Applying the Work Systems Method to Investigate the Operational Efficiency of the Halal Certification System Nurulhuda Nordin, Universiti Teknologi MARA, Shah Alam, Malaysia,
[email protected] Nor Laila Md Noor, Universiti Teknologi MARA, Shah Alam, Malaysia.
[email protected] Zainal Samicho, Universiti Teknologi MARA, Malaysia,
[email protected]
Abstract In providing the assurance to Muslim consumers on the halal quality of products and services, halal suppliers and manufacturers must abide to the halal quality regulation enforced by either the public or semi-public or private regulatory bodies offering halal certification. These regulatory bodies play an important role within the halal supply chain as their operational efficiency may affect the efficiency and the competitiveness of the halal industry. As the issuance of halal certificates is dependent on the practices of the certifying regulatory bodies a strategic approach to halal industry competiveness should attempt to have a holistic view of the halal certification system. This research seeks to uncover the practices of halal certification using the work systems method as the framework for inquiry to give a holistic perspective of the contextual situation in the halal certification landscape. Here, the halal certification system is treated as a special case of a supply chain work system using the Malaysian halal certification system as the case study. For the inquiry process a multistakeholder perspective of the supply and demand side of halal certification was undertaken where face-to-face interviews with both of the supply side and demand side of halal certificates were conducted in addition to document reviews. A qualitative analysis of the problems, opportunities and constraints vetted from the findings with stakeholders is mapped into a halal value chain and halal work systems snapshots to give a comprehensive view of the operational efficiency of the halal certification system. Keywords: work system, quality management systems, value chain, halal information systems, strategic approach
Introduction The tremendous growth in the global demand for halal products has now changed the perception of halal, where halal is no longer about religious matter but has ascended to be a global symbol for quality assurance (Nik Maheran, et al 2009). This global phenomenon is the back drop of the pressing issues of the strategic approach towards managing the growth of the halal market and the competitiveness of players in the halal industry. This is because the growth of the huge demand of halal food products will naturally scale up the demand for halal certificates and logo. The halal market consists of industry players who are suppliers from several nations irrespective of their religious belief. To support this increasing need for halal certification, the halal industry has taken steps to establish their halal certification systems as part of the halal assurance system as halal certification and verification is a key method for bringing added assurance to a particular halal brand. At present several countries have established their own halal certification systems that are either controlled by the government or private organization or communities who are concerned with the halal assurance. This study was conducted to determine the operational efficiency of the halal certification system using the Malaysian halal certification system as the case study. To conduct this study a multi-stakeholder perspective of the supply and demand side of halal certification was undertaken to uncover a holistic view of the situation. To carry out this investigation the framework of the work systems method was used to comprehend the static and dynamic perspective of the system through the representation of the halal value chain and the halal work systems snapshots.
Literature Review Halal Quality Management System Although the subject of halal is receiving an increasing attention globally, the literature of halal research is quite restricted. Research on halal is currently centered on issues of halal market positioning and growth (Nik Maheran, et al 2009; Nor Azman 2010; Nik Hadiyan & Tajul Ariffin 2012), halal logistic (Bruil 2010; Waarden & van Dalem 2010) and halal quality management (Mariam 2004; Soong 2007; Hayati, et al 2008; Ceranić, &. Božinović 2009; Nurulhuda,et al 2010).
