In order to ensure the delivery of the subsidized fertilizer to the farmer in “6 precision-goals”, i.e., quantity precision, type precision, time precision, place precision, quality precision and price precision in accordance to regulated Highest Retail Sale Price, the government has regulated the distribution system of subsidized fertilizer from the plant to the farmers by form of regulation issued by Indonesian Ministry of Trading. The purpose of this research is to evaluate the existing distribution system of subsidized fertilizer which is managed by one of the Public Service Obligation State-Owned Companies (PSO-SOC). The evaluation is carried out by comparing the cost of the existing distribution system with the proposed distribution system. Cost optimization of the proposed system makes use of Mixed Integer Linier Programing (MILP). Optimization is performed by restructuring the cluster and distribution warehouse, allowing through trips from plant directly to distributor’s warehouse, and skipping the producer’s warehouse storing. The proposed cluster restructuring can reduce the existing cost to 94% - 98%, while through trips can reduce the total cost to 61% - 72%. In case where through trips is allowed and producer’s warehouse is in operation and functioned as a buffer, the total cost is reduced to 64% - 78% from the existing cost. Based on the optimization result, it is concluded that the existing subsidized fertilizer distribution system could be improved by allowing through trips, while existing producer’s warehouse is still in operation as the buffer warehouse to ensure that the minimum stock is fulfilled. It is noted, however, that this system requires adequate information technology concurrently.