Supply Chain Relationships Of Khong Guan Expert Answer

Existing Supply Chain Relationships & Implications:

Khong Guan is involved in the trading and distribution businesses in Malaysia. It supplies Fast Moving Consumer Goods and food ingredients via its subsidiaries, TGF and SHC. The Group’s 30% associate, UMF, is a diversified group dealing in wheat flour, oatmeal, pulses, cooking oils, cereals and other investments. UMF group currently exports to over 30 countries in Asia, the Middle East, and Africa. In Singapore, Khong Guan continues to supply good quality wheat flour from UMF’s wheat flour mill in Penang, Malaysia, to local food manufacturers and bakeries. Khong Guan Limited, (2019).

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For the objective of business expansion, and the increase in the production capacity, Khong Guan Limited built and started off with a much bigger production facility in Malaysia, after manufacturing in Singapore. This expansion, and several more endeavors, like association with United Malayan Flour Sdn Bhd also made way for the new factory to be able to procure and distribute flour to the parent biscuit manufacturing facilities, and to other buyers as well. This relationship between the procurer and supplier of the flour and other wheat related products is very beneficial for the business in many ways. First, it removes the dependency on different other suppliers, which could exploit the company for profits, while the associated supplier company would keep the benefit of the parent company as its utmost priority. This relationship calls for reduction in costs, and promotes ease of business.

Second, because that the suppliers are based in a region where the labor and property costs are low, and the access to the flour producing mainland is easy, there is a definite surety of smooth supply of raw material. While the business offices in Singapore have the ever-growing and smooth access to the global markets, the combination of these two actors in the supply chain are strategically very favorable for the business and the stakeholder community.

Khong Guan allows its supply chain actors to benefit from Khong Guan’s profits. This in turn encourages suppliers and distributors to improve their processes and achieve economies of scale, reducing Khong Guan’s total cost. Hence, when there are cost savings for Khong Guan, their suppliers and distributors will also benefit from an increase in equity. Annual Report, (2019).

Supply Chain Sustainability

Khong Guan recognizes the importance of sustainability and has a Sustainability Committee that keep sustainability practices in check. The group’s products and services meet the requirements of its customers and the regulatory bodies of Malaysia and Singapore. Khong Guan and all its subsidiaries focus on product safety and compliance with local laws and regulations to deliver quality products. They have also long focused on developing their human resources to ensure sustainable economic performance. Khong Guan Limited, (2019).

Khong Guan has procedures, especially in KGL’s 30% associate, United Malayan Flour (UMF), in place to enforce good labor practices in all its operations. It provides training opportunities for continuous employee development in all its subsidies.

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SHC is an established importer and distributor of high-quality flour and starches with value pricing and reliable service. The wheat flour and starch products are halal certified by Jabatan Kemajuan Islam Malaysia (JAKIM). Sweehinchan, (2017).

TGF commenced business as an importer and distributor of flour and biscuits. It engages in marketing the group’s products for the state of Sabah. Today, TGF has grown into a full-fledged trading house that markets and distributes consumer products, from different brands throughout Sabah. Khong Guan Limited, (2019).

Training and Engagement

Khong Guan is committed to engage all its stakeholders as part of its continued sustainability endeavors. The group engages with the stakeholders in a variety of formal and informal settings from the annual general meeting to ongoing dialogue with partners and suppliers on how to improve the products and supply chains through supplier surveys, business meetings with critical suppliers, and supplier factory audit. Khong Guan Limited, (2019).

Labor Practices and Decent Work

Khong Guan is committed to ensuring that there is no forced or compulsory labor in any part of the business and in their supply chain partners. All subsidiaries, including TGF and SHC are expected to adhere to these same policies and the same is expected from all its business partners and associates. Khong Guan Limited, (2019).

Khong Guan provides maternity leave for female staff in accordance with local labor laws. In Singapore, Khong Guan provides 12 weeks of paid maternity leave for non-Singapore nationals, and 16 weeks for Singapore nationals. In Malaysia, SHC and TGF provide 60 days paid maternity leave. Khong Guan Limited, (2019).

Environment

Khong Guan remains committed to minimizing its environmental impact in all areas of the Group’s operations valuing and protecting the planet’s natural resources, this means supporting long-term economic growth without negatively impacting environmental aspects of the planet. Assessment of suppliers and manufacturers is done regularly to make sure they adhere to water and energy conservation practices. Khong Guan Limited, (2019),

The Group has internal processes to ensure risks are minimized and that all potential hazards are identified and precautions are taken. UMF conducts safety training programmes annually. These include safety personal protective equipment (PPE) training and fire drills. In addition, they conduct off-site training for their staff in specialized areas such as planning for chemical handling and confined space operations. Khong Guan Limited, (2019).

Memberships in Business Associations

Khong Guan’s companies are members of a number of associations of which most Singaporean and Malaysian businesses in the same sector are members too. These include a number of business federations and food manufacturer’s associations. Khong Guan Limited, (2019).

In Singapore, they are the Singapore Business Federation (SBF), Food Manufacturers Association (FMA) and Singapore Bakery & Confectionery Trade Association (SBCTA).

In Malaysia, they are the Federation of Malaysian Manufacturers (FMM), and Malaysian Employers Federation (MEF). Khong Guan Limited, (2019).

Through participation in these associations, Khong Guan endeavors to contribute to the overall quality standards of products and services, where applicable, and ethics, sustainability of resources and other initiatives.

Sustainable approach to business helps in ensuring that partners, employees, suppliers, manufacturers, and retailers all strive to operate in highly collaborative environments enabling enhanced benefits to the environment and working conditions. Khong Guan believes in instilling its employees, suppliers and manufacturers with a culture of compliance and a high standard of ethics in carrying out their duties. This would in turn mitigate any non-compliance because good governance would allow the Group to manage its risks and opportunities, and deliver sustainable returns.

References:

Annual Report, (2019). Retrieved on September 21, 2020, from http://www.khongguanlimited.com/wp-content/uploads/2020/03/KGL-Annual-Report-2019.pdf

Khong Guan Limited, (2019). Sustainability Report. Retrieved on September 21, 2020, from https://links.sgx.com/FileOpen/KGL-Sustainability%20Report-2019.ashx?App=Announcement&FileID=591568

Sweehinchan, (2017). Retrieved on September 21, 2020, from http://www.sweehinchan.com.my/our-company/