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In Indonesia, about 95% of the furniture industry is managed by small and medium scale enterprises (SMEs). These SMEs have formed natural clusters, which are not efficiently distributed in terms of obtaining raw materials and marketing. This inefficiency reduces the competitive edge of the Indonesian SMEs, which then lose out to the Chinese and Vietnamese furniture industries. This paper provides a spatial analysis of the SME-based furniture industry in Jepara, Central Java, which contributes 10% to the national export value (US$ 1.5 billion). The spatial analysis comprises elements of workshops, tree plantations, log yards, warehouses, showrooms, sawmills, ironmongeries and local markets. This study aims to analyze the spatial context of efficiency in the Jepara furniture industry that may provide options for more efficient SME clustering in connection with regional development, including recommending a future location for the furniture industry. The analysis indicates that the efficiency of the furniture industry in Jepara, reflected in its gross revenue, is determined by its proximity to the retailers rather than wood suppliers. The higher the R 2 of the correlation of distance to furniture retailers indicates that furniture is more buyer driven than raw material driven. Future development of Jepara needs to consider the spatial configuration of furniture retailers, wood suppliers as well as the road network to improve the annual gross revenue, as one of indicators of efficiency.

Spatial modeling approach to clustering the furniture industry and regional development in Jepara, Indonesia