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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