1. Role of Earned Value Management (EVM) in Performance Measurement

Project management has evolved—from Gantt charts pinned on corkboards to AI-driven dashboards analysing hundreds of data points in real time. Yet amidst this technological renaissance, one method endures: Earned Value Management (EVM). It’s not new. Its roots stretch back to the U.S. Department of Defense in the 1960s, but it continues to guide governments, corporations, and NGOs alike. Why? Because it fuses scope, time, and cost into a single performance language.

Earned value management is like a project’s truth serum. It reveals the difference between “what we planned to do” and “what we’ve actually achieved.” Managers who master it gain not only insight but foresight, but also predicting outcomes before they unfold.

“You can’t manage what you can’t measure—and you can’t measure what you don’t define.”
Earned Value Management defines performance in quantifiable terms, transforming intuition into data-driven decision-making.

Before diving into formulas or indices, let’s first build a shared understanding of what earned value really is and why it continues to be essential to project success, even in Agile or hybrid environments.

2. Foundations of Earned Value Management

a. What Is Earned Value Management?

Earned Value Management (EVM) is a systematic project control technique that measures project performance by comparing planned work, completed work, and actual costs. In essence, it answers three questions every project manager should ask:

• Where are we supposed to be? (Planned Value – PV)
• Where are we now? (Earned Value – EV)
• How much have we spent? (Actual Cost – AC)

By analysing these three components together, managers can see whether they are ahead or behind schedule, over or under budget, and, crucially, why.

b. The Three Core Variables: PV, EV, and AC

• Planned Value (PV) represents the authorised budget for work scheduled to be completed by a given point in time. It’s the baseline expectation—how much value you expected to have earned by now.
• Earned Value (EV) reflects the value of work actually performed, expressed in monetary terms using the project’s budget rate. It’s not about cost spent but value produced.
• Actual Cost (AC) is the amount actually spent for the work performed. It includes all direct and indirect costs associated with the delivered portion.

When these three are compared, the real story of project performance unfolds. If EV exceeds PV, your project is ahead of schedule; if EV exceeds AC, you’re under budget. But if both fall short, alarms should ring.

c. The Power of Integration

What makes EVM revolutionary is its integrative nature. Unlike traditional cost tracking, which focuses solely on expenses, or schedule tracking, which focuses only on timelines, EVM merges both perspectives into one coherent narrative. This is why even modern, AI-enhanced project management software still includes EVM dashboards—it quantifies progress with precision.

In practice, EVM data informs everything from executive dashboards to funding decisions. For government contractors, it’s often mandatory; for private firms, it’s a competitive advantage.

3. Core Earned Value Formulas

Let’s demystify the “numbers” behind earned value management. These formulas are not just academic exercises. They are diagnostic tools. They tell you whether your project’s heartbeat is strong or irregular.

a. Variances: The Early Warning System

Two key variances form the basis of all EVM analysis: Cost Variance (CV) and Schedule Variance (SV).

• Cost Variance (CV) = EV – AC
  This measures cost performance. A positive value means you’ve spent less than expected for the achieved work (good news). A negative value means you’re over budget.
• Schedule Variance (SV) = EV – PV
  This measures schedule performance. A positive result indicates you’re ahead of schedule, while a negative one means you’re behind.

For instance, if your:

• EV is £75,000,
• AC is £80,000, and
• PV is £85,000,

Then:

• CV = £75,000 – £80,000 = -£5,000 → over budget
• SV = £75,000 – £85,000 = -£10,000 → behind schedule

Numbers like these give managers the ability to act early, not react late.

b. Performance Indices: The Efficiency Lens

Variance alone is helpful but limited. That’s why project managers rely on indices—ratios that standardise performance across time and cost dimensions:

• Cost Performance Index (CPI) = EV ÷ AC
• Schedule Performance Index (SPI) = EV ÷ PV

These indices express performance efficiency as a ratio. A CPI or SPI of 1.0 means you’re on target. Greater than 1.0 indicates better-than-expected performance; less than 1.0 signals trouble.

For example, a CPI of 0.9 means you’re only earning 90 pence of value for every pound spent, a subtle yet powerful insight that encourages corrective action.

c. Forecasting the Future: EAC and TCPI

One of EVM’s most powerful features is its predictive capability. Using earned value data, we can forecast how the project will perform if current trends continue.

• Estimate at Completion (EAC): the predicted total cost at project completion.
  Common formula: EAC = BAC ÷ CPI, where BAC is the Budget at Completion.
• To Complete Performance Index (TCPI): the efficiency required to meet the original budget.
  Formula: TCPI = (BAC – EV) ÷ (BAC – AC)

When CPI and SPI data are updated regularly, EAC and TCPI offer an almost crystal-ball-like projection of your project’s financial future.

Pro tip: Combine CPI and SPI trends to identify systemic issues. If both are below 1.0 for consecutive reporting periods, your project may require a baseline review or scope re-evaluation.

4. Real-World Examples and Scenarios

a. Construction Project Example

Consider a bridge construction project with a total budget (BAC) of £1 million. After three months:

• The project planned to complete 40% of the work (PV = £400,000).
• The actual work done is 30% (EV = £300,000), and
• The actual cost spent is £450,000 (AC = £450,000).

Let’s calculate:

• CV = EV – AC = £300,000 – £450,000 = -£150,000 (over budget)
• SV = EV – PV = £300,000 – £400,000 = -£100,000 (behind schedule)
• CPI = 0.67 → For every £1 spent, only 67p of value was earned.
• SPI = 0.75 → The project is progressing at 75% of the planned rate.

These numbers reveal not just performance issues but the underlying narrative: the project’s cost efficiency and time progress are both lagging. Management intervention is urgent.

b. IT Software Development Example

An agile development team has a £500,000 budget. After four sprints, EV = £250,000, AC = £220,000, and PV = £200,000.

In this case:

• CV = £30,000 (under budget)
• SV = £50,000 (ahead of schedule)
• CPI = 1.14 (excellent cost efficiency)
• SPI = 1.25 (excellent schedule performance)

Such results indicate healthy performance and resource optimisation. The team can potentially reinvest savings into quality improvements or additional features.

c. Public Sector Project Example

In public infrastructure projects, transparency and accountability are paramount. EVM enables government project offices to report objectively on taxpayer-funded initiatives. When auditors examine CPI and SPI trends, they can assess whether funds are used efficiently without political bias.

In essence, earned value management is not just about numbers, it’s about trust. It ensures that project stakeholders, from citizens to sponsors, can see evidence-based progress rather than promises.

