Determining The Profit Margin In “Patchouli Oil†Supply Chain: A Case Study In Indonesia

Abstract

Patchouli oil is a type of oil obtained from the extraction of patchouli leaves and stems that have been dried. In this study, the extraction process, called distillation, is conducted by Small and Medium Enterprises (SMEs) in West Pasaman, Indonesia. There are several steps must be passed by patchouli oil before used by the manufacturers of patchouli oil based products, such as farmers, middleman, collectors. Based on interviews and surveys conducted show that currently condition of SMEs in West Pasaman decline, because the selling price of patchouli oil is low, while the production cost is high. This condition make the position of farmers are weak. Most traders do not add value to the product, only collect patchouli oil and the push them to next stages. This study aims to determine the cost of production and profit margin of each stage in the supply chain of patchouli oil. Data was collected by interviewing the stakeholders consist of patchouli farmers, SMEs refining patchouli oil, collectors, and exporters. The production cost was determined using the traditional costing method. The results found that farmers obtain IDR 1.236 per day, while the traders obtain IDR 10.000 per day, and the collectors obtain IDR 3.833 per day. Surprisingly, the intermediary traders obtain the highest profit margin although they do not contribute to the added value of the product.