Halal Supply Chain Management

In connection with Customization, Standardization and Quality Management

Ahmed Hussain Alhaddad 12/2/2010

I.
I. I. II. III. A. B. IV. A. B. V.

Table of Contents
Table of Contents ............................................................................................................................. 2 Abstract ........................................................................................................................................... 2 HALAL DEFINITION AND BACKGROUND ............................................................................................ 3 FOOD DISTRIBUTORS AND HALAL CUSTOMIZATION. .................................................................... 2 Customization and Halal in Islamic Countries................................................................................ 4 Customization and Halal in Non-Islamic Countries....................................................................... 5 HALAL SUPPLY CHAIN INTEGRATION AND QUALITY MANAGEMENT. ............................................ 6 Ensuring the Integration Process. ................................................................................................. 6 Ensuring Compliance and Standards. ............................................................................................ 7 CONCLUSION ................................................................................................................................... 8 9

Refrences

I.

Abstract
Most of food providers are now seeking to be global and supply different markets by

customizing the products according to the markets needs. Indeed, the growing awareness of providing halal products as a successful market makes it important for food suppliers to customize their products in compliance with halal regulations, and target Muslims communities wherever in the world. Most of countries are now dealing with halal industry as a hot business prospective. ''Benefiting from a ready-made global customer group of nearly two billion Muslims,
the international halal food industry was valued at US$570 billion during 2005. And with the total spend on logistics operations accounting for around 5-10% of total revenue, it is not surprising that logistics companies all over the world are keen to grab a piece of this growing market" said Nadia Khan an economic journalist by Arabian Business. (3).

This paper focuses on supply chain management in connection with Halal customization trend, standardization, integration and quality management.

II.

HALAL DEFINITION AND BACKGROUND

In Arabic language, the word Halal is defined as a meaning of lawful or permissible. So, it is a term used to designating any action which is permissible to use or engage in according to Islamic law. Therefore, the combination of the words Halal and food means the food that is permissible to eat or consume in accordance with Islamic law. In Islam, the general idea of food is Halal, except the following:

Foods containing ingredients such as gelatin, enzymes, emulsifiers, and flavors are questionable (mashbooh), because the origin of these ingredients is not known. Fish and most of sea-life are permissible in general. (4).

The opportunities for a cooperation to supply Halal products are continuously increasing. In Asia, Malaysia, Thailand, Singapore, the Philippines, Brunei, China and India have all taken a step into the global Halal market. China, for example, has recently signed a memorandum with European Commission (EC) to export Halal products to European markets. The Singapore food industry has also taken a number of steps toward becoming a halal hub. Europe is seen as an important market for Halal products on the basis of higher purchasing power rather than population size. Furthermore, non-Muslims willingness to purchase Halal food adds to the attractiveness of the European market. In particular, one study has indicated that Dutch

y y y y y

Swine/Pork and its by-products Animals improperly slaughtered or dead before slaughtering Alcoholic drinks and intoxicants Carnivorous animals, birds of prey and certain other animals oods contaminated with any of the above products

consumers in general are willing to purchase Halal products on the basis of the belief that such products are safe. (3).

III.

FOOD DISTRIBUTORS AND HALAL CUSTOMIZATION.

Sharing the trend in producing Halal, global fast food restaurants are also on the run to

provide Halal meals. MacDonalds, KFC, Subway, Pizza Hut, and almost most of the global fast food restaurants are providing halal food, not only in the Islamic countries, but also on some of non-Islamic countries.

A.

Customization and Halal in Islamic Countries.

Most of global fast food restaurants are open and available in the local markets of Islamic countries, and they supply Halal. On this topic, I will focus on Macdonalds as an example of providing Halal food. In Arab Countries, MacDonalds is fully owned and managed by Arab and Muslim businessmen by 100% local capital investment. This is fulfilled by franchising agreement between MacDonalds and the local franchisee where MacDonalds gives the brand name and provides the required training and experience. MacDonalds has committed to providing 100% Halal meals in Saudi Arabia and the entire Middle Eastern region. It serves Halal meals in that region by importing meat from BRASLO (Brazil), and is certified Halal by a well-known Islamic Organization called The Islamic Dissemination Center for Latin American. (2). For standardization and quality management prospective, MacDonald's and most of fast food restaurants prefer to deal with known suppliers that can supply the desired quantity and quality on time, and that is why MacDonald's does not supply its global branches from their local

market. The reasons of outsourcing is to minimize cost, use up-to-date technology, focus on core business , and increase the flexibility as the outsource partner may be more readily able to provide more or less of the service as required by the outsourcing company.
(5).

This justifies

why a company, like MacDonalds, imports from a well-known company from Brazil. However, importing food from over a greater distance will raise the cost. Hence, instead of importing livestock, MacDonalds and most of fast food restaurants, ship ready-to-cook meat. Moreover, the frights of Halal products that come from Brazil, in the case of MacDonalds, will serve and supply all of the Middle-Eastern branches for that restaurant, and therefore, the high volume of the shipment will offsite the high cost of the fright over the greater distance. This is what meant by Transport Cost Sensitivity. (5). B. Customization and Halal in Non-Islamic Countries.