Standards for halal management and halal system are similar in terms of shariah principles but may differ in the practice and management. Currently, issues of halal quality management are centered on the issues of establishing reputations and credibility of the halal certification as the market for halal certificates is divided into an organized structure and unorganized structure. A structured organization is seen in the halal markets of countries like Malaysia, Thailand, Singapore and Indonesia and the largely unorganized structure is seen in countries where Muslims are not majority as in the case of Nederland (Bruil 2010) and Serbia (Waarden & van Dalem 2010). Specific work on halal certification in Nurulhuda, et al (2010) pointed towards the importance of understanding the halal value chain to address issues of halal certification from a strategic management perspective. Nurulhuda, et al (2010) also raised up the need for a further analysis to address the efficiency of the halal certification to uncover the point of inefficiency that may take place. The Malaysian Halal Certification System The Malaysian government has announced their intention of developing Malaysia as an international halal food hub to increase the country’s export by capturing the global halal food market (Mariam 2004). Malaysia is one of the countries whose halal certification is issued by the Government. In addition, Malaysia also has a halal standard, the MS 1500:2004 Malaysian Halal Standard. Malaysia is trying to promote the standard which can be replicated by other countries as a coherent yard stick for halal certification (Nik Maheran, et al 2009). The halal certification bodies bodies in Malaysia comprises of certification bodies at the federal and state level authorities which represent the public authorities, semi-public authorities and private independent authorities. These authorities comprises of the federal authority that is the Department of Islamic Development Malaysia (JAKIM), state Islamic religious department (JAIN), the semi-public authority, the Halal Industry Development Corporation (HDC) and private certifying body, the Islamic Food Research Centre Asia (IFRC-ASIA). However, the Malaysian government only recognizes halal certification from the federal and state certification bodies only. The Focus Group of Halal Certification Management (FGPPH) stated that the number of halal certification approval at JAKIM for the year of 2009 to 2010 has increased. This is due to the continuous actions taken by the FGPHH in order to improve the halal certification management. Table 1 shows the halal certification approvals in the years 2009 to 2010. However this figure is modest and does not reflect the potential halal applications. Table 1: Halal Certification Application and Approval Subject
Application Approved Application Disapproved Bring forward application to next year Total Application
Years
2009 1251 88 22 1361
2010 1806 158 36 2000
Porter’s Value Chain The value chain describes all activities needed to make a product and is a useful tool to measure the value created for each activity in the process of product creation. Porter’s value chain framework (Porter 1985) is presently the accepted language for both representing and analyzing the logic of firm-level value creation. According to Porter (1985) the overall value-creating logic of value chain with its generic categories of activities is valid in all industry. In seeking opportunities and possible approaches to making significant improvements in the efficiency and competitiveness of firms Porter’s value chain has been successfully used in various settings of supply chain and has extended to the supply chain in the Internet environment (Breite & Vanharanta 2004; Gabriel 2006; Ahmad & Sharma 2006). Value chain has also gone beyond the firmspecific analysis as its use has been extended to describe the dynamic flow of economic, organisational and coercive activities between producers within different sectors on a global scale (Alter 2002). The Work System Method An important theme in the information systems (IS) research lies in the area of IS implementation in a business setting. The analysis of IS implementation through the work system method (WSM) was developed and promoted by Alter in a series of publications over the last decade beginning with (Alter 2002) and has evolved into (Alter 2010). WSM is now widely accepted as one of the information systems theories (Petkoy, et al 2012). WSM provides a rigorous but non-technical
approach for business professional to visualize, analyze and identify systems problems and opportunities within their work context. The WSM consists of basic elements of a work system that comprises of (1) work practices, (2) participants, (3) information, (4) technologies1, (5) products and services, (6) customers, (7) environment, (8) infrastructure and (9) strategies. When compared to other systems methodologies, WSM seems to be more applicable than the techniques that are used to specify detailed software requirements. This is because WSM is designed to be more prescriptive and more powerful than the domain-independent systems analysis methods such as soft system methodology (Recker & Alter 2012) and is slowly gaining acceptance and used (Alter & Wright 2010). WSM also outlines twenty four principles where three of them are concerned with balancing customers’ priorities, matching process flexibility with product variability and promoting work efficiency (Ryan & Bernard 2002). The WSM offers several frameworks that aid the systems analysis. This includes the work systems snapshots. That can be used to build a working scenario.
Research Method The halal certification system in Malaysia is used as the context of this study and the scope of the study is narrowed down to the certification of halal food. Personal interviews with stakeholders from the demand and supply side of halal certification were conducted based on themes obtained from the WSM framework. An analysis of the problems, opportunities and constraints was conducted from the findings of the interview through the use of work snapshots. A value chain mapping was conducted to construct a halal value chain. Data Collection Data collection consists of face to face interviews with both the supply side and the demand side of halal certification. The interviews were conducted over one year duration due to the difficulty to access the participants. Due to the same reason the focus group interview cannot be performed. The Participants From the supply side, face to face interviews with the representatives from JAKIM, State Islamic Religious Department Selangor (JAIS), HDC and IFRC-ASIA were conducted and the participants are summarized in Table 2. Table 2: Participants from the Supply Side Certification Body Personnel Designation State of Islamic Religious Department Selangor (JAIS)
Halal Auditor/ Food Technology Lecturer
Islamic Development Department Malaysia (JAKIM)
Shariah Halal Auditor
Corporation Halal Development Sdn. Bhd.
