A Sustainable Supply Chain Model of Palm Kernel Shell as Renewable Energy Source for Industries in Cikarang Area

Abstract

Depleting stockpile of fossil fuels and rising global temperature due to the greenhouse effect are probably the two most threatening factors to civilization sustainability. Converting biomass into a readily available energy source would help reduce dependency on fossil fuels, whilst at the same time moderating greenhouse gas emission due to its carbon neutrality. Among various wastes from palm oil processing, palm kernel shell (PKS) is an oil palm biomass with high potential to be applied as a source of renewable energy for industries, given its high caloric value and distinctive physical properties. This source of renewable energy can be utilized by industries with thermal conversion processes. The current poor performance of palm kernel shell supply chain may hamper the realization of this renewable energy potential, it is therefore necessary to build a more effective, efficient, and sustainable supply chain model. Biomass like PKS can be utilized for industrial purposes after it is proven to be technically, environmentally and economically feasible. In this study, a combination of literature study and field observation was conducted to determine the feasibility of palm kernel shell in the case study of ceramic powder spray drying. From technical aspects, relevant thermophysical properties, suitable heat conversion technologies, and applicable quality parameters were identified. The drying performance and thermal efficiency were selected as key indicators to prove the feasibility of palm kernel shell. In terms of the environmental feasibility, the life-cycle assessment method was deployed to determine greenhouse gas emissions from the usage of palm kernel shell in comparison with natural gas and coal under a similar industrial application. To determine the economic feasibility, discounted cash flow analyses were carried out across three alternative fuels. Palm kernel shell has some distinctive supply and demand characteristics that need to be well understood prior to build a robust, effective, efficient, and sustainable supply chain model for industrial applications. This study attempted to investigate those characteristics along with regulatory aspects that may influence supply, demand, and supply chain of palm kernel shells. Various factors, impacting supply quantity, cost, lead-time, and quality uncertainties, were identified through a series of in-depth interviews, questionnaires, and field observations, involving the chain actors. The potential demand of palm kernel shell for industries in Cikarang area was estimated based on questionnaires and industries scanning. Whilst demand criteria for the fuel selection among palm kernel shell, natural gas, and coal were determined by deploying the fuzzy analytic hierarchy process method. As with other biomass, the supply chain of palm kernel shell involves collection processes, storage facilities, and a transportation network, which is dynamic and optimizable. Soft systems dynamics methodology (SSDM) was implemented in this study, by which its key feature of system dynamics has been recognized as one of the most ideal modeling techniques for studying complex and multivariate systems. The study demonstrated how to apply system dynamics in combination with discrete event simulations in analyzing and designing a sustainable supply system of palm kernel shell through mathematical modeling and simulations, which captured the long-term effect of and the interactions among supply chain design variables and parameters. This research proved the feasibility of PKS as a source of renewable energy for industrial uses from all the three aspects, i.e. technical, environmental, and economic. The proven PKS feasibilities would facilitate the shift towards renewable energy usage in the industrial sector. The shift would also be a sustainable solution in solving the agriculture waste issues as the generating palm oil industry is continuously growing. This win-win situation will in turn accelerate the achievement of Indonesia sustainability goal on net zero carbon emission. The performance of current PKS supply chain is still unsatisfactory, due to supply uncertainties, namely quantity, cost, lead-time, and quality. Whilst based on the industrial survey, there is a potential demand between 500,000 to 600,000 tons of PKS per year within Cikarang area, which theoretically should be well fulfilled by sourcing PKS from the four nearest palm oil producing provinces with the estimated unused quantity up to 1,500,000 tons PKS per year. Nonetheless, the current poor performance of PKS supply chain is not reflecting this potential match of supply and demand. From a comparative review between push and pull models, the current PKS supply chain was found to resemble the push model, which is heavily reliant on the stock availability at palm oil mills and influenced by the changes in competing demands. The performance improvement would be accomplished presumably by transforming the supply chain into the pull model, which provides better controlled inventory and is less susceptible to supply disruptions from generation rate and competing demand variabilities, as it was proven mathematically using system dynamics concepts. The application of pull model would also change the way of interactions between the chain actors from transactional to contractual basis. The simulation results showed that the pull supply chain model would be able to deliver continuous availability of PKS at the end customer by achieving the goals of minimum in-full order delivery at 95% with the lower and more stable inventory level in spite of decreasing generation rate from the source and increasing other consumption rates. Through this approach, decision makers can identify and implement necessary changes and recommendations to improve the existing supply chain system. In refer to a newly developed supply chain framework, determining control mechanism is a critical step in designing a supply chain system, as it will drive how it will be managed, what are business processes and resources required in order to achieve the chain objectives and the expected performance. In addition, the incorporation of business continuity management in setting up a supply chain is a necessary element to prevent value loss in the case of disruptive events. It was demonstrated that SSDM can be applied in designing a more robust supply chain model of PKS, which is more effective, more efficient, and sustainable. Findings from this study are expected to motivate decision makers for utilizing PKS as a renewable energy source, given its environmental and economic advantages.