Short Review on organic food supply chain management in Malaysia

ABDULLAH E M F ALRASHIDI1, WALEED FEKRY FARIS1, AHMAD M S ARAFAT 2

1 Department Engineering, International Islamic University Malaysia (IIUM)

2 Management, Limkokwing University

MALAYSIA

Abstract: - The organic food market has not reached its maturity yet in Malaysia. Consumers of organic food

have increased in the last year. The development of organic food supply chain management shows substantial

opportunities. Although it is only a small part of the food market, it gains the interest of consumers researchers

and businessmen. Consumers became interested to know if the food they purchase is fully organic and what are

the activities involved in the supply chain management of the organic food. This paper will discuss the factor that

affects organic food supply chain management in Malaysia. In addition to that, the study discusses Malaysia’s

policy in certifying organic food and standards. Also, the challenges facing food supply chain management. This

paper will give a short review of the importance of organic food supply chain management in Malaysia which

will give the reader a clear view of the standards and concepts of organic food in Malaysia.

Key-Words: - Supply chain management, organic food, Malaysia, organic food policy.

Received: August 19, 2021. Revised: June 3, 2022. Accepted: June 14, 2022. Published: June 27, 2022.

1 Background of the study

Organic food and drinks are the new trends

nowadays. people are concerned for their health and

what they eat. Organic food can be defined as food

that is grown without using artificial chemicals or

hormones antibiotics or genetically modified

organisms. Organic foods also include fresh produce,

meats, and dairy products as well as processed foods

such as crackers, drinks, and frozen meals.

Organic foods are fresh foods like dairy, meats, and

freshly processed foods. Unlike genetically modified

organisms, organic foods are grown and processed

without synthetic fertilizers and chemicals. Organic

agriculture relies on the health of ecosystems and

soils. The supply chain value of these foods lies in

tradition, science, and innovation, looking up to

benefit the environment and people. Organic

producers have production norms upheld in all

stages, from seeding, and processing, to packaging

for consumers [1][2][3]. The process of natural and

organic farming has been becoming popular among

developing nations. North America is the largest

organic domestic market, and Europe is the largest

producer. The Middle East and Asia are third-world

countries where organic foods are broadly demanded

to eliminate poverty.

Because of the increasing population in the Middle

East, demand for food and beverages has increased.

Despite the expansion in population, people are still

looking for healthy and fresh foods over GMOs. The

GCC is the leading organic food market in the region,

mainly Saudi Arabia and the UAE. Informal content

creators and social media use has inspired the value

of staying healthy and immunity. Organic products

and chemical-free foods have become parts of

extensive conversations as people look to consume

plant-based foods [4][5][6].

The government in the UAE is focused on supporting

local organic foods. The ministry of environment in

the nation is committed to analyzing the soil,

improving farming quality, and verifying the absence

of chemicals twice a year. Positive attitudes toward

organic foods have improved organic farming, and

public institutions support the supply chain process.

End customers include restaurants that have

established their independent farms to ensure direct

sourcing of organic raw materials for their

specialized menus. Consumer perceptions are the

driving factors in the organic foods supply chain

Fig.1.

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DOI: 10.37394/232015.2022.18.89

Abdullah E. M. F. Alrashidi,

Waleed Fekry Faris, Ahmad M. S. Arafat

E-ISSN: 2224-3496

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Fig.1: Consumption of Organic Food in the UAE [7]

Organic food production and agriculture in Asia have

substantially grown. Corporate agri-food actors have

evolved through discursive and structural power

forms. Distribution in the region is domestic and

international because the rates of productivity growth

have created room for exports. The development of

the urban middle class in Southeast Asia has

popularized organic foods in the corporate retail

sector. With the government’s support, small-scale

farmers have gotten certifications and increased

access to the markets [8][9][10]. Corporate retailers

are used as intermediaries to like farmers to be local

and commercial markets. Certification and

commercialization of organic foods have attracted

more organic food suppliers and farmers in Asia.

Indonesia and China have the most prominent export-

oriented and domestic organic foods market.

Certification in Indonesia has led to organic

production of $250 million, increasing exports and

streamlining the supply chain [11][12][13][14]. EU

regulations and local government certification

regulate organic land in China. Private standards

have made regulatory agencies and governments a

part of the organic production supply chain. Organic

food has helped eliminate poverty in China [15][16].

