A System Dynamics Approach toBalancing Wood Supply and Demand for   Sustaining the Furniture Industry  Herry Purnomo, Lutf...
StructureI. IntroductionII. MethodsIII. ResultsIV. DiscussionV. Conclusion
I. INTRODUCTIONGlobal furniture trade                         Other emerging                                              ...
Furniture in Indonesia           • Small and medium-             sized enterprises             (SMEs) account for         ...
Status of the furniture industry in Jepara District (the study area)                       • 12,000 business units        ...
Scale of     Mean of wood   Number of      Total wood           industry      consumption    workshops     consumption    ...
Potential wood   Area (ha)    Wood supplies    Inside       suppliers                   (m3/year)       JeparaPERHUTANI Ja...
Problems• Wood demand exceeds supply   – There is a regulation for each district to be self sufficient• China-ASEAN Free T...
II. METHOD• System dynamics modelling offers a dynamic  concept of process-based orientation (Forrester  1961).• The metho...
III. RESULTS    Conceptual model                                                                          Certification   ...
Wood Demand and Supply (m3)3,000,0002,500,0002,000,0001,500,000                   BAU Demand1,000,000                   BA...
Wood supply and demand under CHAFTA      and certification scenario (m3)                                      Demand2,500,...
IV. DISCUSSION• The current Jepara wood demand was fulfilled  by wood from outside Jepara and projected to  continue happe...
• CHAFTA and certification decrease wood demand, but will not affect wood supply.  – The decrease in demand will decrease ...
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...
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A system dynamics approach to balancing wood supply and demand for sustaining the future industry

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The furniture industry provides employment and livelihoods to millions of people. However, insecurity of raw material and power imbalance throughout the value chain impoverishes small-scale producers and results in an unsustainable furniture industry. In this presentation, CIFOR scientist Herry Purnomo uses a system dynamics approach to describe the long value chain of the Indonesian furniture industry, taking Jepara, Indonesia as a case study. He concludes with some recommendations for plausible actions to sustain wood-based industries and improve the livelihood of local communities. He gave this presentation at the MODSIM International Congress on Model and Simulations held on 12–16 December 2011 in Perth. The conference took the theme ‘Sustaining Our Future: understanding and living with uncertainty’.

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

  1. 1. A System Dynamics Approach toBalancing Wood Supply and Demand for Sustaining the Furniture Industry Herry Purnomo, Lutfy Abdullah and Rika Harini Irawati Perth, 12–16 December 2011
  2. 2. StructureI. IntroductionII. MethodsIII. ResultsIV. DiscussionV. Conclusion
  3. 3. I. INTRODUCTIONGlobal furniture trade Other emerging • The global Mexico countries 16% Italy 13% furniture trade is 2% Indonesia Germany worth US$130 8% 2% Canada billion • Indonesia’s Malaysia 6% 3% USA Poland 4% 7% Denmark share is 1.5% of China 3% the furniture 16% France Austria Other developed 2% 3% trade countries 15%
  4. 4. 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.
  5. 5. 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
  6. 6. Scale of Mean of wood Number of Total wood industry consumption workshops consumption (m3/year) (m3/year) Small-scale 99 8,118 803,682Wood Medium-scale 269 158 42,502Demand Large-scale 1,155 13 15,015 Total 104 8,289 862,056
  7. 7. Potential wood Area (ha) Wood supplies Inside suppliers (m3/year) JeparaPERHUTANI Java 1,100,534 450,000 xPERHUTANI CentralJava 300,000 298,410 xPERHUTANI Jepara 23,627 20,000 vCommunity forests,Jepara 1,265 2,272 vCommunity forests,Indonesia 265,708 400,000 x Wood Supply
  8. 8. 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
  9. 9. 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
  10. 10. III. RESULTS Conceptual model Certification CHAFTA Planting InternationalDemandTrend DomesticDemandTrend CommunityLogHarvesting FurnitureProcessing FurnitureInMarket FurnitureInUseCommunityForest LogsPerhutaniForest LogIntake Delivering Supplying Decaying PerhutaniLogHarvesting ForestOutJeparaHarvesting PerhutaniPlanting ForestOusideJepara
  11. 11. Wood Demand and Supply (m3)3,000,0002,500,0002,000,0001,500,000 BAU Demand1,000,000 BAU Supply 500,000 0 Note: BAU = Business as usual
  12. 12. Wood supply and demand under CHAFTA and certification scenario (m3) Demand2,500,000 decreases compared2,000,000 to BAU1,500,000 CAFTA Demand1,000,000 CAFTA Supply 500,000 0
  13. 13. 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.
  14. 14. • 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.
  15. 15. Actions• Training on how to plant teak• Benefit-sharing agreement
  16. 16. • Planting super teak by furniture producers• Collaboration with wood retailers• Efficiency of wood uses
  17. 17. 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.
  18. 18. Thank YOU

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