Synergy in halal supply chains
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Halal supply chain management is becoming important for consumer confidence in halal certified products. However, halal supply chains are complex supply chains with vulnerabilities that need to be addressed through well organised robust, effective and efficient halal supply chains. This paper sets out to argue that new innovative solutions are needed for better optimisation of halal supply chains that exploit collaboration, both vertically with supply chain partners and horizontally among companies in the same industry. Methods in vertical collaboration proposed are halal clusters and a halal supply chain orchestrator. Possible methods in horizontal collaboration are direct collaboration models and collaboration through an intermediary. Governments are recommended to stimulate vertical and horizontal collaboration initiatives in the halal industry and the development of a more advanced halal standard, incorporating international halal standards, which support a supply chain approach to halal. Industry pilots and case study research are needed to test the various collaboration concepts and provide practical solutions for the halal industry to optimise international halal supply chains.
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Synergy in halal supply chains
- 1. Dr. Marco Tieman (CEO LBB International & Adjunct Professor Universiti Tun Abdul Razak) Kuala Lumpur, 25 August 2014 Synergy in Halal Supply Chains
- 2. www.lbbinternational.com This presentation is based on the article ‘Synergy in Halal Supply Chains’, published in the journal ‘Islam and Civilisational Renewal’ in July 2014.
- 5. www.lbbinternational.com Integrity of halal supply chains is becoming an increasing concern for governments and industries due to: 1)halal integrity issues are more likely to occur than before 2)Halal integrity issues are harder to detect 3)Once detected go viral on the internet, exposing the integrity of country’s halal systems and corporate brands
- 6. www.lbbinternational.com The neglect of halal requirements throughout the entire supply chain is gradually weakening consumer confidence in halal certified products!
- 7. www.lbbinternational.com Muslim Company Muslim Company Halal Product Halal Product Halal Supply Chain Halal Supply Chain Halal Value Chain Halal Value Chain 11 22 33 44 Source:Tieman(2011) Evolution of halal
- 8. www.lbbinternational.com The halal industry has not widely implemented halal logistics standards, as halal certification bodies have not extended halal requirements toward the supply chain. This has resulted in a halal industry where food safety (tayyib) requirements receive a ‘supply chain approach’ and halal requirements only a ‘product approach’!
- 9. www.lbbinternational.com As the holy Qur’an (2:168) puts halal and tayyib at equal footing, it would be logic to extend halal assurance toward the supply chain!
- 10. www.lbbinternational.com Vertical and horizontal collaboration are important tools to organise halal supply chains that are robust, effective and efficient!
- 12. www.lbbinternational.com A supply chain is a network of parties that link the source to the point of consumer purchase. Supply chains Source:Lambert&Cooper(2000)
- 13. www.lbbinternational.com The horizontal supply chain structure refers to the number of tiers across the supply chain [short vs. long]. The vertical supply chain structure refers to the number of suppliers/customers represented within each tier [narrow vs. wide] (Lambert & Cooper, 2000). Supply chains
- 14. www.lbbinternational.com Effective vertical collaboration of halal supply chains can be achieved through (1) halal clusters and (2) halal supply chain orchestrators.
