Halal Logistics and Supply Chain Management in Southeast Asia

Nor Aida Abdul Rahman, Azizul Hassan, Mohammad FakhrulNizam Mohammad, Nor Aida Abdul Rahman, Azizul Hassan, Mohammad FakhrulNizam Mohammad

• Publisher: Routledge
• Year: 2020
• Print ISBN: 9780367349974
• eBook ISBN: 9781000073157
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

The concept of Halal defines what adheres to Islamic law and is so comprehensive that it goes beyond food to include processes. The Halal industry has allowed many business firms a competitive advantage and is integral in its support for industries from food, tourism, banking and hospitality to medical. This book gives an overview of what Halal is in logistics and supply chain management, and discusses related issues and challenges in Southeast Asia.

The book also examines Halal logistics and supply chain in reference to global trends and practices. It attempts to integrate theoretical and methodological aspects of Halal logistics and supply chain study in different geographical areas across industries.

This will be a useful reference for those who wish to understand the Halal ecosystem and Halal logistics supply chain development.

1 Awareness and demand of Malaysian consumers towards Halal logistics of meat products
Issues and opportunities for the transport and logistics industry

Au Yong Hui Nee, Peter Yacob and Abdelhak Senadjki

Introduction

Islam is the world’s second-largest, as well as the fastest-growing, religion. It is projected that the global Muslim population will grow to 2.2 billion by 2030. Thomson Reuters (2018) estimated the global Islamic economy to have an annual growth rate of 1.5%. In particular, Muslims are increasing at almost ten times the rate of non-Muslims, and their rapid growth over the past couple of decades has a direct impact on the global demand for the Halal market, which is obviously a leading model for business opportunities.

In relation to the above, the Global Islamic Economy Indicator (GIEI) provides a complete picture of which countries are best placed to address the global opportunity for multi-trillions of dollars. In its fifth year, the GIEI evaluated major national ecosystems to support businesses of the Islamic economy and play a key role in addressing Muslim consumer needs in driving economic growth and development. The indicator is a weighted combination of 49 important metrics, and it calculates the strength of the Islamic economy through supply and demand factors and governance, awareness and social considerations for 73 countries. Malaysia and the UAE are once again leading, but major developments in the leader board are expected, provided that more countries give the Islamic economy strategic importance (Thomson Reuters, 2018).

Set against the global context, Malaysia has had the leading ecosystem in the Islamic economy five years running. It has long taken important steps towards the growth of a world-leading Islamic economy, backed by its clear and wide “halalan” standards, Halal free zones or “Halal hubs”, well-developed manufacturers of Halal goods, strong Islamic finance industry with a private equity investor ecosystem and venture capital. It is important to realise that Malaysia has maintained its place as the leading figure by implementing the International Halal Accreditation Board, which aims to deal with long-term profit among certifiers, with important actions taken towards reinforcing its role in the global regulation of Halal products (Zailani et al., 2015).

Global Halal trade

Currently, the global food market is valued at $8.1 billion, with 52.6% of the total volume being fresh food and agricultural products, and the remaining amount of food being processed. The Halal food industry has a projected annual growth of $1.2 trillion; by 2021, it is projected to reach 8.5%, and by 2023, it will reach $1.9 trillion (Armanios and Ergene, 2018). This, in part, is due to population size and growth rate, with Muslims accounting for 1.8 billion people or 24% of the world population. This is increasing more rapidly than the global average and estimated to reach 2.8 billion or 29.7% of the global population by 2050 (Pew Research Center, 2017). Improving the socio-economic status of Muslim households in certain areas, especially the Arab Gulf States, Asian countries and Muslim-minority countries in the West, leads to higher disposable incomes and higher purchasing power for Halal products. Muslim spending on food and beverage (F&B) is increasing at a rate of 6.1%, consumer awareness of Halal food is also rising significantly and there have been significant investment opportunities and development in the global Halal food industry (Talib et al., 2017).

Nonetheless, the Halal food trade opportunities are enticing as there is a lot of progress within the leading export board, with China, the Philippines and Canada taking important steps. In addition, the Halal food export attracts new rivals, with China leading the charge, in the sense of $191.5 billion of imported F&B from Organisation of the Islamic Conference (OIC) countries in 2017, which can take a strong position as export leaders. Nonetheless, Malaysia, in an attempt to strengthen its central role in the Halal food industry, has started working for a Halal corridor and attempted to allocate US$ 4.5 billion to its Halal Development Fund. Moreover, it is expanding its Halal Certification Services to China, where 5,000 companies are said to have developed Halal local companies, including in Xinjiang, Gansu, Xian and Lanzhou (Dubé et al., 2016). Additionally, the Halal Export Control System, consisting of national certificates and Halal logos enabling exports of goods as well as the 60 countries that support the Malaysia certification system, has officially been recognised by OIC.

Transport and logistics industry

Halal food market growth represents significant potential for international businesses, not only in Muslim countries but also in Western markets with large and rising Muslim populations, among whom Halal observance is increasing. As the international Halal trade continues to grow, several countries are taking steps to capitalise on growth potential. The idea of Halal catalysed developments in Halal markets, creating new business momentum within the supply chain. The movement of goods and services from suppliers to customers is perceived to be highly susceptible to food safety contamination or cross-contamination with non-Halal materials or products. In facilitating its potential, the Economic Planning Unit (EPU) has established the Logistics and Trade Facilitation Masterplan 2015–2020 to provide the strategic direction needed for the logistics industry to further boost its efficiency and competitiveness. In designing the Masterplan, comprehensive stakeholder meetings are conducted with industry players, government agencies, non-governmental organisations and academics. The Masterplan envisages Malaysia as “Asia’s chosen logistics gateway”. To ensure that this goal is acheived, 5 tactical changes and 21 acts have been illustrated. The recommendations encapsulated in this Masterplan will be integrated into Malaysia’s 11th Plan (Ministry of Transport Malaysia, 2019). Figure 1.1 outlines the Logistics and Trade Facilitation Masterplan 2015–2020 Strategic Shift, which was introduced to improve the overall competitiveness and better link businesses to their markets locally and internationally.