5. The Benefits of Earned Value Management

a. Objective Performance Insight

Perhaps the greatest advantage of earned value in project management is its objectivity. Unlike traditional progress reports, which may rely on subjective judgement, EVM uses quantifiable data. It converts progress into metrics that can be verified and audited.

b. Early Warning of Risks

By tracking CV and SV regularly, EVM provides early visibility of deviations. Project managers can act proactively; adjusting resources, negotiating scope, or revising schedules before small issues become crises.

c. Improved Stakeholder Communication

Stakeholders often struggle to interpret project jargon. EVM metrics bridge that gap. A simple statement like “Our CPI is 0.92 and SPI is 1.05” succinctly conveys efficiency and timing in a way that executives or sponsors can easily grasp.

d. Better Forecasting and Decision-Making

Through the EAC and TCPI formulas, EVM empowers managers to predict final outcomes. This makes it easier to justify additional funding or schedule changes using factual evidence.

e. Compliance and Professional Standards

Many industries—especially aerospace, defence, and construction, require formal EVM reporting. Adopting EVM not only strengthens compliance but also improves credibility in audits and funding reviews.

6. Challenges and Limitations

a. Data Accuracy and Availability

EVM depends heavily on accurate, timely data. If progress tracking or cost recording is inconsistent, results become misleading. In practice, data discipline is often the hardest part of EVM implementation.

b. Complexity and Training Needs

While the formulas themselves are straightforward, interpreting them correctly requires experience. Many teams misjudge CPI and SPI trends without considering external factors like resource availability or change requests.

c. Integration with Agile and Hybrid Methods

In Agile projects, where scope and priorities evolve rapidly, traditional EVM can feel rigid. However, modern adaptations like Agile EVM use story points or deliverable value to measure progress instead of strict budget baselines. The principle remains the same—measure value earned, not just effort spent.

d. Misinterpretation and Overconfidence

Numbers can create an illusion of certainty. A project may show good CPI and SPI ratios while quality or stakeholder satisfaction quietly deteriorates. Hence, EVM should complement, not replace, qualitative assessments.

7. EVM in the Age of Digital Transformation

With AI and analytics now embedded in project management tools, earned value management has entered a new era. Modern platforms like Microsoft Project, Primavera, and Asana use automation to collect and interpret EVM metrics in real time.

Machine learning can even identify patterns, such as persistent CPI drops in certain project phases, and recommend corrective actions automatically. Meanwhile, visual dashboards display EVM indicators through dynamic charts, enabling leadership teams to make faster, evidence-based decisions.

Modern insight: The future of project control lies not in replacing EVM, but in enhancing it with AI and predictive analytics. Technology amplifies the human decision-maker; it doesn’t substitute them.

8. Best Practices for Implementation

• Start with clear baselines. Define scope, schedule, and budget precisely before applying EVM.
• Collect data consistently. Automate progress reporting where possible.
• Train your team. Ensure everyone understands the meaning of EV, PV, and AC.
• Review metrics frequently. Monthly or sprint-level EVM updates maintain momentum.
• Complement EVM with qualitative insights. Pair numbers with narrative reports for balanced decisions.

Conclusion:

Earned Value Management isn’t just a spreadsheet exercise; it’s a philosophy of accountability. It demands transparency, accuracy, and reflection. Projects succeed not because they spend less, but because they understand more.

As the world embraces digital transformation, EVM stands firm as a bridge between tradition and innovation—grounding modern methods in timeless principles of control and foresight.

In a world obsessed with speed, Earned Value reminds us that precision still matters.

So, whether you’re building bridges, deploying software, or managing research grants, mastering EVM gives you more than data. It gives you the confidence to lead with clarity.

Supply Chain Manager Job Description

The key roles and responsibilities of supply chain managers are explained below:

1. Maximize Efficiency and Productivity

Supply chain managers are responsible to ensure maximum productivity and efficiency across their supply chain, and streamline logistics processes accordingly.

For Example:

A supply chain manager in an e-Commerce company optimized warehouse operations by implementing automated picking systems. As a result, order fulfillment time reduced by 23%.

2. Build Strong Relationships

Supply chain manager job description also includes establishing strong relationships with vendors, suppliers, and key distributors to achieve their business goals.

For Example:

Recently, at a car manufacturing company in Japan, supply chain managers developed long-term partnerships with suppliers. This supplier relationship management ensured 30% reduction in lead time and maintained a steady flow of parts during the global semiconductor shortage.

3. Coordinate Across Networks

Supply chain managers must also maintain effective coordination with senior management to develop strategies for supply chain operations. They are required to collaborate with other departments and ensure that all supply chain management processes are streamlined.

For Example:

A senior supply chain manager at leading USA Mobile Phone manufacturer collaborated with design and procurement teams in China to secure components for a new Phone launch. It helped the company meet production targets of over 83 million units in a single year.

4. Respond to Bottlenecks

The supply chain manager job description primarily includes addressing supply chain bottlenecks and taking necessary actions to control disruptions promptly. To achieve maximum output, companies should ensure that their supply chain managers are well-trained to guide and lead their teams effectively. This approach helps maintain efficiency across supply chains, and as a result, continuous process improvements can be achieved.

For Example:

During the COVID-19 pandemic, supply chain managers of a giant stored in America rerouted shipments and secured alternative suppliers. This action reduced potential stock shortages by 38% and ensured consistent inventory for high-demand items

How to Write a Supply Chain Manager Resume?

With over 25 years of hiring experience, I am confident that if the following supply chain skills and personal qualities are effectively highlighted on your supply chain manager resume, there is a 90% chance of being shortlisted for the interview stage.

Below, I will break down each skill and attribute in detail:

1. Strategic Supply Chain Planning

Align your skills with the supply chain manager job description and mention your ability to manage supply chains. In the supply chain manager resume, explain that how you developed and executed strategic plans that aligned with the organization’s goals and long-term objectives.

2. Supply Chain Operational Efficiency

You should ensure efficient management of daily supply chain operations, including inventory control, logistics, and procurement management activities.

3. Supply Chain Risk Management

If you have supply chain risk management skills, you must highlight your past experience in this area on your supply chain manager resume. Provide specific examples from your past supply chain manager job description, where you identified potential risks and developed contingency plans that ensured uninterrupted supply chain operations.

4. Supply Chain Technological Expertise

The supply chain manager job description nowadays involves greater use of technology and digital tools than ever before. If you have the ability to leverage supply chain automation solution and using supply chain analytical tools, you must highlight how you have improved supply chain performance, enhanced transparency, and enabled data-driven decision-making in your previous supply chain manager roles.

5. Collaborative Leadership

It is essential in a supply chain manager resume to mention strong leadership and communication skills. If you have past experience coordinating with stakeholders and cross-functional teams, ensure that you include this experience on your resume, highlighting how your effective supply chain collaboration contributed to your past employers’ achievements and overall success.

5 Categories of Supply Chain Manager Interview Questions

We have divided supply chain manager interview questions into five categories, that we frequently ask to evaluate a candidate’s supply chain experience, supply chain problem-solving skills, and their suitability with employers’ supply chain manager job description.

1. Background and Experience Questions

These supply chain manager interview questions help us assess a candidate’s professional history, achievements, challenges faced, and the lessons they learned. These questions help us understand candidate’s past supply chain manager job description and their suitability for the supply chain manager role.