Overpopulation created a food crisis and poverty, but

the growth of organic fresh foods provides domestic

consumption and generates revenue through exports.

Main exported organic products include soybeans,

herbal beans, green tea, and processed vegetables.

European organic foods are distributed through

different retail sectors. Some of the retail outlets

include supermarkets in France and Belgium. Spain,

Greece, and Ireland. There are specialized shops for

distributing organic foods. Discount stores are also

standard in Austrian and German markets for selling

organic foods. There are still struggles with market

realities discrepancies and value chain delivery

systems in the organic food industry [17][18]. Long

retail chains are used to add value to the products and

increase the distribution density. These are the most

common channels for retail food exports from

Europe. Short channels add value through sustainable

production methods, and food is sourced from the

producers directly Fig 2. The region has been

working to overcome supply chain challenges like

poor reliability, lack of alignment, different values,

and limited chain members’ collaboration.

Fig.2 sales channels proffered for organic food

purchase [19]

Organic farming has grown in popularity, and they

are a sustainable means for empowering middle-class

consumers and local farmers in Europe, Asia, and the

Middle East. Most of these regions have improved

organic production beyond domestic markets. Direct

channels are used to supply to grocery and speciality

stores. Conventional marketing channels have

become popular as supermarkets and hypermarkets

are used to increase organic food sales. The value

chain of organic foods depends on the products'

composition, quality, prices, and convenience.

The organic food market has not reached its maturity

yet. It is growing and developing especially in Asian

countries. Malaysia is one of the countries that’s

known for its agriculture [20][21].

2 Overview of organic food supply

chain management (OFSCM)

The main reasons behind using organic food are

human health and environmental sustainability. The

main challenge of organic food is the gain of people's

trust that the food is organically grown. The

certification and labels are given to prove what makes

a successful business in this area. The organic food

industry grew from small niche stores into

mainstream markets. The distribution channel

numbers depend on the increasing numbers of stores

that accept to promote organic food at a competitive

price. Also, the consumers' opinions matter a lot in

the case of organic food. Especially that processed

organic food has a long way to compete with the

artificially processed food that is cheaper and easily

the taste can satisfy the consumers [22][23][24].

100

YES NO

Consumption of Organic Food

Producer

31%

Pharmacy

20%

Supermarket

25%

Specialized Store

23%

Elsewhere

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Abdullah E. M. F. Alrashidi,

Waleed Fekry Faris, Ahmad M. S. Arafat

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3 Factors enhancing organic food

supply chain management in Malaysia

Organic food production is linked to a healthy

agricultural ecosystem. Instead of using modified

chemical fertilizers, organic farmers rely on dynamic

organic cycles, rich biodiversity, and biotic soil

activities. Using synthetic fertilizers is polluting the

environment, so organic farmers go for

environmentally friendly means. Consumers around

the world are increasingly choosing organic foods

because it is a safer healthier option despite costing

20%–100% more than conventional foods. Organic

food demand is a new concept in Malaysia, although

60% of organic products are imported, there is rapid

growth in the market of organic food in Malaysia.

Local demand has increased due to an increase in

consumers’ interest in organic foods, especially after

the pandemic crisis [25][26][27]. Health

consciousness has become a significant motivator for

organic food purchases. Malaysia has created

agricultural policies that regulate farming and

promote organic food production. Public trust for

organic foods has increased after introducing

certification and food standards for organic farmers

and distributors. The paper discusses the Malaysian

certificate and standard for organic food. Malaysia

uses its certification policy and regulatory measures

to manage organic food after increased local

consumption and increasing export efforts [28][29].

3.1 Organic Food Certificate

Certification of organic farming and food began with

the Malaysia Organic Certification Scheme known as

the MS 1529. The scheme provided the specific

standards to be followed and a logo to show that the

products meet organic standards. The MOS logo was

for plant-based food products, excluding livestock

and processed food. Farmers conducting primary

fresh organic foods production participated in this

certification scheme. Trained officers would inspect

farms to ensure compliance with organic standards. It

was the certification system that began the

development of Malaysian organic agriculture.

Farmers received MOS accreditation for local and

export organic products.

