Halal Purchasing

• Purchasing


  The professional buying done by organisations
• Purchasing defines the buyer-supplier relationship
• Purchasing


  A key business management function
• Reasons purchasing is a critical halal business management function


  • Purchasing guarantees all products and services sourced are halal and compliant with halal certification requirements
  • Purchasing builds, maintains, and controls a sustainable supplier base with the appropriate and valid halal certificates
  • Purchasing ensures all supply chain partners contracted by the company are halal compliant, which is enforced through contractual agreement and supplier audits
  • Purchasing screens halal purchase market developments, providing intelligence on the supply risk for commodity categories identified
• Purchasing will need to maintain excellent relationships with other departments, such as research and development, production, logistics, and marketing and sales
• Early involvement of purchasing is mission-critical for effective halal purchasing
• The halal industry traditionally has been addressing halal at the 'specification stage' only
• This is a myopic view of halal purchasing, which will result in an unstable halal purchasing and halal assurance system (HAS) for any halal-certified organisation
• Halal procurement maturity model


  Provides guidance in establishing a solid halal purchasing function
• Stages of the halal procurement maturity model


  • Viewing halal compliance as an opportunity
  • Making supply chains halal
  • Making value chains halal
• Stage 1: Viewing halal compliance as an opportunity


  • Challenge: To ensure that pro-active halal compliance provides a competitive advantage for the company
  • Competencies: Products of the company are halal-certified; Halal Committee is established; Halal Policy is defined
  • Purchasing opportunities: Assessing halal compliance of supplier base; Using compliance to induce supply chain partners to obtain halal certification
• Stage 2: Making supply chains halal


  • Challenge: To support a transition to a halal supply chain
  • Competencies: A halal purchasing team is established; The skills to audit suppliers; The ability to generate real support for halal supply chains; The ability to redesign halal supply chains
  • Purchasing opportunities: Audit high-risk suppliers to ensure that their operations comply with your halal standard(s); Harmonisation of halal standards used in the supply chain; Implement improvements in the procurement strategy and purchasing processes
• Stage 3: Making value chains halal


  • Challenge: To support a transition to a halal value chain
  • Competencies: Expertise in Islamic banking and financing; The ability to redesign products that are less animal-based and more sustainable
  • Purchasing opportunities: Review purchasing contracts; Replace animal-based ingredients with plant-based ingredients; ensuring the environmental sustainability of suppliers
• Halal Compliance Matrix


  A tool to assess the current halal compliance of all suppliers in terms of halal certification for commodity categories where halal is important
• The Halal Compliance Matrix has two axes: one for the halal commodity categories and one for halal compliance
• The total halal compliance of the supplier base is equal to the area: I/(area I+ areas II)
• In the sourcing of animal-based ingredients, special attention is paid to the specification of halal, namely machine slaughtered [yes/no] and stunning [yes/no]
• Halal purchasing team


  A cross-functional team tasked with identifying, selecting, and managing suppliers for halal relevant product groups
• High-risk suppliers, such as suppliers of animal-based products or suppliers based in a non-Muslim country, require a more stringent auditing process compared to other suppliers
• The halal purchasing team is responsible for harmonising halal standards of suppliers, through an active dialogue with the domestic halal authority and their suppliers
• The halal purchasing team is responsible for identifying and implementing any changes required in the procurement strategy and purchasing processes of the company
• Islam prohibits interest, excessive ambiguity, and gambling (speculation)
• Islamic banking products and insurance (takaful), where possible, are used at the third stage of the halal procurement maturity model
• The halal purchasing team is an important partner in replacing animal-based ingredients with plant-based ingredients
• The halal purchasing team is responsible for ensuring the environmental sustainability of its suppliers
• Halal purchasing function


  Consists of three building blocks: halal policy, procurement strategy, and purchasing process
• Halal procurement strategy


  Based on the importance of purchasing and supply risk
• Procurement strategies for different quadrants of the Kraljic Portfolio Matrix


  • Routine product: Reduce the number of suppliers and reduce internal administrative costs
  • Leverage product: Exploit power position for the advantage of the buying company, and medium-term contracts
  • Strategic product: Long-term (win-win) supply relationship, contingency planning, and vendor control
  • Bottleneck product: Volume insurance (at cost premium if necessary), control of vendors, and backup plans
• Halal has an impact on the importance of purchasing for producers of halal sensitive products, namely: 'Is the product animal-based?' [yes/no]
• Halal has an impact on the supply risk based on the country of the supplier: 'Is the supply chain partner based in a non-Muslim country?' [yes/no]
• Halal leads to stronger partnerships with suppliers and adopting various strategies to secure continuity of supply
• Horizontal collaboration in purchasing


  Cooperating with other purchasing organisations (competitors and/or non-competitors) to create synergy advantages
• Possible horizontal collaboration models in halal purchasing


  • Joint procurement team
  • Franchise formula or cooperative: under one corporate brand
  • Purchasing consortium: independent companies cooperating
  • Outsourced purchasing: external purchasing organisation
• Horizontal collaboration in purchasing


  • Essential for bottleneck products to reduce supply risk
  • Relevant for non-animal-based ingredients and additives sourced from non-Muslim countries, and sourcing of cool chain transport and warehousing solutions
  • Allows harvesting synergy advantages that are often left on the table
• Horizontal collaboration models in halal purchasing


  • Joint procurement team
  • Franchise formula or cooperative
  • Direct collaboration between different (and competing) organisations
  • Project purchasing team
  • Activity outsourcing
  • Supply Chain Control Tower
• Joint procurement team


  • Franchise formula or cooperative under one corporate brand leveraging purchasing volume, asset control, inventory sharing, warehousing and transport sharing, and standardisation of halal assurance system and certification
  • Direct collaboration between different (and competing) organisations leveraging purchasing volume, inventory sharing, and harmonisation of halal standards
• Project purchasing team


  • Crisis management in case of a lockdown situation, humanitarian aid, or during a natural disaster, combining transport and warehousing to ensure continuity of supply and deliveries
  • Harmonisation of halal standards for supplies to Hajj/Umrah pilgrims in Mecca and Medina, combining transport and warehousing needs
• Activity outsourcing


  • Sourcing of halal ingredients through a specialised marketplace
  • Halal transport, warehouse, value-added logistics outsourcing to a halal-certified third-party logistics service provider
  • Outsourcing of product packaging or bottling to a halal-certified packaging/bottling company
• Supply Chain Control Tower


  Operational control tower provided by non-asset based fourth-party logistics service providers, supporting purchase order planning, supply chain visibility, and exception management
• The preference for one or a combination of horizontal collaboration models depends on several factors, such as: synergy potential, halal maturity of an organisation, halal procurement maturity, business culture, size of an organisation, and location in the halal cluster