Examples:

Q1. Can you describe your experience in streamlining and improving supply chain processes?

Q2. How do you work with suppliers to ensure cost-effectiveness and on-time delivery of products?

Q3. What supply chain technologies and tools have you implemented to optimize supply chain efficiency in your previous roles?

Q4. How do you ensure compliance with industry regulations and quality standards in supply chain management?

Q5. Can you give a recent example of a supply chain disruption and explain how you resolved it?

2. Critical Thinking and Problem-Solving Questions

These questions evaluate the candidate’s ability to solve complex supply chain challenges, identify potential supply chain management risks, and make quick yet effective decisions.

Examples:

Q1. How do you identify and evaluate potential risks in a supply chain?

Q2. Can you describe a situation when you had to make a quick decision to resolve a supply chain issue? And, what was the outcome?

Q3. How do you assess competitors’ supply chains to improve your company’s efficiency?

Q4. Can you give an example of how you used innovative supply chain thinking to enhance supply chain performance?

3. Team Management and Leadership Questions

These supply chain manager interview questions focus on evaluating the candidate’s leadership style, ability to manage conflicts, and skills in leading cross-functional supply chain teams to achieve common objectives.

Examples:

Q1. How do you motivate your team to meet tight deadlines as part of your supply chain manager job description?

Q2. Can you provide an examples of how you resolved a conflicts within your team?

Q3. How do you ensure smooth collaboration between different departments in the supply chain?

Q4. How do you delegate tasks and responsibilities among your supply chain team members?

Q5. Can you describe a supply chain project you led successfully from start to finish?

4. Technical Skills and Knowledge Questions

These supply chain manager interview questions measure the candidate’s expertise in supply chain software, systems, and best practices, as well as their ability to bring innovation to logistics and supply chain operations.

Examples:

Q1. Can you explain the concept of demand analysis in supply chain management?

Q2. How do you ensure efficient warehouse management?

Q3. What experience do you have in implementing digital supply chain management in your company?

Q4. How do you manage supplier relationships, and what factors do you consider when selecting vendors?

Q5. Can you share a successful supply chain management strategy you implemented in the past?

5. Scenario and Situational Questions

These situational supply chain manager interview questions assess a candidate’s real-world decision-making abilities, problem-solving skills, and ability to work under pressure.

Examples:

Q1. How would you handle a situation where a key supplier suddenly goes out of business?

Q2. Can you describe a scenario where you made a quick decision to solve a supply chain issue? What were the results?

Q3. Give an example of a cost-saving logistics initiative you successfully implemented as part of your supply chain manager job description.

Q4. How do you ensure compliance with ethical standards and company policies within the supply chain?

Supply Chain Manager Job Description – 11 Common Roles

In small companies, a supply chain manager often works as the sole professional, managing multiple tasks outlined in a typical supply chain manager job description — from procurement to logistics and vendor relations.

In large organizations, however, supply chain managers usually lead specialized teams or people, with each handling a distinct function or department.

Depending on the size of the company, the supply chain manager job description may either:

• Be directly include the following roles, or
• Supervise professionals appointed for these specific positions.

Supply Chain Manager job description may include following roles:

• Operations Manager: Oversee daily supply chain and logistics operations.
• Transportation Analyst: Optimize transport routes and reducing freight costs.
• Logistics Manager: Manage warehouse(s), distribution, and delivery processes.
• Production Planner: Align manufacturing schedules with supply and demand.
• Buyer or Planner: Handle vendor negotiations and purchase planning.
• Supply Chain Consultant: Advise on supply chain optimization strategies.
• Demand Planner: Forecast product demand to prevent stockouts or overstocking.
• Inventory Analyst: Monitor stock levels and implement inventory control strategies.
• Purchasing Manager: Manage procurement operations and supplier relationships.
• Production Manager: Coordinate manufacturing processes for maximum efficiency.
• Procurement Manager: Oversee supplier contracts and strategic sourcing.

Supply Chain Manager Salary: How Much Do Supply Chain Managers Make?

The salary of a supply chain manager varies, and it depends on several factors including experience, location, industry, and the size of the company. AIMS recent research and survey on 1,729 supply chain management companies gave us the following results:

Entry-Level Supply Chain Managers: Earn around $65,000 to $85,000 per year.

Mid-Level Professionals (5–10 years of experience): Typically earn $90,000 to $120,000 annually.

Senior Supply Chain Managers: Make $130,000 to $160,000 per year, plus bonuses and incentives (depending on their performance).

Top-Level Executives: Their salaries exceed $185,000 annually in large multinational companies.

Variance in Supply Chain Manager Salary by Location

Location of a Supply Chain Manager also effect the salaries scales. Below is the location-based salary differences:

• In the United States, the average salary is around $100,000/year.
• In the UK, supply chain managers earn between £45,000 and £75,000 annually, with senior supply chain roles exceeding £90,000.
• In Gulf countries (UAE, Qatar, Saudi Arabia), salaries range from $90,000 to $120,000 per year, often including tax-free benefits.
• In Asia, supply chain managers earn between $30,000 and $70,000 per year, depending on the industry and country.

Other Factors That Impact Supply Chain Manager Salary

1. Supply Chain Industry

Sectors like pharmaceuticals, automotive, and aerospace tend to offer higher salaries to supply chain managers, due to their complex supply chains.

2. Supply Chain Qualifications

Our research and industry data confirm that AIMS’ globally recognized educational qualifications, including the CSCE Supply Chain Management Certification, MDSCM Diploma in Supply Chain Management, and a globally accredited and recognized MBA in Supply Chain Management programs increase salaries by 12–28%. The key strength of AIMS’ supply chain management programs lies in their practical learning approach, which equips professionals with real-world skills that the global supply chain and logistics industry demands.

3. Company Size

Larger corporations generally pay more, especially for global supply chain roles.

4. Technology Expertise

Professionals skilled in ERP systems, supply chain blockchain, supply chain automation, and proficiency of AI for supply chain management are in high demand, often receiving premium compensation.

Frequently Asked Questions

Q1: What does a Supply Chain Manager do?

They oversee procurement, logistics, warehousing, and cross-functional coordination to improve efficiency, reduce costs, and mitigate risk across the end-to-end supply chain.

Q2: Which skills should a Supply Chain Manager highlight on a resume?

Strategic planning, operational efficiency, risk management, analytics and automation tools, ERP proficiency, and collaborative leadership with cross-functional teams.

Q3: How can I show operational efficiency on my CV?

Use measurable outcomes. For example: “Implemented automated picking to cut fulfilment time by 23%,” or “Optimised routes to reduce freight costs.”

Q4: What interview questions assess problem-solving in supply chains?

Expect scenarios on risk identification, rapid decision-making during disruptions, benchmarking competitors, and applying innovative methods to boost performance.

Q5: What are typical Supply Chain Manager responsibilities?

Maximising productivity, supplier relationship management, network coordination with executives, and resolving bottlenecks to maintain service levels.

