Analysing Halal Integrity and Sustainability Nexus in an Emerging Halal Supply Chain Ecosystem (HSCE)

Analysing Halal Integrity and Sustainability Nexus in an Emerging Halal Supply Chain Ecosystem (HSCE)

D. N. Shariff¹, Dahlan Abdullah²*, Azita Aboo Bakar³, Mohd Rizaimy Shaharudin⁴, Anderson Ngelambong²

¹Faculty of Maritime Studies, Universiti Malaysia Terengganu, 21030 Kuala Terengganu, Terengganu, Malaysia

²Faculty of Hotel and Tourism Management, Universiti Teknologi MARA Cawangan Pulau Pinang, 13500 Permatang Pauh, Penang, Malaysia

³Business Technology Section, Universiti Kuala Lumpur Malaysian Spanish Institute, 09090 Kulim, Kedah, Malaysia

⁴Faculty of Business and Management, Universiti Teknologi MARA Cawangan Kedah, 08400 Merbok, Kedah, Malaysia

*Corresponding Author

DOI: https://dx.doi.org/10.47772/IJRISS.2024.807122

Received: 01 July 2024; Accepted: 08 July 2024; Published: 08 August 2024

ABSTRACT

Global demand for halal food has grown substantially. In 2020, about a quarter of the world’s food trade comes from halal food sector, amounting to approximately USD 2 trillion. Over the past few decades, research on halal food has primarily focused on the demand side of the market economy, especially customer needs and satisfaction. Recently, researchers have begun to shift their attention to the supply side of the halal food industry, particularly exploring issues on halal integrity. Studies have revealed that the transportation and transiting sector poses a higher risk compared to manufacturing in establishing halal integrity assurance on halal products. This article analyses the factors that lead to halal integrity issues in the halal supply chain ecosystem based on the latest statistics, press releases, industrial reports, and recent research articles. The discussion concludes with some recommendations for improvement from the perspective of freight forwarders are provided. Along with other stakeholders, freight forwarding services play a crucial role in the supply chain ecosystem, acting as customers’ brokers, assisting in forwarding and clearing cargo. In the post-COVID-19 context, the need to re-evaluate and enhance the efficiency, competitiveness, and sustainability of the ecosystem is crucial due to the current global GDP shrinkage and trade wars across countries. Halal supply chain services are eco-friendly, preferred by customers, and producing higher gross social welfare, but these benefits come along with higher production costs compared to conventional supply chain services. Hence, policy incentives, along with other sustainability strategies, are fundamental for the development and advancement of the halal supply chain ecosystem.

Keywords: halal integrity assurance, halal industry sustainability, critical zones in the halal food product cycle, Halal Supply Chain Ecosystem (HSCE).

INTRODUCTION

The global market for halal products, driven by increasing consumer awareness and demand among Muslim populations, has significantly expanded opportunities for halal manufacturing and freight services globally. This growth has sparked a surge in scholarly research focusing on the halal industry, particularly the critical role of the halal supply chain in maintaining product integrity (Mohamed et al., 2020).  Despite the proliferation of studies, a clear understanding of the factors influencing halal integrity assurance within the supply chain remains incomplete. Ngah et al. (2014) categorised and analysed halal transportation and transit services, laying foundational groundwork for understanding how different supply chain segments impact overall halal compliance. Similarly, Zulfakar et al. (2014) developed a conceptual model illustrating the diverse elements of the halal supply chain that contribute to ensuring halal integrity. These studies highlight critical points where integrity can be compromised or strengthened, yet a comprehensive theoretical framework integrating these insights is lacking. Moreover, Bahrudin et al. (2011) integrated customer satisfaction metrics with halal integrity assurance, underscoring the importance of consumer trust in the halal certification process and suggesting avenues for further exploration within the halal transportation industry. Building on these foundational studies, this research aims to fill this gap by investigating the nuanced factors that influence halal integrity within the halal supply chain ecosystem. Specifically, this study will explore the halal transportation system as a focal point for developing a comprehensive theoretical framework. By introducing continuity variants and novel theoretical constructs, this research seeks to advance the conceptual understanding of the Halal Supply Chain Ecosystem (HSCE) adaptation, positioning it as a sustainable industry concept that ensures stringent halal integrity across all supply chain processes.

