Determining Sources of Uncertainty, Performance, and Strategy in Biodiesel Supply Chain

Abstract

Recently, biodiesel as a biofuel has a significant role in replacing fossil fuels because of its benefits, including energy security, reducing environmental impacts (e.g., global warming and GHG emissions), and improving the economy in the rural area. However, the utilization of large-scale biodiesel industry faces many challenges, mainly uncertainties that inherent within decision making in the biodiesel supply chain. Therefore, this paper contributes by identifying several sources of uncertainty in upstream, midstream, and downstream along the biodiesel supply chain. The sources of uncertainty were investigated by using a fishbone diagram as the tool to identify the root causes in which its elements derived from the Supply Chain Operations Reference (SCOR) model. SCOR model provides several basic supply chain processes, i.e., plan, source, make, and deliver. Due to these uncertainty issues related to the biodiesel supply chain, it highlights the need to set performance measures to be achieved through the alignment of supply chain strategies. In the Indonesian context, critical uncertainty sources in the biodiesel supply chain are oil palm supply, oil palm price, land farming, CPO price, CPO supply, production, and operation, technology, policy and regulation, transportation and logistics, biodiesel price, and biodiesel demand. Key performance measures for each source of uncertainty are also determined, such as oil palm yields and oil palm quality for biomass supply uncertainty. The uncertainty management strategies discussed refer to lean strategies, but agile or hybrid strategies are also considered. Future research directions are also presented in this paper.