Q6: Which roles can a Supply Chain Manager lead or oversee?

Operations, logistics and warehousing, transportation analysis, production planning, procurement, demand planning, inventory analysis, and consulting.

Q7: What salary ranges can Supply Chain Managers expect?

Entry: $65k–$85k; Mid: $90k–$120k; Senior: $130k–$160k+; top roles may exceed $185k depending on region, sector, and company size.

Q8: How does location impact Supply Chain Manager salary?

US averages around $100k; UK typically £45k–£75k with senior roles £90k+; Gulf roles often $90k–$120k; Asia varies $30k–$70k by country and industry.

Q9: Which qualifications increase salary potential?

CSCE certification, the MDSCM diploma, and an accredited MBA in Supply Chain Management can lift earnings by roughly 12–28%.

Q10: What technologies matter most for modern supply chains?

ERP systems, analytics, automation, and emerging capabilities like blockchain and AI that improve transparency, resilience, and data-driven decisions.

Q11: How should I prepare for Supply Chain Manager interviews?

Prepare STAR examples for disruptions, supplier collaboration, digital implementations, and cost-savings. Quantify results and align with the job description.

Q12: What common mistakes should applicants avoid?

Generic CVs without metrics, weak supplier KPIs, overlooking risk plans, and not evidencing cross-functional leadership or technology impact.

Concept of Hiba Explained in Hadith

An act of Hiba is considered incomplete unless the donor relinquishes actual possession of the donated item. Additionally, the declaration of the gift must be made in clear and unambiguous terms. Prophet Muhammad (صلى الله عليه وسلم) reinforced the significance and ethics of Hiba in Muslim Law through various Ahadith (Prophetic traditions):

This Hadith not only confirms the permissibility of giving gifts (Hiba) but also encourages mutual exchange to foster love and unity among Muslims.
Ibn ‘Umar narrated that ‘Umar ibn al-Khattab (RA) donated a horse for the sake of Allah. Later, he saw it being sold and considered buying it back. He consulted the Messenger of Allah (صلى الله عليه وسلم), who replied:

Similarly, Ibn ‘Umar and Ibn ‘Abbas narrated a Hadith from the Prophet (صلى الله عليه وسلم):

Nu’man Ibn Bashir narrated that his father gifted him a portion of his estate. However, his mother, Amrah bint Rawaha, disapproved and insisted that Allah’s Messenger (صلى الله عليه وسلم) be made a witness. When his father presented the case, the Prophet (صلى الله عليه وسلم) said:

Fundamental Principles of Hiba in Muslim Law

The fundamental principle of Hiba in Muslim law involves the transfer of ownership from one person to another without consideration or compensation. This transfer must occur immediately, without attaching conditions or delays. A Hiba (هبة) may involve either movable or immovable assets, and the recipient must accept the gift for it to be legally valid.

1. Declaration by the Donor

• The donor must clearly express the intention to transfer ownership, either verbally or in writing.
• This declaration must be explicit, voluntary, and free from coercion, deception, or undue influence.
• A genuine and unambiguous intention to make the gift is essential for the validity of Hiba in Muslim Law.

2. Acceptance by the Donee

• The donee (recipient) must accept the gift, either explicitly (through spoken or written acknowledgment) or implicitly (through conduct, such as taking possession).
• This acceptance must occur during the lifetime of the donor and prior to any revocation.
• If the donee refuses or fails to accept, the Hiba becomes void.

3. Possession of Gift

To complete the Hiba process, the donee must take possession of the gifted property — either through actual physical delivery or symbolic handover, depending on the nature of the asset.

• The method of delivery depends on the type of property involved.
• Possession signifies the donor’s relinquishment and the donee’s acquisition of ownership rights.

8 Conditions for a Valid Hiba in Muslim Law

The following are the 8 essential conditions defined by Muslim Scholars for executing Hiba (هبة) is considered valid in Islamic Shariah:

1. Voluntary Transfer

• Hiba is a voluntary transfer of ownership rights from the donor to the donee, carried out without any coercion.
• Its focus on voluntariness aligns with the Islamic principle of sincerity in action.
• A valid Hiba must stem from sincere intention, reflecting the donor’s desire to help the recipient and seek spiritual reward.

2. Immediate and Unconditional

• The transfer of ownership in Hiba must take place instantly and unconditionally.
• The donor’s intention is actualized at the time of gifting, and the Hiba becomes effective upon the donee’s acceptance.
• This immediacy ensures clarity and prevents future disputes regarding ownership.

3. Acceptance by the Donee

• While the donor’s intent is crucial, the acceptance by the donee holds equal legal weight.
• Acceptance can be verbal or implied and must occur during the donor’s lifetime.
• Acceptance serves as confirmation of the transaction, distinguishing Hiba from other types of property transfers under Islamic law.

4. Absence of Consideration

• A defining feature of Hiba (هبة) is that it is given without any form of compensation.
• Unlike commercial exchanges, Hiba is driven by altruism, not by expectations of monetary or material return. This reinforces the values of generosity and selflessness emphasized in Islam.

5. Transferred Property and Ownership

• The property being gifted must be clearly identified and described.
• Whether movable or immovable, the gift must be specific and owned by the donor at the time of the Hiba.
• This ensures the legality and enforceability of the transfer, avoiding ambiguity or disputes.

6. Soundness of Mind and Legal Capacity

• To execute a valid Hiba in Muslim Law, both the donor and the donee must have legal capacity.
• The donor must be of sound mind and legally competent to make independent decisions.
• Similarly, the donee must have the legal authority to accept the gift. This guarantees the transaction is entered into knowingly and willingly.

7. Donor’s Intent and Purpose

• The donor’s motivation must align with the Islamic principles of charity and goodwill.
• While expressing love or concern through a Hiba is valid, the gift must not serve as a tool to bypass legal duties, such as those related to inheritance (Mīrāth).
• The intent should remain free of manipulation or concealed objectives.

8. Non-retrospective and Irrevocable

• Once accepted, Hiba is typically irrevocable and non-retrospective. This ensures stability in ownership and protects the donee’s rights.
• However, revocation may be allowed in specific, Shariah-compliant circumstances, particularly if stipulated and agreed upon at the time of the gift.

Restrictions Regarding Hiba in Shariah

The following points outline key restrictions and limitations on Hiba (هبة) as prescribed by Shariah law regarding Hiba:

1. A donation (Hiba) may be made either verbally or in writing, by any individual who possesses the legal capacity to enter into a contract.
2. A Hiba made by a person who is in debt is generally considered invalid, as it may infringe upon the rights of creditors.
3. A donation made during a terminal illness (Marḍ al-Mawt) must not exceed one-third of the individual’s estate, and only after all debts and funeral expenses are settled. This aligns with Islamic inheritance laws.
4. Hiba can only be made to living individuals. Gifts directed toward deceased persons are not valid under Islamic law.
5. Only existing, tangible property can be gifted. For example, a gift of oil from unpressed sesame seeds or butter from milk yet to be churned is considered invalid, as the asset must be in existence and clearly defined.
6. Once a valid Hiba has been executed and accepted, it cannot be revoked, except in exceptional cases permitted by Shariah, such as fraud, misrepresentation, or if explicitly agreed upon.
7. A father may revoke a gift given to his children, provided that such revocation does not violate Shariah principles or result in injustice or favoritism.
8. The revocation of a Hiba requires a formal ruling from a competent Islamic court, to ensure the action is legally justified and compliant with Shariah.

