providers in managing international supply chain triads. 2022 IEEE 6th International Conference on Logistics Operations Management (GOL), 1–10. https://doi.org/10.1109/GOL53975.2022.9820185
Waluyo, D. (2024, July 22). Industri Alat Angkut Indonesia 2024: Kontribusi dan Tantangan. Https://Indonesia.Go.Id/Kategori/Editorial/8405/Industri-Alat-Angkut-Indonesia-2024-Kontribusi-Dan-Tantangan?Lang=1.
Wirjodirdjo, B., Ghiffary Budianto, A., Widjanarka, A., Pujawan, I. N., & Maflahah, I. (2021). Carrier and Freight Forwarders Strategies to Utilize the Immobile Shipping Capacity of Freight Forwarders and Maximize Profits. International Journal of Technology, 12(4), 876. https://doi.org/10.14716/ijtech.v12i4.4413
Woldt, J. J., Prasad, S., & Stapleton, A. (2024). Practice makes perfect: Using the total cost of ownership to teach global locational decision making. Journal of Purchasing and Supply Management, 100972. https://doi.org/10.1016/j.pursup.2024.100972
World Bank. (2023). Connecting to Compete 2023: Trade Logistics in an Uncertain Global Economy. Https://Lpi.Worldbank.Org/Sites/Default/Files/2023-04/LPI_2023_report.Pdf.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 Alexander Evan Putra, Ratih Dyah Kusumastuti
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
