Vendor Managed Inventory for Strategic Supply Chain of Explosive Material in Coal Mining Operation

The research observed the Supply Chain (SC) of Ammonium nitrate (AN), a critical and high-value explosive material in coal mining operation, which faces disruptions due to fluctuations of global and domestic coal demand, impacting to AN demand volatility. The lengthy, complex, dependency on sole suppliers, and non-integrated business process, coupled with specific mining conditions, results in long procurement lead times, high inventory costs, and coal production halt. This research used Kepner-Tregoe Analysis (KTA), Business Process Engineering (BPE), Vendor Managed Inventory (VMI), and Economic Order Quantity (EOQ) methods to appraises the complex SC situation, assess the business processes, develop an effective and efficient inventory management model and quantify the cost analysis. The VMI design will streamline SC processes by segregating the responsibilities: vendor manages daily procurement and warehouse operations, while the company provides oversight. It also aims to minimize unpredictable delivery times, elimination of shortages through optimized vendor stock, price and fall pricing stability via long-term agreements, enhanced cash flow through a monthly invoice, usage-based reconciliation, and a significant reduction in ordering and inventory holding costs. Eventually, this research contributes the benefits to Company, vendor, and as references for SC experts to develop a strategic SC Management through VMI implementation.