Understanding Hiba in Islamic Banking and Finance

Hiba in Islamic Banking and Finance refers to an unconditional and voluntary gift of property or asset from a financial institution to its customer, without expecting anything in return.

Application of Hiba in Islamic Finance

Hiba or Gift in Islam is one of the important component of Islamic banking and finance. It is used is used in various Islamic financial contracts. A comprehensive study of Hiba is an essential part of Islamic finance certification course, career focused diploma in Islamic banking and finance, and an accredited online MBA in Islamic banking and finance program offered by AIMS. Hiba is not a financial product but used as a component within Islamic financial contracts.

Here are few applications of Hiba (or Gift) in Islamic banking and finance:

Ijarah (Islamic Lease)

At the end of an Ijarah Muntahia Bi Tamleek, upon competion of payments from the customers, the bank transfers the ownership of the leased asset to the customer through Hiba.

Takaful (Islamic Insurance)

In Takaful (Islamic Insurance system), participants contribute to a risk pool. The operator grant surplus (if any) back to participants as Hiba, rather than as a contractual right under the Islamic Shariah.

Mudarabah Contracts

In some cases, the capital provider (Rab al-Mal) in Mudarabah contract offers the entrepreneur (Mudarib) an extra reward beyond the agreed profit share. It can be given as a Hiba, but it must not be pre-agreed or conditional.

Other Types of Hiba

The actual Hiba is Gift without conditions. According to Shariah guidelines, there are four other types of Hiba (هبة), and they are discussed below:

1. Hiba-Bil-‘Iwāḍ (Gift with Consideration)

Hiba-Bil-‘Iwāḍ refers to a gift that is exchanged for some form of consideration, resembling a sale. In this arrangement, the donor transfers ownership of property and receives something in return from the donee. This type of Hiba in Muslim Law requires the actual transfer of both ownership and possession to be considered valid and complete.

Example:

A person transfers ownership of his residence to his son, and the son gives his father a car. This is a valid case of Hiba (هبة) with consideration, as it must fulfill the conditions of declaration, acceptance, and transfer of possession.

2. Hiba-Ba-Sharṭ al-‘Iwāḍ (Conditional Gift)

Hiba-Ba-Sharṭ al-‘Iwāḍ is a conditional gift, where the donor stipulates specific conditions that the donee must fulfill for the gift to become effective. These conditions must be reasonable, making the transaction similar to a contractual agreement. The delivery of possession is essential, and the gift remains revocable until the conditions are fulfilled. Once the conditions are met, it assumes the legal nature of a sale.

Example:

A person tells his son, “I will gift you my car, provided you pay for the fencing and irrigation system within three months.” Son agrees and takes possession of the care. The gift remains revocable until he fulfills the condition. Once his son installs the fencing and irrigation as agreed, the car becomes irrevocable and takes the form of a completed transaction, resembling a sale.

3. Sadaqah (Charitable Hiba)

S0adaqah is a religiously motivated form of Hiba, given purely for the sake of Allah (SWT). It is driven by piety and the desire for spiritual reward. Unlike other types of Hiba, Sadaqah is irrevocable once executed. The three essential conditions for a valid Ṣadaqah are:

• Clear declaration,
• Acceptance by the recipient, and
• Delivery of possession.

Example:

An individual donates a piece of land to a mosque for religious use. This act, done for the sake of Allah, and it is classified as Sadaqah, a spiritually motivated form of Hiba. This type of Hiba is irrevocable once executed.

4. Ariyah (Loan of Usufruct)

Ariyah is a form of gratuitous permission to use the usufruct of a property, without transferring ownership. The benefit (usufruct) is granted while the ownership and possession of the property remain unchanged. Here are some important points related to ariyah:

• It is subject to revocation, and
• It grants the right to use the property, but not the right of ownership.

Example:

A farmer allows his neighbor to use his tractor during harvest season without transferring ownership. The neighbor may use it temporarily, but the ownership and full possession remain with the lender.

Key Takeaways

• The Islamic Law of Gift (Hiba / هبة) embodies the principles of generosity, sincerity, and altruism, aligning with a universal philosophy of giving that transcends cultures and religions.
• While the concept of unconditional Hiba is inherently straightforward, conditional gifts (e.g., Hiba-Ba-Sharṭ al-‘Iwāḍ) introduce complex legal and ethical considerations.
• The interpretations of these complexities by Islamic jurists and courts continue to shape the legal structure surrounding Hiba in Muslim law.
• As social and legal environments evolve, the central challenge is to preserve the spiritual and ethical foundations of Hiba while adapting to contemporary circumstances and regulatory developments.
• In striking this balance, both classical Islamic jurisprudence and modern legal systems promotes justice, transparency, and equity in the practice of gift-giving. This ensures Hiba remains both authentic and applicable in today’s world.

Frequently Asked Questions

Q1: What is the meaning of Hiba in Muslim Law?

Hiba (هبة) means a voluntary transfer of ownership without compensation, symbolizing generosity and goodwill in Islam.

Q2: Who are the parties involved in a Hiba contract?

The donor (Wahib), the donee (Mawhūb-lahu), and the asset (Mawhūbah) constitute the core parties of a Hiba transaction.

Q3: What are the essential conditions for a valid Hiba?

A valid Hiba requires declaration, acceptance, and delivery of possession, ensuring voluntariness and clarity of ownership.

Q4: Can Hiba be revoked under Islamic Law?

Generally, Hiba is irrevocable once accepted, except where a father revokes a gift to a child in line with Shariah justice.

Q5: How is Hiba different from a sale or exchange?

Unlike sales, Hiba involves no consideration. It’s a one-sided act of giving rooted in spiritual sincerity rather than trade.

Q6: What are the main types of Hiba?

They include Hiba-Bil-‘Iwāḍ, Hiba-Ba-Sharṭ al-‘Iwāḍ, Sadaqah, and Ariyah — each with unique rules and applications.

Q7: How is Hiba used in Islamic Banking and Finance?

Hiba facilitates ownership transfer in Ijarah, surplus sharing in Takaful, and goodwill rewards in Mudarabah agreements.

Q8: Is written proof necessary for Hiba?

Written proof is advisable to prevent disputes and confirm transfer, especially for valuable or immovable assets.

Q9: Can Hiba be made during illness?

Yes, but it must not exceed one-third of the estate and must comply with Islamic inheritance regulations.

Q10: What is the ethical importance of Hiba?