LITERATURE REVIEW

According to Jaakkola (2020), more conceptual papers are needed to generate new theories. The scholar discussed four potential forms for concept papers, namely theory synthesis, theory adaptation, typology, and model. Also discussed are the aims of the paper, approaches to applying theory, and its potential contributions. Just like empirical research papers, research design for conceptual papers also includes parameters and data analysis at its core. A concept paper also has a focal phenomenon or concept and a stream of additional literature or theory to enhance the main concept by adding value and eliminating inconsistencies (Hirschheim, 2008). The focal concept is also known as “domain theory” and the supplementary concept is known as “method theory”. Making the chain of evidence visible and easy to grasp is important for any conceptual paper, where structure is the most significant determinant of how easy it is to follow the chain of argumentation (Jaakkola, 2020). In a theory adaptation paper, revisiting extant knowledge (domain theory) and introducing alternative frames of reference (method theory) can propose a novel perspective of an existing concept (Maclnnis, 2011). Hence, for the purpose of this article, we have identified Halal Integrated Freight Service (HIFS) as the focal phenomenon and sustainability dimensions as method considerations to propose a novel Halal Supply Chain Ecosystem as a sustainable Halal industry theme. The basic research design would include the following elements: 1) Halal integrated freight service as the research phenomenon, 2) Sustainability dimensions as the method theory for variant consideration, and 3) Construction of a novel concept for a sustainable halal industry theme.

Necessity of Halal Logistic within Halal Manufacturing Industry

The largest constituent of the halal industry is halal food, which is no longer a niche market, comprising about a quarter of world food trade with current estimated value of USD 2.8 trillion in the coming year (Puri-Mirza, 2024). Manufacturers have the responsibilities throughout the supply chain by coordinating the supply chain through third-party logistics service providers’ services (Naumov & Kholeva, 2017). Discovery of challenges and syntheses of themes for making freight transport sustainable are critical for sustainable society (Abbasi & Nilsson, 2012).  It is claimed that, besides Muslims, nowadays non-Muslims have started demanding for halal food due to the perception that halal foods are cleaner, more hygienic, hazard-free and non-toxic (Belkhatir et al., 2009;  Talib et al., 2008) in a Muslim ecosystem known as “halalan toyyiban”. In the halal food supply chain, the goal is not only to ensure customer satisfaction but also to retain halal integrity throughout whole process (Bahrudin et al., 2011). World food statistics prepared by Times Intelligence show that top ten halal food consumer countries and top ten halal food producing countries are not same; hence, supply chain matters between halal food producers and halal food consumers. Jaafar et al. (2011) argued that halal integrity of a food product remains intact as long the product is in custody of producer. Expressed and implied commitments of buyers and sellers that defines expectations and behaviours of both parties are known as trust (Pullman & Wu, 2012). Studies in various countries showed that trust plays important role in influencing consumer purchasing behaviour in the halal food industry in China (Ali et al., 2021), Belgium (Bonne & Verbeke, 2008), and Malaysia (Rahman et al., 2021). Hence, for trustworthiness, the halal food manufacturing industry must collaborate with halal supply chain as an emerging industry, both for halal integrity and customer satisfaction of halal consumers. Figure 1 presents the link between halal manufacturing and halal consumers, mediated by the halal supply chain within a halal food cycle framework.

Figure 1: Halal supply chain within Halal food cycle

Interaction of Participants within Freight Forwarding System

Freight forwarding functions cover the full range of operations and delivery services from producer to consumer (Shanova et al., 2011). Supply chain integration has a direct impact on the following four main dimensions of halal integrity:  raw materials integrity, production integrity, service integrity, and information integrity (Ali et al., 2017). To understand the stakeholders of halal freight services, we need to first understand the participants in a general freight forwarding scenario. Figure 2 is prepared based on an analysis of the interaction of participants in the freight forwarding system (Popovych et al., 2016). It shows that a freight forwarding company is connected to all other participants in a supply chain ecosystem.

