Strategy Analysis for Developing a Simulation Model to Increase the Value Chain of the Palm Oil Industry Supply Chain: A System Thinking Approach: A System Thinking Approach (Case Study: Riau)

  • Nindy Permatasari ITS


 The Indonesian palm oil industry has grown significantly in the last forty years. Riau Province is the largest palm oil producer in Indonesia, in 2020 Riau produced 9.7 million tons of palm oil with a plantation area of ​​almost 3.4 million hectares. Indonesia has always prioritized exporting crude oil (CPO) compared to its derivatives which have a higher selling value than raw products, then Indonesia also needs to reduce the import burden of several palm oil derivative products such as biodiesel. Although Riau is the largest palm oil-producing province, this is inversely proportional to the welfare of oil palm farmers, many areas dominated by oil palm have high poverty rates. Therefore, this study aims to develop a model of the supply chain value of the palm oil industry to create scenarios in increasing supply chain value that can increase the absorption of palm oil nationally to reduce the burden of imports and increase the income and welfare of oil palm farmers. The result of this research is a model that has useful information about the factors that can be used to increase the value of the palm oil supply chain and help the government and policymakers to be able to make policies related to oil palm.


[1] W. M. Yohansyah and I. Lubis, "Analisis Produktivitas Kelapa Sawit (Elaeis guineensis Jacq.) di PT. Perdana Inti Sawit Perkasa I Corporation, Riau," Buletin Agrohorti, vol. 2, no. 1, pp. 125-131, 2014.
[2] Badan Pusat Statistik, Statistik Kelapa Sawit Indonesia 2019, Jakarta: Badan Pusat Statistik, 2020.
[3] E. Suryani, R. A. Hendrawan, I. Muhandhis and L. P. Dewi, "Scenario Development to Improve Crude Palm Oil Production and Farmers' Revenue: a System Dynamics Framework," IEEE, 2016.
[4] D. PASHA, "Pengembangan Model Rantai Pasok Industri Cpo Untuk Meningkatkan Produktifitas Dan Efisiensi Rantai Pasok Menggunakan Sistem Dinamik (Studi Kasus : Minyak Goreng Di PT. Tunas Baru Lampung)," Institut Teknologi Sepuluh Nopember, Surabaya, 2017.
[5] M. Z. M. FAEID, "A Hybrid Model Of System Dynamics And Genetic Algorithm To Increase Crude Palm Oil Palm Oil," Universiti Utara Malaysia, Malaysia, 2018.
[6] Direktorat Jenderal Perkebunan, Statistik Perkebunan Indonesia 2018 - 2020, Jakarta: Sekretariat Direktorat Jendral Perkebunan, 2019.
[7] A. Shri Dewi, N. Abidin, H. Sapiri and M. Zabid, "Impact of various palm-based biodiesel blend mandates on Malaysian crude palm oil stock and price: A system dynamics approach," Asian Social Sciences, vol. 11, no. 25, pp. 190-203, 2015.
[8] I. Abdulla, F. Arshad, B. Bala, K. Noh and M. Tasrif, "Impact of CPO export duties on Malaysian palm oil Industry," American Journal of Applied Sciences, vol. 11, no. 8, pp. 1301-1309, 2014.
[9] F. Arshad and A. Hameed, "Crude oil, palm oil stock and prices: How they link," Review of Economics & Finance, vol. 3, pp. 48-57, 2012.
[10] M. Z. M. Faeid, N. Z. Abidin and S. D. Applanaidu, "Palm oil supply and demand characteristics and behavior: A system dynamics approach," Future of Food: Journal on Food, Agriculture and Society, vol. 6, no. 1, pp. 8-11, 2018.
[11] A. Rahman, R. Abdullah, N. Balu and F. Shariff, "The impact of la niña and el niño events on crude palm oil prices: An econometric analysis," Oil Palm Industry Economic Journal, vol. 13, no. 2, pp. 38-51, 2013.
[12] H. Purnomo, B. Okarda, A. Dermawan, Q. P. Ilham, P. Pacheco, F. Nurfatriani and E. Suhedang, "Reconciling oil palm economic development and environmental conservation in Indonesia: A value chain dynamic approach," Forest Policy and Economics, vol. 111, 2020.