The Malaysian Organic Certification Program

expanded after organic food has gained popularity in

the country. The agriculture department created the

Malaysian Standard MS1529:2001 to regulate all

organic plant and animal-based products. The four

principles for the certification program are care,

fairness, ecology, and health. Farmers have to grow

food that promotes the health of plants, soils, and

humans. Meeting the balance and fairness of an

ecological ecosystem makes producers in Malaysia

MOS certified. The certification follows the EU

organic certification principles that define organic

production as a farming and food production system

that follows climate action regulations and

environmental standards. The Malaysian government

is prioritizing the production of foods using natural

processes and substances (Sulaiman, 2020). Between

2016 and 2020, the government managed to improve

organic farmers’ income by 26.7%. Organic

production has become a dual social role where it

responds to the increasing demand for natural

products while responding to animal welfare,

environmental protection, and national development

efforts.

The entire organic food value chain is regulated from

any harmful practices. Qualified products are

completely synthetic-free. Local farmers are

increasing investing in organic farming because it is

natural and cost-friendly. In addition to that, 87% of

consumers prefer certified organic foods because

they are healthier [31]. Certification helps build

consumer trust because it is proof that the food

products are free from synthetic additives,

irradiation, and harmful industrial solvents [32]. The

regulatory framework is stringent, and the label is

reassuring to consumers. The entire organic food

supply chain feels responsible for protecting the

environment by consuming foods without chemical

residues. Certification is proof of non-toxicity in the

organic food produced by the farmers or exported

from abroad.

The Malaysian certification standard covers all stages

in the value chain. The logo is included in the

production, handling, marketing, and labelling of

organic products because it is proof of compliance.

Certification protects consumers and producers from

fraud and deception through unsubstantiated claims.

Malaysia has been increasingly exporting organic

products, and the certification shows a focus on

international standards. The certification is given

after three years of producing and processing organic

foods. Farmers should apply ethical farming

practices like mulching, crop revolution, hand

weeding, intercropping, thick planting, and other

practices that improve soil health [33]. With the

department of agriculture implementing and

monitoring standards, all organic food producers

must adhere to all standards. Certified farms are

examined by the Malaysian DOA each year and 240

have been certified by 2020 [34]. The government

interest and participation in the organic food supply

chain means there will be accreditation scheme

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Abdullah E. M. F. Alrashidi,

Waleed Fekry Faris, Ahmad M. S. Arafat

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changes to respond to new standards and

preferences.

3.2 Organic Food Standards

The government’s commitment to organic food

production has led to the introduction of the organic

agricultural practice. There is a standard built for the

Farm Certification Scheme for good practices.

Malaysia has an integrated system that manages any

production hazards that deal with the farm, input,

process, and output of organic agricultural

production. The standard ensures that anyone offered

the certification scheme maintains sustainability, and

productivity and provides socially acceptable

products [35]. The standards are measured during

every inspection to ensure all processes are followed,

and foods meet safety and quality standards.

Malaysian Standard MS1784 follows national hazard

control laws related to food safety, consumer health,

and environmental protection.

The standard document is crucial because it is used

as a reference point by key organic production

players like farmers and producers. The guiding rules

lie under a ‘must’ and ‘encouraged’ spectrum. Some

of the rules are mandatory and certified members

must follow them to achieve Good Agricultural

Practice objectives. Farmers must strictly follow the

standards because they are the first step in the supply

chain [36][37]. Non-compliance means losing

certification and facing sustainability and food safety

legal action from the department of agriculture.

Encouraged rules are not mandatory in organic food

production, but they make the process better. Impacts

are not hazardous if these rules are not followed.

They are ethical organic agriculture practices like

hand weeding and intercropping. If the encouraged

standards are ignored, it is not a threat to food safety,

environmental well-being, and ecosystem

sustainability. Good Agricultural Practice has

become a priority in Malaysia as the awareness about

organic foods improved and production expanded to

an international scale.

