Innovations in Halal Logistics

Presented by

Datuk Che Azizuddin Che Ismail Chief Executive Officer

5th World Halal Research Summit 2012

Kuala Lumpur Convention Centre, 4th April 2012

1. Muslim Demography and Halal Market 2. Evolution of Halal & Trends 3. Why Halal Logistics? 4. Misconceptions About Halal Logistics 5. Role of Innovation in the Halal Logistics

Table of Content

1. Muslim Demography

and Halal Market

Muslim Population 1990 to 2030

Source: PEW Research Centre (pewresearch.org)

• Muslim population is expected to grow from 1.6 billion in 2010 to 2.2 billion in 2030; increase by 600 million (average of 2% per year)

• Constitutes 27% of the world population by 2030 • 79 countries to have over 1 million Muslim population in 2030

Muslim Population by Region

Source: PEW Research Centre (pewresearch.org)

• Growth of Muslim population in all regions including in Americas and Europe • Muslim population is expected to have higher growth rate at 1.7% as

compared to non-Muslim at 0.9% for the period 2010 to 2020

Opportunities for Halal Markets

Year

Rank Country 1990 2010 2030

1 Indonesia 154,680,000 204,847,000 238,833,000

2 Pakistan 112,303,000 178,097,000 256,117,000

3 India 100,873,000 177,286,000 236,182,000

4 Bangladesh 102,103,000 148,607,000 187,506,000

5 Egypt 53,884,000 80,024,000 105,065,000

18 China 16,839,000 23,308,000 29,949,000

20 Malaysia 8,870,000 17,139,000 22,752,000

21 Russia 13,634,000 16,379,000 18,556,000

40 Philippines 2,872,000 4,737,000 7,094,000

46 Thailand 2,324,000 3,952,000 4,261,000

Source: PEW Research Centre (pewresearch.org)

• Pakistan’s population is expected to surpass Indonesia in 2030 • Emergence of potential halal markets in non-Muslim countries including India, China

and Russia with the expected growth of Muslim population

Huge and growing potential for halal market

2010

Growing Malaysia’s Halal Export 2011

No Product RM (Mil)

1 Ingredient 12,312

2 Food & Beverage 11,917

3 Palm Oil Derivatives 7,005

4 Industrial Chemical 2,062

5 Cosmetic & Personal Care 1,815

6 Pharmaceutical 286

Total 35,397

Rank Destination Export Value

1 China 12%

2 The United States 9%

3 Singapore 8%

4 Netherlands 6%

5 Japan 6%

Source: Halal Industry Development Corporation (HDC)

• 53% increase from RM23.1 billion in 2010 • 5% contribution from the total export of RM694.5 billion • SMIs represent 75% of Malaysian exporters • 19 halal parks across the country

A lucrative sector with enormous opportunities to

support the country’s economic growth

RM35.4 billion Halal Export

Value

2. Evolution of Halal & Trends

Evolution of Halal

Source: Marco Tieman, (2011) "The application of Halal in supply chain management: in-depth interviews", Journal of Islamic Marketing, Vol. 2 Iss: 2, pp.186 - 195

The Trends

1. Importance of Halal has expanded from meat, to food, cosmetics and pharmaceutical products

2. Halal has gone mainstream

3. Halal is changing from a source focus to supply chain management focus

4. Rising awareness of the importance to control Halal (food) chains by the Muslim world

5. Importance of Halal certification (MS 1500:2009, MS 2400:2010, IHIAS 0100:2010, GCC Halal Standards [in development], other local standards)

3. Why Halal Logistics?

1. To extend the halal integrity from farm to plate! Customer’s Perspective

2. To protect the brand integrity of manufacturers!

3. To meet the requirements of more stringent halal

standards

4. Religious obligation to avoid direct contact with haram (Kamali, 2008), doubtful products (Al-Qaradawi, 2007), and comply with different schools of thought, local fatwas and local customs (Tieman, 2011)

Logistics is the solution to eliminate doubtful circumstances in the halal supply chain

Why Halal Logistics?

Halal products are segregated from non-Halal products to (IHI Alliance, 2010): 1. avoid (cross) contamination 2. avoid making mistakes 3. ensure consistency with Syariah and the expectations of the stakeholders

The Principles

Foundation of Halal SCM

Perception

Risk

Direct contact with Haram

Best practice

Precaution

Cross- contamination

Source: Marco Tieman, (2011) "The application of Halal in supply chain management: in-depth interviews", Journal of

Islamic Marketing, Vol. 2 Iss: 2, pp.186 - 195

Muslim vs Non-Muslim Countries

Perception

Risk

Direct contact with Haram

Min

imu

m le

vel

Pre

ferr

ed le

vel

Source: Marco Tieman and Maznah Che Ghazali, (2011) ”Principles in Halal Logistics”, INCOMAR 2011, 13-14

September, Putrajaya, Malaysia

A Comparison

Logistics Non-Muslim Country Muslim Country

Warehouse Strict segregation of halal and non-halal in warehouse process; No combined storage of halal and haram in cold chain environment

Dedicated for halal

Transportation No mixing of halal and non-halal on one pallet/load carrier; No mixing of halal and haram in cool transport

Designated for halal: No mixing of halal and non-halal in transportation.

Terminal In consolidation of cargo follow above principles

In consolidation of cargo follow above principles • Halal certified storage

available at North Port and Penang Port

• Airport (unavailable)

4. Misconceptions About Halal

Logistics

1. … only about transportation and storage services in isolation! 2. … more expensive than conventional logistics! 3. … is the same for Muslim and non-Muslim countries! 4. … something to start with only when it is required by law! 5. … not critical for the success of Malaysia as global halal hub!

Misconceptions: Halal Logistics is…

5. Role of Innovation in the

Halal Logistics

1. Complex 2. Vulnerable 3. Based on Islamic values

Halal Supply Chains Are …

1. … simplified 2. … robust 3. … filled with Islamic values

Halal Supply Chains Should Be …

This is the goal of halal logistics and our commitment!

Thank you for your kind attention

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