Hiba promotes social justice and compassion, reinforcing the moral essence of giving in Islam.

Concept of Kafalah in Qur’an

The Kafala contract is considered permissible based on the following evidence found in the Holy Qur’an:

Kafalah in Hadith

The teachings of Prophet Muhammad (SAW) are the basis of Shariah. He explained every aspect of human life. The following are Hadiths about الكفالة, narrated by various companions of Prophet Muhammad (SAW):

Types of Kafalah

Kafalah is divided into two major types:

• Kafalah bi al-Nafs (Physical Guarantee), and,
• Kafalah bi al-Mal (Financial Guarantee).

1. Kafalah bi al-Nafs (Physical Guarantee)

It refers to a guarantee where an individual is presented to the relevant authority.

Shariah Laws Related to Kafalah bi Al-Nafs

• In the case of suretyship for a person, the guarantor assumes the obligation to ensure that the principal appears in a legal proceeding, particularly when the principal owes a debt to a creditor.
• The guarantor’s role is solely to guarantee the individual’s presence and does not include the responsibility to repay the principal’s debt.
• If the principal passes away, the guarantor is not obligated to settle any debts on their behalf. This is because the guarantee pertains only to the physical presence of the principal, not the repayment of their obligations.

2. Kafalah bi al-Mal (Financial Guarantee)

It serves as a guarantee for the settlement of a debt or the return of a specific item.

Shariah Laws Related to Kafalah bi Al-Mal:

• The guarantor remains liable even if the creditor or the item’s owner dies.
• The beneficiaries of the creditor or owner can require the guarantor to settle the debt or return the item.

Types of Kafalah bi al-Mal

Kafalah bi al-Mal is further categorized into the following three types:

a. Kafalah bi al-Dayn

It is an assurance of repayment for the loan obligation of another party.

b. Kafalah bi al-Ayn or Kafalah bi al-Taslim

It is an assurance of payment for a product or a guarantee of delivery in a transaction.

c. Kafalah bi al-Darak

It is a guarantee that a specific asset is free from any defects or claims when a transaction involves the transfer of title rights.

Application of Kafalah in Islamic Banking

This section illustrates how Kafala is applied in Islamic banking and finance:

1. Personal Kafalah

In personal Kafala, when a customer seeks any Islamic banking service, the bank typically requires a personal guarantor to secure the repayment.

Shariah Rules Regarding Personal Kafala

• If the customer defaults on the financing, both the customer (the principal debtor) and the guarantor will be held jointly responsible for settling the debt.
• The creditor has the right to pursue either the customer or the guarantor, without relieving the customer of their obligation.
• The bank may obtain a personal guarantee with or without additional security charges.

2. Bank Kafalah

It includes performance assurance, tender assurance, and the guarantee of sub-contracts.

Shariah Rules Regarding Bank Kafala

• It is established between the bank and another entity, whereby the bank commits to covering its client’s liability in the event of default or failure to meet the obligations (outlined in the guarantee contract).
• If the client fails to fulfill their responsibilities, the bank must pay the specified amount to the third party.

3. Credit Card Kafalah

a. Mechanism of Kafalah-Based Credit Cards

Credit cards in Islamic finance may be designed based on the principle of Kafalah. This is how it works:

• The bank acts as the card issuer and ensures the fulfillment of all payment obligations for transactions between the customer and the merchant, including cash withdrawals made by the customer from other banks.
• The bank imposes a pre-agreed service fee, which is established before the contract is signed, and the duration of the contract is predetermined.

b. Opinions in Support of Shariah Compliant Credit Cards

Some Islamic banks do offer Shariah-compliant credit cards, and they often claim to structure them using several types of Islamic financial contracts. They include:

• Kafalah (guarantee),
• Ujrah (fee for service),
• Murabaha (cost-plus financing), and,
• Tawarruq (commodity-based financing).

These banks argue that:

• No interest (riba) is charged.
• Fees are fixed and transparent (e.g., annual card fees).
• Payments are due within a grace period, with no late penalty as interest.

c. Why Some Shariah Scholars Prohibit الكفالة in Credit Card

Many Islamic scholars either oppose or are very cautious about Islamic credit cards, and here’s why:

i. Potential for Riba

If a customer fails to pay the full amount by the due date and is charged any late fee or interest, this will fall into Riba.

ii. Prohibition of Debt-based System

Scholars like Sheikh Taqi Usmani argue that credit cards encourage debt and overspending, which conflicts with Islamic financial principles of living within means.

iii. Hidden Risks

Even when no interest is charged, if the card indirectly causes gharar (excessive uncertainty), it’s problematic.

iv. Deposit Insurance System Kafalah

Kafala with Kafalah bil-Ujr (with fee) is utilized in the Islamic deposit insurance scheme. This scheme provides takaful-based coverage and safeguards depositors against potential losses of their deposits held with the Islamic bank, if the Islamic bank fails to meet the customer’s withdrawal requests.

The Kafalah contract is a component of AIMS’ Islamic finance course and Islamic banking and finance diploma, and it is discussed in detail within these internationally accredited and recognized programs. These qualifications lead to our globally accredited Masters in Islamic Banking and Finance.

Understanding the Kafalah Contract

After arriving at a broad agreement on the legal status of the Kafalah contract, many scholarly debates have taken place concerning its specific elements. These elements include:

• Kafalah framework,
• Conditions for Kafala validity,
• Understanding of the guaranteed obligations, and,
• Discharge of the primary party is involved.

We will discuss each of them in detail:

1. Composition of the Contract of Kafalah

The majority of Muslim scholars agree on the following four essential components of a Kafalah contract:

• Al-Kafil (the guarantor) transacts with their individual property.
• A true liability is subject to representation.
• The form (sighah) provided by the guarantor.
• Al-Makful ‘Anhu (the guaranteed party), who initially bears the liability, whether alive or deceased.

2. Conditions for the Validity of Kafalah

Several conditions must be fulfilled for a Kafala contract to be considered valid. These conditions relate to:

• The guarantor,
• The subject of the guarantee,
• The party being guaranteed, and,
• The language used in the guarantee contract.

a. Knowledge of the Guaranteed Liability

According to Islamic scholars, the guarantor is not required to know the exact amount of the debt they are guaranteeing.

b. Exoneration of the Makful ‘Anhu (Guaranteed Party)

When a debt is secured through Kafalah, it does not relieve the Makful ‘Anhu (the guaranteed party or principal debtor) from their original obligation.

Primary Conditions for the Execution of Kafala

Kafalah involves an action that includes the transfer of responsibility or obligation as agreed upon by the principal. The primary elements of Kafalah in the Islamic socioeconomic system are discussed below:

1. The Kafala agreement becomes binding with the offer of a surety, provided that the claimant agrees.
2. A surety may also be established through a promise, subject to a specified condition.
3. It is permissible to act as a surety for another surety.
4. In the case of a surety for the delivery of an item, it is required that the obligation falls upon the party primarily responsible for the item.
5. A price guarantee for goods sold only takes effect after the delivery of the goods is completed.
6. When individuals are jointly liable, each is responsible for the entire debt and guarantees the other’s obligations.
7. The discharge of the principal debtor does not automatically discharge the surety.
8. Upon the death of the individual for whom bail was provided, the surety is immediately released from obligation.
9. If the principal debtor is granted an extension to settle their debts, the same extension must be offered to the surety.

