Supply Chain Relationship

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).

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. 

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).