Palm kernel shell (PKS) is a waste of palm oil processing, that has enormous potential to become a green energy resource for industries with thermal conversion. To realize PKS potential as biomass fuel, it is important to build an effective, efficient, and sustainable supply chain model. As with other biomass, PKS supply chain involves collection processes, storage facilities, and a transportation network, which is dynamic and optimizable. Soft systems dynamics methodology (SSDM) has been implemented in this study, by which its key feature of system dynamics is recognized as one of the most ideal modeling techniques for studying such complex and multivariate system. We demonstrate how to apply SSDM in analyzing and designing a sustainable supply system of PKS through mathematical modeling and simulations, which capture the long-term effect of and the interactions among supply chain design variables and parameters. The simulation results show that the proposed supply chain model would be able to deliver continuous availability of PKS at the end customer side by achieving the goal of minimum 95% customer production level despite decreasing PKS generation rate from the source and increasing other consumption rate. Furthermore, decision makers can identify and implement necessary changes and recommendations to improve the existing supply chain system. The application of soft systems dynamics approach in biomass supply chain will enable greater use of green energy for continuous industrial purposes.