Figure 1.1 Logistics and Trade Facilitation Masterplan 2015–2020 strategic shift.

Source: Adapted from Ministry of Transport (2019).

Furthermore, international standardisation in the certification process for Halal goods now includes stringent criteria throughout the supply chain process. The transportation and logistics industry players need to be well versed in order to maintain the Halal credibility of a consumer movement, especially for meat products. The industry now needs more advanced Halal-compliant solutions for its entire supply chain system. Together with the rapid growth of the Halal industry worldwide, with total Halal economy spending hitting US$ 2.1 trillion in 2017 and expected to rise to US$ 3 trillion in 2023 (Thomson Reuter, 2018), Malaysia undertook significant regulatory, trade and industry initiatives to further develop the Halal logistics industry and become the world’s chosen one-stop shop for Halal business solutions.

Another exciting development that began in the fourth quarter of 2018 is Malaysia’s strategic partnership on the “Halal Silk Route”, intended to shift the logistics landscape between Malaysia and China. The “Halal Silk Route” promises end-to-end logistics services with integrated Halal value-added services, hassle-free documentation processes and competitive transportation cost. This project connects the 2.1 billion Muslims globally through trade-in Halal goods and is considered the missing link that completes the international Halal market value chain (MIHAS, 2019).

Halal industry and Halal logistics

Halal is a Quranic word meaning allowed, permitted, permissible and legitimate. The opposite is haram (forbidden, unlawful or illegal). In Islam and according to “Shariah” (Islamic law), all questions concerning Halal or haram, and even all conflicts, should be addressed to the “Quran” or “Sunna” (prophetic tradition), and its validity is important for Muslim consumers (Aziz and Chok, 2013).

Halal certification is one of the pre-requisites for global market entry, recognizing a product as “halalan toyyiban” for the entire supply chain, from farm to fork. In the Halal meat industry, the programme ranges from permissable animal farming to post-slaughter management in order to preserve Halal status. The animal welfare factor and antemortem inspection were also highlighted, which exist to reduce the chance of slaughtering wounded or diseased animals, which may not only affect meat quality but also lead to unhealthy consumption. Due to the principle of “toyyiban” (wholesomeness) food must be free from microbiological, physical and chemical hazards (Tieman and Che Ghazali, 2013).

In Malaysia, the Department of Islamic Development Malaysia or “Jabatan Kemajuan Islam Malaysia (JAKIM)”, a government agency, has jurisdiction and authority over all Halal matters. This department is not only responsible for the implementation of relevant acts, laws and regulations pertaining to local Halal requirements but also plays a significant role in the international scene through its Halal standards.

In producing Halal certification in Malaysia, four main entities need to collaborate extensively. Figure 1.2 shows that JAKIM and an accredited Halal laboratory must track Halal composition. Meanwhile, the manufacturing process must be supervised by the Standard and Industrial Research Institute of Malaysia (SIRIM) and Ministry of International Trade and Industry (MITI). The incorporation of Halal composition into a manufacturing process could establish a good Halal manufacturing process (Badruldin et al., 2012).

Figure 1.2 Framework of integrated Halal GMP.

Source: Adapted from Bakar and Rosbi (2019).

During the implementation phase of Halal in Malaysia, the Halal definition specifically refers to the definition used in Malaysia’s Halal certification by the “competent authority” JAKIM and Islamic Religious Council of the States. Therefore, Halal, as prescribed by Malaysia Manual Procedure for Halal Certification, includes Trade Description Act 2011, Trade Description (Definition of H...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• Figures
• Tables
• Contributors
• Introduction
• 1 Awareness and demand of Malaysian consumers towards Halal logistics of meat products: issues and opportunities for the transport and logistics industry
• 2 Halal supply chain and Halal logistics of the cold chain model in the milk industry: evidence from milk cooperatives in Indonesia
• 3 Knowledge management strategy towards the development of the Halal logistics industry in Vietnam
• 4 A conceptual framework highlighting barriers in cold chain management for Halal food products in South-East Asian countries
• 5 The premier of Halal logistics in Brunei Darussalam
• 6 Halal logistics policy development in Indonesia
• 7 The evolution of Halal logistics in Malaysia, Thailand, Indonesia, the Philippines and Vietnam
• 8 Halal development in Singapore: Halal logistics perspective
• 9 The development of Halal logistics in Thailand
• 10 Developing an integrative model for Halal transportation in Malaysia: a Structural Equation Modelling approach
• 11 The development of Halal logistics standards in South-East Asia: Halal supply chain standards (MS2400) as a principal reference
• 12 Halal integrity, Halal logistics service provider (LSP)
• 13 Training essentials for capacity building in the Halal industry: the importance of Halal logistics training
• 14 Successful Halal compliance factors for air cargo warehouse: warehouse operator perspective
• 15 Halal Knowledge Integrity Model (HaKIM) in intensifying the integrity of the Halal industry
• 16 Digital innovation, Halal industry and the Fourth Industrial Revolution
• Index