Figure 2. Positioning a freight forwarding company in supply chain ecosystem

Critical Zone in Halal Food Product Cycle

Adoption of halal logistics is the most significant strategy influencing manufacturers’ effort to safeguard halal integrity (Yunan et al., 2020). Consensus has been achieved in the segregation of halal supply chains in terms of designated halal transport, storage and halal compliant terminals, for Muslim-majority countries, whereas in a non-Muslim-majority countries greater leniency is possible (Tieman et al., 2019). Elements of supply chain services could be classified as follows (Shyriaieva & Selivanova, 2014): 1) Chartering and transportation services, 2) Loading and unloading of cargo, 3) Warehousing, cold storage and freight handling, 4) Specialized arrangements and equipment services, 5) Registration, documentation, reception, and delivery of goods, 6) Logistics information including halal auditor services, 7) Custom services, 8) Cargo insurance, 9) Payment and financial services, 10) Networks, platforms, software and apps services, 11) Consulting, outsourcing and other forwarding services etc.

Halal integrity assurance is the key factor in building a trusted halal food supply chain in the current competitive and complex environment (Mohamed et al., 2020; Tieman et al., 2019). Consequently, it is essential for us to view halal freight forwarding in the context of the halal food product life cycle, to understand the “grey areas” or “critical zone” while building a halal supply chain service that maintain halal integrity and meet customer expectations. Grossly, when a halal food product moves beyond the manufacturers’ yard and before it arrives at distributor’s jurisdiction, during the periods of transport and transit, it remains in grey areas with higher risk of halal integrity breach. This period needs to be identified as critical zone for halal integrity in the halal food product life cycle, which demands further study and research. Figure 3 shows the critical zones for halal integrity breach in the halal food product life cycle.

Figure 3. Critical zone in life cycle of a Halal food product for Halal integrity

Halal Integrity Framework in HSCE

Research shows an association between global ethics, environmental purchasing, sustainable packaging, moral responsibility, halal supply chain management and halal sustainable supply chain performance (Ibrahim et al., 2018). Full participation of all stakeholders or parties involved in the halal supply chain is necessary to achieve halal supply chain integrity (Samsi et al., 2011). These stakeholders include companies, agents, logistic providers, employees, consultants, auditors, government authorities, NGOs, religious bodies, certification and monitoring bodies, associations, and the halal consumers. Halal-certified products instil confidence and trust that the purchased product comply with Sharia law (Zulfakar et al., 2014). According to Riaz and Chaudry (2004) and Talib et al. (2008), a halal certificate of compliance or halal logo, which shows that the product has sufficiently met Islamic dietary standard, must be authorized and issued by a trustworthy Islamic organisation to prevent from any fraud, fake, and misleading logo or certificate. The lack of halal standards has caused slow growth in the halal industry (Hassan, 2007). Evans (2007) noted that halal standards should be moderate instead of being too strict or too lenient to prevent fraudulent actions. Evans (2011) reiterated the need of one international halal standard for global acceptability and smooth operations. A comprehensive traceability system could increase halal transparency and strengthen halal integrity (Zulfakar et al., 2014). However, many researchers agree that current technology may not be adequate to ensure reliability, traceability, security, and real-time monitoring of halal integrity (Anir et al., 2008). Researchers also identified the need for dedicated assets, utensils, and handling equipment for halal integrity assurance (Ahmad & Shariff, 2016; Khan, 2009; Zulfakar et al., 2014). Jaafar et al. (2011) believes that creating a dedicated team of workers to handle halal items would reduce the possibility of cross-contamination to a minimum level, avoid unnecessary human error, and thus help protect the integrity of halal supply chain. According to Pullman and Wu (2012), trust is the expectations that buyers and sellers will behave in accordance with express or implied commitments. As business evolved, trust in the supply chain is now based on the halal logo or halal certification (Tieman et al., 2019). Research identified that government roles in ensuring halal food supply chain integrity include planning, developing, implementing, regulating, promoting, and educating halal industrial players and halal consumers (Samsi et al., 2011). Deuraseh (2019) noted that the Department of Syariah Affairs from the Ministry of Religious Affairs in Brunei is authorized to handle halal matters in the country and is supported by the Halal Food Control Division (HFCD).

