Proceeding of Industrial Engineering and Service Science, 2011 Copyright © 2011 IESS. Dynamic Simulation Model to Enhance Market Share of Liquid Fertilizer Industry Erma Suryani; Hanim Maria Astuti Information System Department, Sepuluh Nopember Institute of Technology, Surabaya, Indonesia erma@its-sby.edu; hanim@its-sby.edu ABSTRACT As with any other companies, liquid fertilizer companies need to keep its market share increases in order to remain competitive in this global economy. Although the demand of liquid fertilizer is quite high, some liquid fertilizer compa- nies are failed to increase their market share. One of the causes is their inability to predict market demand. This paper aims to propose a model using system dynamics that is used to model and to generate scenarios because of their capability of representing physical and information flows as well as scenarios for liquid fertilizer companies to predict market demand and therefore enhance their market share. Since the formulation of scenarios refers to the mod- el, the model is verified and validated to ensure its correctness before the scenario is defined. The result of this paper is expected to help liquid fertilizer companies maintain their competitiveness through the increase of their market share. Keywords: simulation, system dynamics, liquid fertilizer industry 1. Introduction With the increasing business competition in the global era, companies including liquid fertilizer industries need to improve their performance. Companies’ performance can be defined by some indicators such as market share, revenues, profit margin, etc. However, one of the crucial issues faced by liquid fertilizer companies is inability to fulfill their pro- jected market share. One of ways to increase the market share of a company is by increasing its sales volume. Never- theless, this is a non trivial task and can be difficult because there are various internal and external factors that affect the level of sales such as changes happened in industrial structure, fluctuating demands and supply, governmental policy and regulation, etc. A tool such is thus required to support management of a company formulating strategy to achieve the increased sales. Sales forecasting is a tool that has been widely used to support business by providing prediction of future demand and performance that are essential for business decisions. System dynamics model is considered as a good sales fore- casting tool reacting to the aforementioned problems. This model can be used to predict corporate sales based on some scenarios analysis so that a company can increase market sales. This model can be useful to understand the demand and sales behavior that evolve over time. Comparing to other forecasting methods, system dynamics has several strengths as follows [4]: (a) Forecasts derived from calibrated system dynamics models are likely to be better and more informative than those from other approaches. The models are calibrated to historical data and used to produce a forecast of the future sales. With the detailed and calibrated models, once is possible to accurately predict the demand and sales volume based on demand scenario analysis. (b) System dynamics models can provide more reliable forecasts of short- to mid-term trends than statistical models, and therefore lead to better decisions. (c) System dynamics models provide a means to determine key sensitivities, and therefore more robust sensitivities and scenarios. This paper provides a model using system dynamics for a liquid fertilizer company to increase corporate sales and therefore enhance its market share. In this study, we utilized a liquid fertilizer company in Indonesia as our case study. Recently, this company has market share around 1.24% whereas the target market share is 1.6%. Using system dynam- ics, we propose a model as well as scenarios for the liquid fertilizer company to achieve its targeted market share. This paper is organized as follows. Section 2 provides the literature review. Section 3 describes the base model de- velopment. Section 4 shows the model validation, Section 5 demonstrates scenario development and Section 6 shows the conclusion and further research. Finally in Section 7, references are presented.