Vice President of Halal Integrity Department Shariah Auditor/ Customer Relationship Officer Food Technology Auditor Halal Executive Officer Managing Director
Islamic Food Research Centre Asia (IFRC)
On the demand side, representatives from six processed food manufacturers were interviewed and their designations are described in Table 3. Company A
Table 3: Participants from the Demand Side Product Personnel Designation Beverage Operation Assistant Manager
B
Frozen Foods
Business Administration
C
Beverage
Marketing Executive/ Halal Executive
D
Sauce and Ketchup
Managing Director
E
Virgin Coconut Oil
Managing Director
F
Cakes and Pastry
Managing Director
The Instrument In the face-to-face interview with the supply side, the interview questions were based on six elements of the WSM framework while for the demand side the interview questions were based on four elements of the WSM framework. The questions posed for the supply side and the demand side are shown in Table 4 and Table 5 respectively.
Work system elements Process
Environment
Infrastructure
Participants
Information
Technologies
Table 4: Questions for the Supply Side Questions How the halal certification process is conducted? How long it takes to process the halal certification application? What are the problems in the halal certification process? Who are involved in the halal certification process? What are their roles in the halal certification process? Who plays important roles in halal certification process? What information that is requires in the halal certification? Which information is important in the halal certification? How the halal information is managed? How the information affect the halal certification decision making? What technology used in the halal certification? How the technology supports the halal certification process? What agencies involved in the halal certification? Is there any agencies information system that integrated with the halal information system?
Table 5: Interview Questions for the Demand Side Work system elements Process
Technology
Information
Participant
Questions
How long have you obtained your halal certificate and from which certification body did you apply the certificates? How do you apply the halal certification? Is the halal certification procedure easy to understand? What are the problems that you encounter during your application process? Is the halal certification application expensive to apply? How long it takes to complete and submit the halal application? Is the 30 working days of halal certification approval is achieved? How long it takes for you to get your halal certification? Do you think the halal certification is an easy process? Why/ Why not? Have you attend the halal certification training? Who provides the training? In your opinion, what can be done to improve the halal certification system? How halal certification benefits to your company? Are you using manual or online application? What are the technology being used in your halal application process? How do you communicate with the halal certification officer? What kinds of information (e.g. documents) required for your halal application? Is the information provided to you consistent and accurate? How do you get information about halal certification? Who help you to understand the requirement of halal application? How the halal certification officers help you to understand the halal certification procedures? Do you get the fast respond from the certification officer? Are there any other agencies that help you with the halal certification process? Who are they?
The Document Review From each of the interview visit to the authorization bodies several documents pertaining to the HC were collected. The documents include manual procedures, standards as complements to other resources collected that comprise of journals, proceedings, newspaper and magazines articles as well as Internet sources.
The Analysis The interviews were transcribed and analysed using the content analysis technique which is key-words-in-context (KWIC) [(Ryan & Barnard 2003) once the keywords were obtained based on the work system elements, the systematic search on the whole transcriptions were made to find all the instances of word or phrase. After the words were identified, the whole sentences were copied and organized into piles of similar meaning and from that the themes were determined. Thematic Analysis The themes identified from the interviews with supply side of halal certification are shown in Table 6 Table 6: Thematic Analysis from the Interview with Supply Side and Demand Side Participants Description of Themes Themes Supply Side Demand Side Halal Certification Procedures Application of Halal Certification procedures. Halal Certification Body Certification body who issue the halal certificate. Halal Certification Charges Service fee for Halal Certification application. Halal Certification Validity Duration of Halal Certification validity. Halal Certification Inspection Premise inspection conducted by the auditors. Information on Halal Certification Information needed in halal Application certification application. Halal Certification Application system Manual or online application. Halal Certification information system Technology used in applying Halal Certification and communication between the applicant and certification body. Halal Certification Problem Problems in Halal Certification Problems of Halal Certification Communication Channel Communication channel between manufacturers and the certifier. Implications Implication of Halal Certification to the manufacturers. Certification Suggestion Suggestions to improve the Halal Suggestions to improve the Certification Halal Certification The results obtained showed that there is only one common theme between the supply and demand sides of the halal certificates where both sides agree that there is a problem in the halal certification. Generally, the demand side is mainly concerned with the certification body or agency, the application procedures (manual or online), communication channel between them and the supply side, the problems of certification, the implication of certification on their business, and their suggestions to improve the certification. On the other hand the supply side is concern with the certification procedures, charges, validity and inspection in addition to the concern for an information system as the technology that supports the certification application and the communication channel between the supply and the demand sides. The views of the manufacturers on the implication of certification on their business are further illustrated below:
Company B: Company E:
Company F:
Halal certification is a certification that proves our product which the ingredients are halal, clean and we can market it to Muslims and nonmuslims. Nowadays, the non-muslims also consumed halal products… ...I get offer to market my products at one of the supermarket in ‘N’. But, I cannot market my products because there is rules in ‘N’ which products without halal certificate cannot be marketed in any shop or hypermarket. ...I have to bear cost of renewal my local council license which is RM700 per year and I still did not get my halal certificate from federal certification body. ... First, the delayed of getting halal certificate affected my export to Abu Dhabi. Second, my container was rejected at Brunei due to the unrecognised of XYZ halal logo.