In Malaysia, the Department of Islamic Development Malaysia (JAKIM), a governing body supported by multiple government agencies, is responsible for halal certification matters in Malaysia, with sufficient backing from the government (Zulfakar et al., 2014). To overcome the issues and challenges, practitioners and academicians, together with policymakers, must standardize all the requirements, such as the acts, rules and regulations, and to make efforts successful (Selim et al., 2018). Figure 4 depicts the components of halal supply chain eco system’s stakeholders, operating components, processes, and policy framework, based on Zulfakar et al’s (2014) research on halal integrity frameworks.

Figure 4. Halal supply chain integrity framework

Sustainability Dimensions for Halal Supply Chain Industry

Halal values have an innovative impact on product and service excellence, economic competitiveness, and sustainability (Karia, 2019). Research in Brunei Darussalam identified five factors impeding halal logistics growth in the country: the lack of trained halal logisticians, the absence of halal logistics standards, the paucity of halal logistics infrastructure, weak demand, and intense competition (Talib, 2021). As an emerging industry, the Halal Supply Chain needs to actively consider the following sustainability dimensions, in addition to halal integrity and customer satisfaction, for future growth in the current complex and competitive context.

Profiling International Freight Forwarders to Understand the Industry Trends, Models and Weaknesses

Relationship marketing management and cost switching have a positive impact on service quality and customer satisfaction in the airfreight forwarding industry. The integration of complex supply chain services could improve sustainability (Yang & Chao, 2017). International freight forwarders (IFFs) are typically employed by companies of all sizes to facilitate their cross-border consignments (Lambert et al., 1998). IFF functions include booking vessel space or slots, preparing relevant documentation, paying freight charges, and arranging inland transportation services (Coyle et al., 2003). The size of supply chain company is particularly relevant in terms of revenue generation and employment creation, with suggestions that smaller forwarders face a higher risk of extinction (Schwartz, 1998).

Murphy and Daley (1996), in their research on the USA market profiling international freight forwarders, identified key issues such as technology and Internet usage, ocean and air freight forwarding, custom-house brokerage, non-vessel operating common carriers, and electronic data interchange as important features of supply chain companies. They also suggested four characteristics for corporate demographic profiling in the freight forwarding industry: 1) firm age from year of incorporation, 2) firm size in terms of the number of employees, 3) firm revenue from annual gross earnings, and 4) firm diversification from other intermediary services.

Similar efforts could be made in the halal supply chain industry for corporate demographic profiling to understand the characteristics and sustainability potential of halal supply chain ecosystem providers, especially in Malaysia as a “Global Halal Hub”.

Measurement of Halal Logistic Service Quality (HLSQ) in Freight Ecosystem

Service quality, particularly management-related factors, has a significant positive impact on customer satisfaction (Yeo et al., 2015). Supply chain service providers often grapple with meeting the service quality expectations and requests of clients. To successfully address these expectations, service quality must be continuously benchmarked, measured, monitored, and improved (Yeo et al., 2015). Halal Logistic Service Quality (HLSQ) should seize this opportunity to build better strategies that will attract not only Muslims consumer but also non-Muslim consumers who are willing to pay for halal logistics (Majid & Shamsudin, 2020). Managers in halal logistics service firms can use HLSQ items to evaluate their service quality and benchmark their performance against competitors (Selim et al., 2018).

Franceschini and Rafele (2000) utilized eight traditional dimensions of SERVQUAL: 1) lead time, 2) regularity, 3) reliability, 4) completeness, 5) flexibility, 6) correctness, 7) harmfulness, and 8) productivity as indicators of LSQ. Rafele (2004) later improved this by reducing eight dimensions to three: 1) information actions, 2) ways of fulfilment, and 3) tangible components for measuring LSQ. Numerous researchers argue that customer perspective should be added to the service attributes. Mentzer et al. (2001) distinguished two components: 1) physical distribution service quality (PDSQ) and 2) customer service quality. Katajajuuri et al. (2009) mentioned that LSQ consists of technical and functional components. Karim et al. (2006) proposed a two-dimensional model consisting of operational LSQ and relational LSQ. In third-party logistic (3PL), models for the quality of external logistic services were proposed (Rafiq & Jaafar, 2007). Bienstock et al. (2008) expanded a logistics service quality (LSQ) model through theoretical integration with the technology acceptance model (TAM) (Davis, 1989). Recently, using confirmatory factor analysis (CFA), Nikoličić et al. (2015) proposed a more comprehensive LSQ measuring scale, consists of five basic dimensions: 1) reliability, 2) responsiveness, 3) assurance, 4) empathy, and 5) tangibility. The Halal supply chain industry also needs to analyse and understand the SERVQUAL gap for continuous quality improvement, customer satisfaction, and the sustainability of Halal Supply Chain Ecosystem as an emerging industry theme.

