MODIFICATION OF HAYAMI’S VALUE ADDED METHOD FOR THE PALM OIL AGROINDUSTRY SUPPLY CHAIN

Abstract

ABSTRACT

Added value is the difference between the output value and the related input and processing costs. Calculation of added value in the palm oil supply chain from upstream  to  downstream was conducted using the modified Hayami method, based on the crude palm oil (CPO) industry processing capacity of  30 tonnes fresh fruit bunch (FFB) per hour, calculated for a year. The Hayami formula was modified to suit the business in terms of number of organization in a chain and multi-year continuous business cycles. Stakeholders in this palm oil supply chain were the smallholder farmers who produce FFB, traders, CPO industry, frying-oil industry, distributors, and the consumers. For the CPO industry with a processing capacity of 30 tonnes of FFA per hour,  180,000,000 kgs of FFB was needed. This amount of FFB was supplied by 6,065 hectares of palm oil estate. Assuming that each farmer had an estate of 2 hectares, the estate belonged to 3,032 farmers would produce 32,832 tons of frying oil  annually, with a selling price of Rp 12,215 per kg. In addition, 8,208 tonnes of  stearin with a price of Rp 5,000 per kg and 1,987 tons of palm fatty acid distillate (PFAD) with a price of Rp 2,500 per kg were produced. The application of the modified method provided the comparative added values obtained by each of the supply chain actors.  In this current setting of assumptions and parameters, it showed that the small scale farmer group gained the highest added value of Rp 6,233  or 50.33% of the total added value of Rp 12,385 per kg of frying oil. Added value per farmer was Rp 3,285,295 per month. It is expected that the Hayami modified method can be easily applied to larger and more complex industries.
Keywords: value added, supply chain, palm oil, Hayami method