Noticeable is that the supply side did not comment on the impact of the halal certification on the demand side. A further analysis on the actors and their responsibilities and information needs of halal certification revealed the following findings from both sides: Supply Side o Checking and verifying product ingredients time-consuming (a comparison between information needs of private authorities is less stringent than public authorities) Demand Side o Slow acknowledgement of application problem. o Inconsistent information o Poor communication o Certification officers/ halal panels are too rigid during inspection and decision making o Delay in decision making It appears that on the supply side there may be issues of manpower and stringent procedure of ingredient inspection that may slow down the processing of the application. The analysis showed that the information needs for the halal certification application from the government and semi-government halal certification authorities are more stringent than the information needs of the private halal certification authority. This may be one reason for faster halal certification processing from private authority. On the demand side, the issue of communication is again emphasized in addition to the concern for the rigidity in halal inspection procedures and certification approval decision making.
The Works Systems Snapshots From the analysis, the work system snapshot for the halal certification process for both the demand and supply sides were constructed. Appendix I demonstrate the work system snapshot for the manufacturers and state halal certification authority. From the snapshots, the manufacturers’ views on the halal certification problems and their causes are illustrated. The findings showed that certification bodies at the state level are still using manual application system that requires manufacturers to collect the application form from the state religious department at each state. Secondly, the state level halal certification process involves multiple agencies with different structure and implementation and often involved internal and external officers in the inspection process. This may give rise to coordination problem for the inspection visit and the application approval decision making. The Value Chain Mapping A value chain mapping is performed where the halal certification system is mapped to the value chain that was constructed based on a standard format with three elements showing the interactions between the (a) processes, (b) information and (c) actors. The mapped halal certification processes and the problems identified during the interview were tagged at the appropriate value points. A further mapping was performed to integrate the process flow of the halal certification with an elaboration of the operational procedures, the information needs, actors and communication media at each value point. The halal value chain is shown in Appendix II. The concern for communication with certification bodies may be overcome by the availability of a halal information portal that helps the demand side track down the processing stage of their application in addition to the traditional means of communication.
Conclusion This work attempts to describe the halal certification systems from a holistic perspective as a strategic move to improve the operational efficiency of halal certification. The approach of analysing the halal certification system from the dual perspective of the demand and supply side of halal certification illustrated important themes related to the problem of the implementation of a halal certification system, using the Malaysian halal certification system as the case study. The WSM framework is used as the framework for inquiry to give a holistic perspective of halal certification system that is being analysed. The halal WSM snapshots and the halal value chain developed through analysis work based on the WSM framework provided a holistic illustration of the halal certification system. This illustration facilitates the understanding of halal certification system by identifying the potential continuous improvement in the operational efficiency of the halal certification. In addition this research enriched the literature of the WSM framework which currently lacks of illustration on how WSM framework can be used to describe work systems situation. With this illustration, it strengthened the argument on the usefulness of the WSM framework as a technique of systems analysis for gaining a better insight of work systems requirements from the perspective of the business phenomena model. This work is part of a continuing work to describe the halal ecosystem as a strategic approach to gain competitive advantage for the halal industry.
ACKNOWLEDGMENT We would like to extend our gratitude to Mariam Abdul Latif, formerly from JAKIM and HDC who has given her kind assistance to access stakeholders for our interviews. Without her assistance we are not in the position to continue with the investigation.
