a system dynamics approach to balancing wood supply and demand for sustaining the future industry

A System Dynamics Approach to Balancing Wood Supply and Demand for

Sustaining the Furniture Industry

Herry Purnomo, Lutfy Abdullah and Rika Harini Irawati

Perth, 12–16 December 2011

I. Introduction

II. Methods

III. Results

IV.Discussion

V. Conclusion

Structure

Austria

2%

France

3%

Denmark

3%

USA

4%

Canada

6%

Italy

13%

Germany

8%Indonesia

2%

Mexico

2%

China

16%

Poland

7%

Malaysia

3%

Other developed

countries

15%

Other emerging

countries

16%

• The global

furniture trade is

worth US$130

billion

• Indonesia’s

share is 1.5% of

the furniture

trade

I. INTRODUCTION

Global furniture trade

Furniture in Indonesia

• Small and medium-

sized enterprises

(SMEs) account for

95% of production.

• Livelihoods of ≈ 5

million people in

Java depend on

furniture industry and

its chains.

Status of the furniture industry in Jepara District (the study area)

• 12,000 business units

• 0.8 million m3 wood

processed yearly

• 27% of Jepara’s economy

• Wood supply scarcity

• Fierce competition with

China and Vietnam

Wood

Demand

Scale of

industry

Mean of wood

consumption

(m3/year)

Number of

workshops

Total wood

consumption

(m3/year)

Small-scale 99 8,118 803,682

Medium-scale 269 158 42,502

Large-scale 1,155 13 15,015

Total 104 8,289 862,056

Wood Supply

Potential wood

suppliers

Area (ha) Wood supplies

(m3/year)

Inside

Jepara

PERHUTANI Java 1,100,534 450,000 x

PERHUTANI Central

Java 300,000 298,410 x

PERHUTANI Jepara 23,627 20,000 v

Community forests,

Jepara 1,265 2,272 v

Community forests,

Indonesia 265,708 400,000 x

Problems

• Wood demand exceeds supply

– There is a regulation for each district to be self sufficient

• China-ASEAN Free Trade Agreement (CHAFTA)

can decrease the furniture demand.

• Forest certification and chain of custody can

increase the furniture price

II. METHOD

• System dynamics modelling offers a dynamic

concept of process-based orientation (Forrester

1961).

• The method comprises (Grant et al. 1997)

– Conceptual model development

– Specification and execution of the model

– Evaluation of the model

– Use of the model

III. RESULTS

Conceptual model

CommunityForest

PerhutaniForest

Logs

CommunityLogHarvesting

PerhutaniLogHarvesting

FurnitureProcessing

LogIntake

FurnitureInMarket

Delivering

Planting

PerhutaniPlanting

FurnitureInUse

Supplying Decaying

ForestOusideJepara

ForestOutJeparaHarvesting

DomesticDemandTrendInternationalDemandTrend

CHAFTACertification

Wood Demand and Supply (m3)

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

BAU Demand

BAU Supply

Note: BAU = Business as usual

Wood supply and demand under CHAFTA and certification scenario (m3)

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

CAFTA Demand

CAFTA Supply

Demand

decreases

compared

to BAU

IV. DISCUSSION

• The current Jepara wood demand was fulfilled

by wood from outside Jepara and projected to

continue happening in the future.

• Incentive to grow trees did not occur in Jepara,

because the profit margin for growing teak is

very low.

• CHAFTA and certification decrease wood

demand, but will not affect wood supply.

– The decrease in demand will decrease the wood

demand.

– The wood supply is insensitive to this decrease,

because the market share of wood in Jepara is still

low.

• Increasing furniture prices is the right way to

increase wood prices and in turn to increase

incentive to grow trees.

Actions

• Training on how to plant teak

• Benefit-sharing agreement

• Planting super teak by furniture producers

• Collaboration with wood retailers

• Efficiency of wood uses

V. CONCLUSION

• The sustainability of furniture industry is challenged

because of the imbalance of wood supply and

demand.

• CHAFTA and certification are not the answer to the

problem.

• Increasing furniture prices is a must, in order to

encourage people to grow trees.

Thank YOU