Implementation of Risk Factor on Optimisation Model to Minimise Transportation Cost of Fatty Acid Methyl Ester (FAME) as Biodiesel Raw Material

Fatty Acid Methyl Ester (FAME) is the main component that form biodiesel mixture. The transportation cost of FAME from biodiesel company to blending terminal has a significant contribution on the total production of cost. This study aims to define the optimum combination of supply and demand of FAME distribution from biofuel company to the blending terminal with minimum transportation cost. This study included risk factor, i.e. the condition of distribution route, in the optimisation model. A linear programming model was developed to describe the variables and constraints that were involved in the optimisation. This study applied simplex method in the optimisation process. The results indicate that the incorporation of risk factors leads to higher transportation costs and subsequently alters the supply-demand allocation pairs compared to model that excludes these risks. These findings highlight the critical role of risk assessment in logistical planning and optimisation in the FAME supply chain.