Increased local production and government

involvement in Malaysian agricultural practices has

popularized organic supply chain certification and

regulation standards. Although organic agriculture is

still a new concept in Malaysia, it has made massive

progress through consumer awareness and

government recognition. The regulatory system

creates a solid organic food supply chain system and

achieves national agriculture objectives. Although

the certification process might be too complex for

small-scale farmers, they have made notable progress

in familiarizing themselves with the process

[38][39][40]. The certification and standards are

necessary to ensure organic farmers and retailers

meet food quality and safety standards. The

Malaysian Department of agriculture needs to

identify small-scale organic farmers who might need

assistance understanding and meeting organic

certification and Good Agricultural Practice

standards [41].

4 Supply chain management

challenges in the Malaysian organic

food market

Malaysia’s organic food sector-main problem is the

Inconsistency between market realities, the value

delivery system and the value chain. For organic food

in Malaysia the separate distribution can be described

as long channels and short channels, where in long

channels the retail chains add the value through the

price and high distribution intensity, while in short

channels directly from the producers, they add value

through manufacture methods and sustainably

practices [42].

The structure and performance of organic food

supply chain management is the main concern of

most studies. Issues concerning structure and

performance are high operating cost, poor reliability

of supply, lack of collaboration among chain

members, the sources of motivation are different for

the people who represent the chain and the values as

well and most importantly lack of information flow.

In addition to that, supply chain management (SCM)

faces challenges regarding the food origin and

distance to import it, the size of the farms and the

market unpredictability. The distance from the place

of production until it reaches the consumer affects the

idea of organic food which in many cases it can be

ruined if the time of production and transportation is

long. Such as some types of vegetables where it

cannot last as long as the non-organic. In this regards

the origin of organic food plays a big role in the

predictive and confidence value of the product. The

organic food sector is mainly owned by privet

businesses such as families that manage small farms.

Usually, these farms are affected majorly by the

economic scale [43].

The instability of organic food is defined by the

fact that fresh produce is perishable, also they are

seasonal, in addition to the fact they depend on the

change in the climate. These characteristics affect the

certainty of the market price and quantities highly.

This has discouraged the organic food owners from

getting into contracts in the produce trade.

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Waleed Fekry Faris, Ahmad M. S. Arafat

E-ISSN: 2224-3496

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In regard to the distribution of the organic food

strategies, there are two types of sales channels. The

first one is the hypermarkets which are the most

popular in Malaysia, and the second one is a direct

sale where the organic product is sold directly

through specialist stores [44][45].

The market for organic food is growing in Malaysia.

And the number of stores and organic brands is

increasing. Malaysia's market also depends on

exporting organic products from neighbouring

countries such as Australia.

The operating price of organic products is very high

compared with non-organic products. this affects the

supply chain management of organic food. Also, the

weak communication between supply chain members

slows down the process of OFSCM [46].

5 Conclusion

This paper discussed the challenges and concept of

organic food supply chain management. Growing

organic food requires traditional methods that do not

include using artificial chemicals. Traditional

methods require more manpower and time. This

plays a big part in the supply chain management of

organic food. In order to meet the demand of the

customers, the food must be available as a

replacement for non-organic. While nowadays food

is produced in large number and artificial methods

are practised, which require a market of organic food

that interest a small number of customers people in

the present. This market can grow although the

population is growing, due to the increasing

awareness of health and the bad effect of non-organic

food in Malaysia. Many challenges face the supply

chain of organic food in Malaysia.

Including producing an organic product that

competes with the non-organic which is 20%-100%

cheaper than organic food. Malaysia’s supply chain

management must be improved in terms of

shortening the time transporting the product from the

farm to the shelf and reducing the price of organic

products. Communication between retail and farmers

must be improved. And the production of organic

products must increase locally instead of exporting

from abroad. It is suggested to work on supply chain

mapping and traceability to improve the OFSCM.

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Waleed Fekry Faris, Ahmad M. S. Arafat

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3.pdf

Contribution of individual authors to

the creation of a scientific article

Abdullah E M F Alrashidi carried out the writing

and research of the article, Waleed Fekry Faris

worked on the editing of the review paper, and

Ahmad M S Arafat was responsible for the

Statistics.

WSEAS TRANSACTIONS on ENVIRONMENT and DEVELOPMENT

DOI: 10.37394/232015.2022.18.89

Abdullah E. M. F. Alrashidi,

Waleed Fekry Faris, Ahmad M. S. Arafat

E-ISSN: 2224-3496

943

Volume 18, 2022

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