Supply Chain Frontiers issue #43
The world population of some two billion Muslims is driving the growth of a global market for halal products that is worth an estimated $2 billion annually. In order to flourish, however, this vast market must be supported by supply chains that comply with Islamic principles and that deliver products to a highly fragmented customer base.
Halal is a set of rules that describes what is permissible under Islamic law. Food, which accounts for about 30% of the global trade in halal goods, must be clean and pure and must be kept segregated from non-halal items, for example.
The demand for these products is worldwide, but the major markets are in Asia. Indonesia, the country with the largest Muslim population, offers a huge potential for growth. Malaysia is a leading player, and has created the Halal Development Corporation to support the trade. The agency is developing a series of halal parks where manufacturers and service companies can collaborate and build the country’s exports of these products.
However, some formidable distribution challenges must still be overcome. The integrity of the supply chain must be rigorously maintained across multiple countries where geographies, the mix of cultures and religions, interpretations of Islamic law, and income levels can vary greatly. Product packaging and labeling have improved over recent years, but still need to be upgraded to meet world-class standards. Work is going on to establish a more unified certification process for halal products. In addition, product flows have to be carefully managed. Halal meat cannot be stored in freezers that share cooled air with non-halal items, for instance.
In much the same way that Islamic banking has become a multibillion-dollar business that serves the financial needs of Muslims, Halal Logistics – the term for the end-to-end distribution of halal products – is gaining acceptance as a distinct branch of supply chain management.
More research is needed to help companies develop halal-compliant supply chains. Some of the methods can be drawn from existing practice. One example is the track-and-trace systems developed by the pharmaceutical industry to monitor the movement of drugs in the supply chain, as traceability is a key issue in the movement of halal products.
The Malaysia Institute for Supply Chain Innovation (MISI) plans to establish a research initiative to explore Halal Logistics regionally and globally. MISI was created earlier this year by a joint venture between the government of Malaysia and the MIT Center for Transportation & Logistics. “We are engaged in discussions with industry partners and seeking to appoint personnel who are active in the Halal Logistics space,” says Dr. Mahender Singh, Rector, MISI. “Our expertise as a world-class center for supply chain education and research, and the fact that Malaysia is a leading country in the halal trade, puts us in a unique position to understand these fast-growing supply chains.”
The global trade in halal goods is no longer a niche business. As more companies compete for a share of this lucrative market, the demand for appropriate supply chain expertise will increase as well. Research company Frost & Sullivan estimates that the Halal logistics business in Indonesia will generate revenues of approximately $29.2 billion in 2011, for example.
“Halal Logistics represents a major opportunity for manufacturers and service providers at a time when many companies are searching for new growth opportunities around the globe,” says Singh.
For more information on MISI’s plans for a Halal Logistics research facility, contact Dr. Mahender Singh.