How to Apply Automation in Logistics and Supply Chain Management?

Supply chain automation is applied across many logistics and supply chain processes. Below are a few key use cases:

1. Inventory Automation

Traditionally, inventory registration of goods was done manually or using basic tools, which were prone to errors. However, automation in supply chain management now optimizes warehousing through AI-powered systems that integrate data, forecast demand, and generate purchase orders to manage inventory levels efficiently.

Real-World Example:

Amazon uses AI-driven robots in warehouses to automatically scan, move, and update inventory data in real time. This reduces errors and speeds up order fulfillment.

2. Back-Office Automation

Supply chain automation enhances back-office operations by reducing human error and operational costs. It captures data from orders without manual input and automatically enters it into the system. Robotic process automation in supply chain workflows significantly improves data accuracy and processing speed.

Real-World Example:

Maersk, a global shipping company, uses RPA to automate invoice processing, which reduces turnaround time by over 80%.

3. Logistics Automation

Technology enables supply chain automation solutions to manage package delivery, route planning, and communication among supply chain stakeholders. E-commerce platforms, for example, utilize delivery tracking tools to meet customer expectations. GPS tracking systems and real-time delay notifications ensure transparency and enhance the delivery experience.

Real-World Example:

FedEx uses automated route optimization and real-time GPS tracking to improve delivery accuracy and notify customers about delays instantly.

4 Key Benefits of Supply Chain Automation

In today’s increasingly digitalized world, supply chain management businesses that adopt automation in supply chain operations gain a significant edge over competitors. Below are four key benefits of automation in supply chain management:

1. Flexibility

Supply chain automation reduces human error and operational disruptions, which enables companies to respond more quickly and flexibly to shifting market demands.

For Example

Zara, the global fashion retailer, uses automated inventory and distribution systems. These systems allow the company to launch new designs and restock stores in just 2–3 weeks, significantly faster than the industry average of 6–9 months.

2. Data-Driven Decisions

Automation in the supply chain enables accurate demand forecasting, real-time tracking, and smarter resource planning. These capabilities support data-driven decisions, which reduce costs and improve performance.

For Example

Procter & Gamble (P&G) integrated AI and machine learning into its supply chain. It resulted in a 20% reduction in supply chain costs and 95% forecast accuracy, according to a 2022 McKinsey report.

3. Transparency

Traditionally, gaining end-to-end supply chain visibility was a challenge. Now, supply chain automation solutions provide real-time data access across departments, aligning all stakeholders and simplifying processes.

For Example

Unilever implemented a digital control tower to monitor its global supply chain. This system improved transparency and allowed the company to proactively manage disruptions. This improved the company’s on-time delivery by 10%, as per Deloitte Insights.

4. Customer Satisfaction

AI-powered tools enhance the customer experience by improving order accuracy and reducing delivery times. Automated supply chain systems for last-mile and long-haul logistics enable dynamic route planning and real-time updates.

For Example

UPS uses its ORION (On-Road Integrated Optimization and Navigation) system, which saves 100 million delivery miles annually, cuts delivery times, and improves customer satisfaction.

Supply chain automation is a core discipline in modern supply chain and logistics education. Students pursuing a diploma in supply chain or our accredited MBA in Supply Chain and Logistics management study the future of supply chain automation in depth to build cutting-edge skills for the global marketplace.

Types of Supply Chain Automation Solutions

Businesses are complex ecosystems with dedicated tools for each supply chain function. When these processes are interconnected and visible in real time, issues like stockouts and delays can be addressed proactively. Below, we discuss five types of supply chain automation solutions, each designed to enhance specific operations and improve overall supply chain efficiency.

1. Procurement and Sourcing Automation Software

a. Supplier Management

The supply chain process begins with procurement and sourcing, where effective supplier management is essential. Supply chain automation introduces tools like B2B vendor portals, which allow businesses to automate supplier selection and contract management using AI and machine learning. These tools evaluate vendors based on quality, compliance, reliability, and cost, helping businesses make data-driven decisions.

b. Order Management

In this stage, robotic process automation in supply chain operations handles tasks such as: generating purchase orders, matching invoices, and automating payments. This reduces manual errors and accelerates processing time, which enables a seamless automated workflow from order creation to payment completion.

c. Contract Management

Blockchain supply chain based automation in supply chain ensures a centralized, secure, and transparent contract management system. It supports compliance monitoring, contract renewals, and minimizes legal and operational supply chain management risks.

d. Real-Time Data and Analytics

Supply chain automation software delivers real-time insights into spending, supplier performance, and market trends, which allows you to improve strategic procurement planning.

e. Collaborative Platforms

Automation tools enable collaborative dashboards through IoT integration, enhancing communication between businesses and suppliers.

2. Production Planning and Execution Management

Supply chain automation systems, such as Enterprise Resource Planning (ERP), are essential for optimizing production processes with precision and control.

a. Scheduling and Resource Allocation

Automated systems use advanced algorithms to create dynamic production schedules, allocate resources efficiently, and respond quickly to changes in demand or supply.

b. Real-Time Monitoring and Control

IoT-enabled devices provide a comprehensive view of the production floor. This enables real-time tracking, quick troubleshooting, and consistent quality assurance.

c. Simulation of Production Environment

Digital twin technology enables the simulation of production scenarios in a virtual environment. It allows companies to test process changes, improve supply chain agility, and reduce risk in complex manufacturing operations.

d. Integration

Automation in supply chain processes links procurement, production, and warehouse functions via customized supply chain software platforms, ensuring seamless coordination.

e. Predictive Analytics and Maintenance

AI-powered predictive analytics can forecast equipment failures, prevent downtime, and enhance operational continuity.

3. Warehouse Management Tools

Warehouse automation boosts efficiency, accuracy, and responsiveness in inventory management.

a. Inventory Management

Warehouse Management Systems (WMS) and cloud-based inventory tools streamline inventory tracking and storage decisions.

b. Optimize Stock Conditions

IoT-integrated sensors monitor and regulate environmental conditions, such as temperature and humidity, minimizing damage and spoilage.

c. Data Analytics

AI-driven supply chain management analytics identify demand patterns, control inventory levels, and avoid overstocking or stockouts, which are among the key benefits of automation in supply chain.

d. Order Fulfillment

Automation in supply chain warehouses supports the picking, packing, and shipping processes through tools that enhance speed and accuracy.

e. Logistics Management

WMS platforms integrate with logistics management processes to optimize delivery routes using AI-based route planning, which ensures faster and more economical shipments.