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APPENDIX 1 MANUFACTURERS’ WORK SYSTEM SNAPSHOT Customers Products and Services The manufacturers are concerned that it takes so long to get halal certificate and their businesses are affected because of this problem. Manufacturer Application form for halal certification Halal certification officer Halal certificate Halal certification panel Halal food information (products and ingredients) Inspection report Lab test report Payment Work Practices (Major Activities or Processes) Manufacturer takes application form at the State Islamic Religious Department (JAIN). Manufacturer fills application form and submits the form with the supporting documents. Halal certification officer examines and verifies documents. Halal certification officer issues an acknowledgement letter to manufacturer for the incomplete application. Manufacturer sends product sample to lab test. Manufacturer submits the lab test result to Halal certification officer. Halal certification officer issues letter for certification fee. Manufacturer makes payment. Halal certification officers and Halal certification panels conduct premise inspection (ingredients, storage, processing, machinery, etc.). Halal certification officer gives general inspection report and advises to manufacturer. Halal certification panel approve reports which comply with halal standard set. Halal certification officer issues the halal certificate to successful manufacturer. Participants Information Technologies Manufacturer Manual procedure of halal certification Telephone Halal certification officer Application form Fax Halal certification panel Supporting document (company profile, map, etc) Product information (food ingredient, sources, etc) Food Act 1983 Lab test result Inspection report (recommendation/comment) Halal certification panel decision STATE HALAL CERTIFICATION AUTHORITY’S WORK SYSTEM SNAPSHOT Customers Products and Services Research and Development Unit State of Islamic Religious Department Selangor (JAIS) work system for halal certification system starts with receiving an application and ends with issuance of halal certificate or a formal letter of failure. Halal applicant Application form for halal certification Administration Halal certificate Halal auditors (technical and shariah) Halal food information (products and ingredients) Halal certification panel Auditor’s report Payment of fee Work Practices (Major Activities or Processes) Applicant fills application form manually. Applicant submits supporting documents for the halal certification application. Administration officer processes all the documents. Administration issues acknowledgement letter to applicants. For cases of incomplete application, supporting documents are requested. Auditors examine, verify documents and determine certification fee. Administration issues letter for certification fee to applicants. Halal auditors (technical and shariah) conduct premise audit (site audit) (ingredients, storage, processing, machinery, etc.). Halal auditor (technical) will conduct product sampling for analysis, if necessary. Applicant submits the lab test result to auditors. Halal auditors write audit report and submit to halal certification panel for approval. Halal certification panel approve audit reports which comply with the halal standards. Administration issues the halal certificate to successful applicants and acknowledgement letter to those who failed and for further correction. Participants Information Technologies Halal auditors (shariah & technical) Fatwa and Halal Act 2011 e-Halal system Halal applicant Malaysian Halal Standards (MS) Internet Halal certification panel JAKIM Manual Procedure of Halal Certification Telephone Administration Applicant’s supporting document (company profile, map, etc) E-mail National Fatwa Council Product information (food ingredient, sources, etc) Fax Halal certification application form Lab test result Auditor report (recommendation/comment) Halal certification panel decision.
APPENDIX II VALUE CHAIN OF HALAL CERTIFICATION Application / Document Approval
OPERATIONAL
Receive Application & Supporting Documents Print & Compile Application & Documents
Check & Verify Application & Documents
DATA
Issue certification fee and Receive fee
Premise Inspection
Panel Committee/
Issuance of
Monitoring
Appeal Committee
Halal
and
Prepare Inspection Schedule
Internal Pre-meeting Halal Certification
PrepareCertification List of Approval / Rejected
Enforcement Prepare Monitoring Schedule
Re-check Application & Documents
Halal Certification Panel Approval Meeting
Prepare & Print Halal Certificate
Conduct Premise Inspection
Conduct Premise Inspection
Approve or Reject Application
Send Halal Certification
Issue General/NonConformant Report Write Report
Issue General/NonConformant Report Write Online Report
Application form, Supporting documents, Certification fee, Inspection scheduled
Inspection report, Application form, Supporting document, Halal certificate
E-mail, Fax, Telephone e-Halal information system
Administration Officer Application Processing Officer
Senior Auditors Technical Auditor & Shariah Auditor
Auditors & Head of Units External Panels
Monitoring Team Secretariat Halal Certification
List of Certify Manufacturers, Slaughtering house/ Abbatoirs