Human Resource Competencies for Global Supply Chain Competitiveness

Chung et al. (2015) classified previous studies on competitiveness into four main focuses: 1) productivity, 2) efficiency, 3) competitive advantage, and 4) choice model. Scholars believe that human resource variables can significantly impact supply chain performance and competitiveness (Marwah et al., 2014). People with intangible knowledge-based resources have greater potential to create sustainable competitive advantages in a rapidly changing and challenging business environment (Pringle & Kroll, 1997). Youndt et al. (1996, p. 839) stated, “In fact, numerous researchers have recently noted that people may be the ultimate source of sustained advantage since traditional sources related to market, financial capital, and scale economies have been weakened by globalization and other economic changes”, thus reinforcing the importance of people-related competencies.

Successful implementation and execution of industrial policy heavily depend on competent personnel (Thompson & Strickland, 2003). Recruiting, developing and retaining the right employees are crucial for successful strategy execution (Hashim, 2013). From an HRM perspective, competencies are viewed as the capabilities of people (Cardy & Selvarajan, 2006). Competencies encompass a cluster of knowledge, skills, abilities, motivation, beliefs, values, and interest that relate to significant parts of the job, are associated with effective and superior performance, are observable and measurable against well-accepted standards, are linked to future strategic directions, and can be improved via training and development (Lambert & Cooper, 2000).

Hunt et al. (2005) argued that individual employee competencies could be leveraged to increase efficient and effective production of market offerings and enhance firm performance. The people dimension is especially pertinent for the supply chain to achieve most of its objectives (van Hoek, 1999). Therefore, halal supply chain firms and the industry ecosystem as a whole need to utilize the potential of human capital for sustainable development.

Dynamic Organisational Capability and Eco-innovation

The presence of halal scientific dietary standards, consumption allowances, principles and methods, halal dietary needs manuals, nutritional allowances, and hunger definitions and standards are among the various elements that can influence global food safety, security, and sustainability (Khan et al., 2018). Eco-innovations encompass a wide range of innovations, including renewable energy technologies, pollution prevention schemes, waste management equipment, eco-design products, and the adoption of biological materials (Hsiao et al., 2010). Eco-activities, when based on dynamic organisational capability (DOC), are instrumental in identifying the correct and efficient resources or processes to meet economic and environmental challenges (Burgelman et al., 2009).

Several research indicate that DOC positively impacts performance (Guide et al., 2003; Krishnan & Winter, 2010).  Eco–innovation and DOC, approached from an industrial dynamics perspective, emphasize that research should address environmental issues that are becoming integrated economic processes (Nasir & Karakaya, 2014). A firm’s long-term competitive advantage depends on its resource configuration capability (Saranga et al., 2018). Wu et al. (2016) proposed several evaluation aspects and criteria for exploring eco-innovation and dynamic organisational capability under incomplete information. The evaluation aspects and criteria are presented in Table 1.

Table 1. Evaluation aspects and criteria

Source: Wu et al. (2015)

This cross-country and cross-industry evaluation aspects and criteria could be contextualized for the sustainable development of the halal supply chain ecosystem in Malaysia and elsewhere.

