Halal food logistics – has the time for it arrived?

The notion of halal logistics has been around for over a decade and as the halal food market has matured, the awareness of halal logistics has grown with it.

Some early initiatives, such as a halal-only facility at the Port of Rotterdam in 2007 and the Halal Express by Malaysia’s MISC shipping line, certainly appear to have jumped the gun. But the need for end-to-end compliance to ensure halal integrity throughout the supply chain is an increasingly important issue and logistics plays a central role in this respect.

Assuming that logistics accounts for 15 percent of the final value of goods (2012 share of Muslim F&B logistics, assumed unchanged, as referenced in the State of the Global Islamic Economy 2014-15 report by Thomson Reuters in collaboration with DinarStandard, the logistics in the halal food sector were valued at $151 billion in 2014 (State of the Global Islamic Economy 2015-2016 report).

 Stakeholders in the logistics sector are recognising that at some stage, halal logistics will become a viable business proposition, as it becomes a necessity, rather than a nicety. But has that time arrived yet, from a manufacturer’s perspective?

DO CONSUMERS CARE?

 Do research to ascertain whether there is a genuine need to use halal logistics and whether consumers are willing to pay a premium for it.

To date, there have been limited specific and comprehensive surveys seeking consumer attitudes to halal logistics.

However, consumers may simply expect that a product that leaves the manufacturer with its halal integrity intact will arrive at its destination in the same state of compliance.

In this respect it is no different to mainstream attitudes regarding health and safety, and in many respects, the safety parameters for transportation and warehousing will come very close to ensuring halal integrity as well.

The majority of the ‘buzz’ around halal logistics has come from the transportation sector and academia, rather than from the food manufacturers.

For consumers, compliance during storage or transportation is an assumption, rather than a strongly-held view and there is currently no clear evidence that consumers are willing to pay a premium on their halal foods for additional logistics costs. (Source: ASEAN Conference on Environment-Behavior Studies, Bangkok, 2012.)

 WHICH STANDARD TO FOLLOW?

Choose a standard that is practical and provides a real commercial advantage.

Standards Malaysia published a halal logistics standard in 2010 (MS 2400:2010), covering transportation, warehousing and retail. This replaced the adaptive use of the halal food standard (MS1500:2009) for specific logistics compliance. However, there are indications that the new standard posed significant challenges to logistics providers.

Malaysia’s Halal Industry Development Corporation (HDC) listed five certified providers in 2012 and only one in 2013. Part of the reason for this has been cited as being the prerequisite need to comply with additional requirements such as Halalan-Toyyiban Management System, Management Plan and Assurance Pipeline, as discussed at the International Agribusiness Marketing Conference, in Kuala Lumpur in 2013. 

The Emirates Standards and Metrology Authority (ESMA) is developing a Halal Logistics standard, and this will come into its own with the development of Dubai’s two planned halal industrial parks, one in the Jebel Ali Free Zone, and another at the new TechnoPark.

Abdullah Al Maeeni, Director General of ESMA told Gulf News in June this year, “To boost the halal industry locally and internationally, proper specifications and standards for halal logistics should be in place…Accordingly, any activities along the supply chain such as handling, storage, and distribution must be done according to Sharia-compliant standards.”

Given the strategic importance of Dubai as an established trading and transhipment hub and its recent commitment to the halal food market, ESMA’s new standard may well prove to gain more commercial traction than that of Malaysia’s.

MUSLIM F&B TOTAL AND LOGISTICS MARKET (2014, USD billions)

Source: DinarStandard estimates based on State of the Global Islamic Economy Reports 2014-2015 & 2015-2016. Thomson Reuters in collaboration with DinarStandard

COSTS

Will the costs outweigh the benefits? As a very young and emerging sector the extra costs of halal logistics are not clearly apparent, as current halal logistics services are still somewhat experimental.

However, a Malaysia study of eight halal logistics providers, covering warehousing, sea freight, air freight and one-stop service providers cited several barriers to compliance, including:

·       Cost of compliance

·       Limited halal products for shipping

·       Large capital expenditures required

·       Lack of collaboration between service providers leading to insecure supply chain

·       Not enough training

·       Not cost effective

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