The increasing number of Muslims' population in Europe and USA makes it attractive targeting this large community by customizing the products based on demand. Not only targeting Muslims, but also non-Muslims perceive Halal for quality and save products, so the nonMuslims' willingness to purchase Halal makes the business more attractive. There are two main companies they supply Halal in America and Europe. Those companies are Midamar and AlSafa. Incorporated in 1974, Midamar grew into a major export company sending halal meat approved by the Department of Agriculture and certified by the organization Islamic Services of America to over 30 countries around world, including Lebanon, Iraq, Saudi Arabia, United Arab Emirates, Indonesia and Singapore. (1). Midamar supplies its products to those countries as well

as within the US, Canada, and Europe through Midwest Halal Distribution, which is an affiliated company with Midamar. Thus, the company is outsourcing its SCM to this affiliated company. In addition, another company called Al-Safa also delivers Halal to mainly the US and Canada. Its products are also endorsed and certified by Islamic organization called Islamic Food Council of America (IFANCA). This company currently supplies only the US and Canada by outsourcing, too.

IV.

HALAL SUPPLY CHAIN INTEGRATION AND QUALITY MANAGEMENT.

Halal SCM requires a special care due to the natural of the business and sensitive standards

and requirements that are demanded by the market. As a result, Halal suppliers face further challenges in order to ensure delivering the required genuine Halal product on the good conditions and standards.

A.

Ensuring the Integration Process.

The complication of food SCM in general, requires that food to be delivered from farms to the consumption point as fast as possible before the food gets spoiled. Beside, Halal SCM adds more complication to that in the way that suppliers have to ensure the products are genuine Halal products and they comply with Islamic laws. There are some real examples I have personally faced that I found non-Halal products available at Saudi market that have been imported mistakenly. As a result, customers have the fear in dealing with food that has been imported from non-Islamic countries even with those products that are labeled Halal, and customers try to avoid having such products.

Therefore, suppliers of Halal products have to include everything from procurement and the preparation of Halal ingredients to the manufacturing and delivery of the final products all the way to consumers. It is necessary to create collaborative network, whereby multiple partners in different regions can come together to work and ensure every product is manufactured to the quality and standards and ensure that the products are not mixed with non-Halal ingredients. In today's world of international trade and global competition, where increasingly supply chains compete more than so than individual firms and products, integration and collaboration have become key differentiators of high performing supply chains.
(5).

Hence, supervising the process

is the most important part of controlling genuine Halal products. Currently, there are no sufficient companies or organizations that control the procedure from A to Z. Thus, in order to ensuring the integrity in supplying genuine Halal products, Halal suppliers have to broaden this type of business. B. Ensuring Compliance and Standards.

Fortunately, there is now a trend in creating organizations in order to endorse the integrity and the compliance with the standards in the global trade through issuing certificates, collaboration, and membership. This makes it more convenient for customers to be assured of the compliance with the standards. For instance, most of Halal restaurants notify their customers by showing a certificate or a note of Halal Compliance that has been issued by a known Islamic organization. Personally, I have observed like these signs when I was dealing with Halal restaurants in my trips to UK, New Zealand. Also I witnessed this when I was at Michigan in one of KFC's branches. Ironically, recently, MacDonald's has admitted selling Halal chicken in some of its branches in UK without notifying its customers and later has apologized for doing so. However, countries like Singapore, Malaysia, Indonesia, and even western countries like USA
7

and UK, are stepping ahead of the Middle East when it comes to taking Halal logistics very seriously. You can rarely find Halal restaurants in Middle East fulfill these regulations, so it is hard to be fully comfortable in dealing with those restaurants.

V.

CONCLUSION

For logistics and SCM, Halal industry is recently a dynamic business and cannot be ignored. The increasing global demand makes it very important to regulate Halal SCM and logistics. Hence, Halal suppliers have to increase the effort to ensure that participants meet Halal requirements that include Halal customization and quality management.

Work Cited
1. AlHajal, Khalil . "Midamar brings halal meat to Detroit." (2008): 1. Web. 1 Dec 2010. <http://www.arabamericannews.com/news/index.php?mod=article&cat=Community& article=737>.

2.

"FACT S ABOUT MACDON ALDS." MacDo nald's' Arabia . N .p., n.d. Web. 9 Dec 2010. <ht t p:/ / www. mcdonal dsarabi a. com/ i ndex. php/ ar_sa/ m- worl d/ f act s- about mcdonalds.html>.

3.

Khan, Nadia. "Halal Logistics." (2007): 1-2-3. Web. 1 Dec 2010. <ht t p:/ / www. arabi ansuppl ychai n. com/ art i cl e- 385- speci al - report - hal al - l ogi st i cs/>. "Islamic Food and Nutrition Council of America." 22 Nov 2010<http://www.ifanca.org/halal/> Mangan, John , Chandra Lalwani , and Tim Butcher. Global logistics and supply chain ma na g emen t. Chapters 1,2 & 13. United Kingdom: Wiley, 2008. 5, 28 & 249. Print.

4. 5.