Institutional Pressure and Industrial Zone Support for Motivating Sustainable Production

Indicators of forwarding enterprises’ sustainable development include: 1) the use of productive resources of the forwarding enterprise in the process of its operation within the framework of the macro logistical system of the transport market, 2) the impact of the results of the operation of forwarding companies on the environment, and 3) the social component of the operation of a forwarding enterprise as a socio-economic system (Naumov & Kholeva, 2017). Sustainable production (SP) for long-term industrial success has been promoted since the late 1990s. Several studies have examined how to reduce pollution emissions (Hankle, 2008), while others have studied resource consumption (Carlsson et al., 2011). Later SP was combined with sustainable consumptions as a systematic way for sustainable development (Akenji & Bengtsson, 2014). Therefore, in order to motivate SP among small companies, scholars urged governments to aid their financial constraints for eco-innovation (Cuerva et al., 2014). Mylan et al. (2015) found that cost reduction, customer requests, and legal requirements could be useful for the implementation of various SP-related technologies. Another trend in SP proposed identifying decoupling tools to keep economic gains while at the same time reducing environmental burdens (Nieuwenhuis & Katsifou, 2015).

In contrast, local government in China have transitioned from enforcing environment laws to supporting SP practices among companies (Rutten et al., 2014). Governmental support has demonstrated a significant positive effect on green technology practices among Chinese companies (Lin & Liang, 2011). Zhu (2016) proposed that exploratory factor analysis (EFA) with maximum likelihood and varimax rotation be used to extract the theoretical dimensions (factors) of SP practices, institutional pressure, and support from industrial zone (authorities). Both the scree plot and the initial eigenvalue tests indicate five factors for SP practices: 1) material-saving practices, 2) energy-saving practices, 3) water-saving practices, 4) land-saving practices, and 5) preventive energy and material-saving practices. The same EFA was used to identify factors for institutional pressures and support from industrial zones. Factors for institutional pressures includes coercive, normative, and mimetic types, while support from industrial zones includes various incentives and benefits offered (Zhu, 2016). Similar practices could be introduced in the halal supply chain industry for its competitiveness and sustainable growth.

Policy Incentive for Price Competition and Social Welfare in Halal Freight Ecosystem

Firms in developing countries and newer industries often benefit from cheaper labour costs. However, developing countries planning to impose climate policy measures will inevitably push these firms to face higher production cost. Wang et al. (2016) argued that firms in developing country should be given incentives to cope with the adverse impact of price competition resulting from carbon tariff policies imposed by developed countries. Many have called this controversial, questioning the legality and anti-competitive influence of carbon tariffs (Ismer & Neuhoff, 2007; Malina et al., 2012). Wang et al. (2016) showed that higher production costs would lead to a drop in sales revenue for firms and lower consumption for customers, resulting in a reduction in gross global social welfare.

To overcome such challenges, all vulnerable industries must be included in governmental policy incentive schemes. The halal supply chain industry, being greener, more environment friendly, cleaner, more hygienic, less hazardous, less toxic, and less poisonous, may struggle to remain price competitive. Hence, to ensure competitiveness of the halal supply chain as a service industry by lowering production costs for customer affordability and gross social welfare, government authorities, NGOs and other associations must develop policy incentives for this emerging halal supply chain eco system.                   

CONCLUSION

From the literature on supply chain and halal issues and the analysis conducted, we can discern the development pathway of the emerging halal supply chain ecosystem. Initially, most research focused on customer needs, customer satisfaction, and customer demand for halal product and services. As the volume of halal products increased over time, shifting halal food from a niche market to a significant share of global food trade, questions arose about ensuring halal integrity throughout the entire process, from manufacturing to transport and delivery to consumers.

This discussion of halal integrity has caused a multidimensional expansion of the halal supply chain ecosystem, encompassing stakeholders such as companies, agencies, logistic providers, government authorities, monitoring and religious agencies, auditors, freight professionals, consultants, and halal consumers. These stakeholders interact under given policies, regulations, and strategies to achieve halal integrity and trustworthiness in the services provided. Researchers have identified that halal assurance is not at risk as long as the product remains at the manufacturers’ premises. However, transportation and transit periods have become grey areas for confirming halal integrity, necessitating continuous halal monitoring of the supply chain.

In the current global economic downturn and international trade war context, assessing the competitiveness of the halal supply chain and introducing sustainability dimensions for future growth is crucial. While industry efficiency, customer demand, and the perceived eco-friendly and cleaner services provided by halal systems are preferred by a wider customers base, the higher production costs associated with these services may render the halal supply chain less competitive, challenging the sustainability of this emerging industry during current economic turmoil. Therefore, policy incentives to lower production costs and enhance gross social welfare could position the halal supply chain ecosystem on a sustainable foundations.

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