Conceptual Model of Essential Oil Agroindustry Development by Using System Dynamics Approach

Abstract

Essential oil industry is a growing industry in Indonesia due to the abundance of raw materials. However, the current production rate is still not able to meet the demands of domestic and foreign industries. This research aims to map Indonesian essential oil agroindustry, which starts from the supply of raw materials at the farm level to the marketing of products of essential oils at the exporter level. This research employed system dynamics approach. A conceptual model was built to determine factors that influenced the production of essential oils along the supply chain and is presented in a causal loop diagram. The results of this research indicate that the price factor is the main factor influencing the production of essential oils, and can be used as a basis to assist in determining the strategy for developing essential oil agroindustry in the future. This research will be useful for policy makers, all business actors involved in the essential oil agroindustry, and future researchers.