- 15. www.lbbinternational.com Halal clusters are spatial clustering of halal production chains (food, cosmetics, pharmaceutical manufacturing) in an industrial park or economic zone, whereby a significant part of the supply chain is geographically positioned in a halal cluster. Halal clusters
- 16. www.lbbinternational.com 1)Logistical advantages (shorter transportation times) 2)Optimal use of by-products 3)Increase capacity of cluster participants and innovative growth 4)Stimulate new business formation that support innovation and expand the halal cluster. Halal clusters
- 17. www.lbbinternational.com Today there are halal park initiatives in Brunei (Bio-Innovation Corridor), China (Qinzhou), Malaysia (21 halal parks), and the United Kingdom (Birmingham and Norfolk). Halal clusters
- 18. www.lbbinternational.com The halal supply chain orchestrator manages global halal supply chains according to the specification of the designation market and ensures that the integrity is maintained throughout the halal network. He makes use of common halal distribution centres, consolidation of transportation and innovative logistics concepts (Tieman, 2012). Halal supply chain orchestrator
- 19. www.lbbinternational.com The role of the halal supply chain orchestrator can be fulfilled by a fourth- party logistics service provider (4PL): an integrator that assembles the resources, planning capacity, and technology of its own organisation and other organisations to design, build, and run comprehensive supply chain solutions. Halal supply chain orchestrator
- 20. www.lbbinternational.com 1)Effective halal supply chain assurance: reference to one international halal logistics standard (e.g. IHIAS 0100:2010) and consistent communication of halal status (‘halal supply chain’ code) throughout the supply chain 2)Standardisation of halal assets in the supply chain: from source to point of consumer purchase 3)Supply chain optimisation: sharing demand data, reducing inventories, and better transport planning Vertical collaboration allows for:
- 22. www.lbbinternational.com Collaboration between companies in the same industry, horizontal collaboration, can be facilitated through (1) direct collaboration between different companies or via an (2) intermediary.
- 23. www.lbbinternational.com 1)Dominant industry player, where smaller players can use their halal assets or supplier contract 2)Transportation is facilitated by company A, Warehousing by company B, and cargo boxes by company C 3)Collaboration on project basis, for example: Hajj season and humanitarian aid 4)Intensive collaboration on continuous basis, where many activities are done jointly together Direct collaboration forms
- 24. www.lbbinternational.com An intermediary is able to consolidate halal goods flows for different companies that need domestic road transportation, cross border transport, air shipments, sea shipments, warehousing, and value added logistics. In here various companies can make use of the expertise of, global network of and ability to consolidate halal flows by this halal logistics service provider. Intermediary
- 25. www.lbbinternational.com 1)Sharing of information: ‘halal supply chain’ code, best practices in halal supply chain and value chain, and halal specifications [machine slaughter: yes/no; stunning: yes/no] 2)Pooling of resources: outsourcing to a common (halal certified or compliant) logistics service provider, efforts, halal assets 3)Bundling of halal volumes: reducing transportation costs, improved segregation conditions Horizontal collaboration allows for:
- 27. www.lbbinternational.com The application of vertical and horizontal collaboration concepts provide better control of halal supply chain from source to point of consumer purchase and increase the confidence of the consumer in halal certified products. These collaboration concepts require a more advanced halal certification system (beyond product certification), expanding halal regulation along the supply chain. This should reduce the exposure of a country’s halal system and brand owners.
- 28. LBB International B-5-8 Plaza Mont Kiara Mont Kiara 50480 Kuala Lumpur Malaysia Dr. Marco Tieman Chief Executive Officer marco@lbbinternational.com www.lbbinternational.com halalsupplychainmanagement.blogspot.com Thank you
- 29. www.lbbinternational.com Lambert, D.M., & Cooper, M.C. (2000). Issues in supply chain management. Industrial marketing management, 29(1), 65-83. Tieman, M. (2011). The application of halal in supply chain management: in-depth Interviews. Journal of Islamic Marketing,2(2), 186 – 195. Tieman, M. (2012). Control of halal food chains. Islam and Civilisational Renewal, 3(3), 538-542. References
- 30. www.lbbinternational.com IHI Alliance (2010), ICCI-IHI Alliance Halal Standard: Logistics – IHIAS 0100:2010 [first Edition], Kuala Lumpur: International Halal Integrity Alliance. Tieman, M., Vorst, J.G.A.J. van der, & Ghazali, M.C. (2012). Principles in halal supply chain management. Journal of Islamic Marketing, 3(3), 217-243. Tieman, M. (2014). Synergy in Halal Supply Chains. Islam and Civilisational Renewal, 5(3), 454-459. Recommended literature
Editor's Notes
- The evolution of the value chain was published in the Journal of Islamic Marketing, an international academic journal under the Emerald Group (UK). I recognise 4 phases: the Muslim company, halal product, halal supply chain and halal value chain. Important to recognise for the Industry (as well as Governments) that one phase builds further on the previous phase and that phases cannot be skipped. I will present now in detail the various phases.