[13] S. Glöser and J. Hartwig, "The classical cobweb the-orem and real commodity market behaviour: Modelling delayed adjustment of supply in industrial metals' markets," Cambridge, 2015.
[14] H. Purnomo, B. Okarda, A. A. Dewayani, M. Ali, R. Achdiawan, H. Kartodiharjo, P. Pacheco and K. S. Juniwaty, "Reducing forest and land fires through good palm oil value chain governance," Forest Policy and Economics, vol. 91, pp. 94-106, 2018.
[15] C. I. Lim and W. K. Biswas, "Sustainability Implications of the Incorporation of a Biogas Trapping System into a Conventional Crude Palm Oil Supply Chain," Sustainability, vol. 11, pp. 1-19, 2019.
[16] M. Munasinghe, P. Jayasinghe, Y. Deriniyagala, V. J. Matlaba, J. F. d. Santos, M. C. Maneschy and J. A. Mota, "Value–Supply Chain Analysis (VSCA) of crude palm oil production in Brazil, focusing on economic, environmental and social sustainability," Sustainable Production and Consumption, pp. 1616-175, 2019.
[17] S. Ibnu, "Environmental Evaluation of Agro-Product Supply Chain : Indonesian Palm Oil and Japanese Green Tea Case Studies," Osaka University Knowledge Archive : OUKA , Osaka, 2016.
[18] J. Többen, K. S. Wiebe, F. Verones, R. Wood and D. D. Moran, "A novel maximum entropy approach to hybrid monetary-physical supply-chain modelling and its application to biodiversity impacts of palm oil embodied in consumption," Enviromental Research Letter, vol. 13, 2018.
[19] J. K. Santiago, W. C. Silva, M. F. Capristo, M. C. Ferreira, R. A. Ferrari, E. Vicente, A. J. A. Meirelles, A. P. Arisseto and K. A. Sampaio, "Organic, conventional and sustainable palm oil (RSPO): Formation of 2- and 3-MCPD esters and glycidyl esters and influence of aqueous washing on their reduction," Food Research International, no. 140, 2020.
[20] R. Hariandja, "Kebun Sawit Riau Terluas, Tak Jamin Rakyat Sejahtera dan Berdaulat Pangan," MONGABAY Situs Berita Lingkungan, 20 May 2020. [Online]. Available: [Accessed 01 Agustus 2021].
[21] E. D. Innocenti and P. Oosterveer, "Opportunities and bottlenecks for upstream learning within RSPO certified palm oil value chains: A comparative analysis between Indonesia and Thailand," Journal of Rural Studies, vol. 78, pp. 426-437, 2020.
[22] Tim Riset PASPI, "Perkembangan Biodiesel di Indonesia dan Terbesar di Asia," GAPKI, 2017. [Online]. Available: [Accessed 1 Agustus 2021].
[23] M. Shukla and M. K. Tiwari, "Big-data analytics framework for incorporating smallholders in sustainable palm oil production," Production Planning & Control : The Management of Operations, vol. 28, no. 16, pp. 1365-1377, 2017.
[24] A. Suryanendra and E. Suryani, "The analysis of coffee productivity and production improvement strategies in Indonesia: A system thinking approach," in AIP Conference Proceedings 2329, 2021.
[25] Y. Fauzi, Y. E. Widyastuti, I. Satyawibawa and R. H. Paeru, KELAPA SAWIT, 1 ed., Jakarta: Penebar Swadaya, 2012.
[26] T. Ermawaati and Y. Saptia, "Kinerja Ekspor Minyak Kelapa Sawit Indonesia," Buletin Ilmiah Litbang Perdagangan, vol. 2, no. 7, pp. 129-148, 2013.
[27] Masykur, "Pengembangan Industri Kelapa Sawit Sebagai Penghasil Energi Bahan Bakar Alternatid Dan Mengurangi Pemanasan Global (Studi Di Riau Sebagai Penghasil Kelapa Sawit Terbesar Di Indonesia)," Jurnal Reformasi, pp. 96-107, 2013.
[28] Rachmawati and L. Fitria, "Rekayasa Model Sistem Dinamik Komoditas Jagung Untuk Mendukung Program Upaya Khusus Di Jawa Barat," Institut Pertanian Bogor, Bogor, 2016.
[29] J. D. Sterman, Business Dynamics: Systems Thinking and Modeling for a Complex World, Boston: McGraw-Hill Education, 2000.
[30] Y. Barlas, "Multiple Tests for Validation of System Dynamics Type of Simulation Models," European Journal of Operational Research, vol. 42, no. 1, p. 59–87, 1989.
[31] H. Wijaya, A. Yandra and E. Hambali, "Formulation of Indonesian palm oil biodiesel policy for energy security by using system dynamics model," AgricEngInt: CIGR Journal, pp. 268 - 282, 2017.