Synergy in halal supply chains

Dr. Marco Tieman (CEO LBB International & Adjunct Professor Universiti Tun Abdul

Razak)

Kuala Lumpur, 25 August 2014

Synergy in Halal Supply Chains

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.

www.lbbinternational.com3

Agenda

IntroductionIntroduction

Vertical CollaborationVertical Collaboration

Horizontal CollaborationHorizontal Collaboration

ConclusionConclusion


Introduction


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 before2)Halal integrity issues are harder to detect3)Once detected go viral on the internet, exposing the integrity of country’s halal systems and corporate brands


The neglect of halal requirements throughout the entire supply chain is gradually weakening consumer confidence in halal certified products!


Muslim Company

Muslim Company

Halal Product

Halal Product

Halal Supply Chain

Halal Supply Chain

Halal Value Chain

Halal Value Chain

11 22 33 44

Sou

rce:

Tie

man

(20

11)

Evolution of halal


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’!


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!


Vertical and horizontal collaboration are important tools to organise halal supply chains that are robust, effective and efficient!


Vertical Collaboration


A supply chain is a network of parties that link the source to the point of consumer purchase.

Supply chains

Sou

rce:

Lam

bert

& C

oope

r (2

000)


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


Effective vertical collaboration of halal supply chains can be achieved through (1) halal clusters and (2) halal supply chain orchestrators.


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


1)Logistical advantages (shorter transportation times)2)Optimal use of by-products3)Increase capacity of cluster participants and innovative growth4)Stimulate new business formation that support innovation and expand the halal cluster.

Halal clusters


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


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


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


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 chain2)Standardisation of halal assets in the supply chain: from source to point of consumer purchase3)Supply chain optimisation: sharing demand data, reducing inventories, and better transport planning

Vertical collaboration allows for:


Horizontal Collaboration


Collaboration between companies in the same industry, horizontal collaboration, can be facilitated through (1) direct collaboration between different companies or via an (2) intermediary.


1)Dominant industry player, where smaller players can use their halal assets or supplier contract2)Transportation is facilitated by company A, Warehousing by company B, and cargo boxes by company C3)Collaboration on project basis, for example: Hajj season and humanitarian aid4)Intensive collaboration on continuous basis, where many activities are done jointly together

Direct collaboration forms


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


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 assets3)Bundling of halal volumes: reducing transportation costs, improved segregation conditions

Horizontal collaboration allows for:


Conclusion and Recommendations


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.

LBB InternationalB-5-8 Plaza Mont Kiara

Mont Kiara50480 Kuala Lumpur

Malaysia

Dr. Marco TiemanChief Executive Officer

[email protected]

halalsupplychainmanagement.blogspot.com

Thank you


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


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

Synergy in halal supply chains

Business

Transcript of Synergy in halal supply chains