4. Transportation and Delivery Automation Tools

Efficient transport and timely delivery are vital to building customer trust. Below are key tools used in the future of supply chain automation:

a. Automated Route Optimization

Tools use real-time data, including traffic and weather, to choose optimal delivery routes. This reduces fuel use, wear and tear, and delivery times.

b. Automated Fleet Management

These systems provide real-time vehicle tracking, manage driver performance, and schedule preventive maintenance, enhancing safety and efficiency.

c. Automated Dispatch and Scheduling

AI-based scheduling tools match deliveries with available drivers and vehicles. This improves operational flow and delivery accuracy.

d. Real-Time Tracking and Visibility

Supply chain automation tools enable logistics teams and customers to track shipments, manage disruptions, and enhance delivery transparency.

5. Customer Service and Returns Automation Software

Automation improves post-purchase interactions, which play an important role in customer satisfaction and loyalty.

a. Automated Handling of Customer Inquiries

AI-powered chatbots respond instantly to FAQs and route complex queries, which maintains consistent communication.

b. Automated Returns and Exchanges

Automation simplifies reverse logistics process by generating return labels, sorting products, and guiding customers through the process efficiently.

c. Order Tracking

Customers can monitor their orders in real time. This increases confidence and reduces support queries, which is one of the key benefits of automation in supply chain management.

d. Feedback Management

AI analyzes customer feedback from multiple sources (e.g., surveys, emails, social media), categorizes responses, and helps businesses identify recurring issues and improve service.

Future of Supply Chain Automation

1. Rising Complexity and the Need for Flexible Automation

A supply chain includes all the activities involved in the manufacturing, movement, and delivery of goods, connecting manufacturers, suppliers, logistics providers, and end customers. As the supply chain management network becomes more complex, it continues to face challenges such as supply disruptions, labor shortages, and shifting customer expectations. Therefore, adopting reliable and flexible supply chain automation solutions is critical.

2. Automated Response Systems and Real-Time Agility

When companies implement automated customer response systems, teams can adapt quickly, which improves overall supply chain agility.

For Example

• If a procurement manager detects a potential shortage, automation can trigger pre-set actions such as ordering replenishments or initiating alternative sourcing strategies.
• If a supplier fails to meet deadlines, the system can automatically identify alternate suppliers or authorize expedited freight, thereby minimizing disruption.

3. Limits of Automation and the Role of Human Labor

Supply chain automation increases efficiency and responsiveness, offering advanced tools to predict, plan, and respond to changes in a dynamic global environment. However, it is important to note that full automation does not entirely eliminate the need for human involvement. In the absence of fully autonomous transport infrastructure, the supply chain will continue to rely on truck drivers, ship crews, and airline staff to complete critical logistics operations.

4. Smart Workflows and the Shift to High-Value Tasks

As the future of supply chain automation evolves, businesses must embrace smart workflows and integrate cutting-edge automation technologies that eliminate manual, time-consuming tasks.

For Example: Automated inventory management is far more accurate and efficient than traditional methods.

By leveraging these technologies, employees can shift focus to high-value tasks, such as strategic supply chain planning and relationship management in supply chain management, thereby boosting productivity across the supply chain.

Frequently Asked Questions

Q1: What is supply chain automation?

It uses software, AI, RPA, sensors, and robotics to automate planning, sourcing, production, warehousing, transport, and order management.

Q2: What are the main benefits?

Greater flexibility, better decisions, end-to-end visibility, and higher customer satisfaction via faster, more reliable fulfilment.

Q3: Which processes are ideal to automate first?

Procurement, demand planning, production scheduling, inventory control, warehouse tasks, route optimisation, tracking, and returns.

Q4: Which tools enable automation?

ERP, APS, WMS, TMS, control towers, digital twins, predictive analytics, and supplier collaboration platforms.

Q5: How does warehouse automation help?

It streamlines picking, packing, and shipping, maintains stock conditions with IoT, reduces errors, and boosts inventory accuracy.

Q6: What’s AI’s role?

AI predicts demand, flags anomalies, prevents equipment failures, and recommends actions that raise service levels and cut costs.

Q7: How do digital twins improve production?

They simulate scenarios to test changes, optimise resources, and reduce risk before real-world deployment.

Q8: Can you share real examples?

Zara uses automated inventory flows; UPS deploys ORION routing; FedEx uses GPS-enabled tracking; Unilever runs control towers.

Q9: Where does automation fall short?

Complex exceptions, regulatory steps, and nuanced customer interactions still require human judgment and oversight.

Q10: How do we start an automation roadmap?

Identify pain points, prioritise high-ROI use cases, standardise data, integrate ERP/WMS/TMS, pilot, then scale.

How Businesses Use Logistic Regression R

Organizations use the logistic regression model to extract insights from historical data and perform predictive analysis. By applying logistic regression in R or other platforms, businesses can:

• Improve decision-making,
• Boost operational efficiency, and
• Reduce costs.

What is the Logistic Regression Formula?

Logistic regression involves a logit transformation, which is based on log odds—the natural logarithm of the odds ratio. Odds are defined as the probability of success divided by the probability of failure. The general logistic regression formula for the model is:

Logit(π) = ln(π / (1 − π)) = β₀ + β₁x₁ + β₂x₂ + … + βₖxₖ

Where,

• Logit(π) = the log odds of the dependent variable
• π = probability of success (dependent variable = 1)
• x₁, x₂, …, xₖ = independent variables
• β₀, β₁, …, βₖ = regression coefficients, estimated using Maximum Likelihood Estimation (MLE)

For binary classification using the logistic regression model, predictions are interpreted as:

• Probability < 0.5 → predicted class is 0
• Probability ≥ 0.5 → predicted class is 1

This threshold can be adjusted based on the business requirement or model performance metrics.

Assumptions of Logistic Regression

The following assumptions must be satisfied when applying a logistic regression model:

• The dependent variable is binary (e.g., 0/1, yes/no, true/false).
• There is a linear relationship between the logit of the outcome and the predictor variables.
• No extreme outliers should be present in the continuous independent variables.
• There must be no multicollinearity (high correlation) among the independent variables.

Decision Boundary in Logistic Regression

In this model, the decision boundary is formed based on the logit function applied to a linear combination of input features. It represents the threshold at which a predicted probability switches classes, typically when the probability equals 0.5. This is the point at which the model is equally likely to classify the case as positive or negative.

For a binary logistic regression model with two predictors, the decision boundary is defined by:

0 = β₀ + β₁x₁ + β₂x₂

Where:

• β₀, β₁, β₂ are model coefficients
• x₁, x₂ are the independent variables

This answers the question: How do we find a decision boundary for logistic regression? The boundary can be linear or nonlinear, depending on the model and transformation of input variables.

Key Properties of the Logistic Regression Equation

Important characteristics of the logistic regression formula include:

1. The dependent variable follows a Bernoulli distribution, meaning it can take on only two values: 0 or 1.
2. Predictions are made based on the Maximum Likelihood Estimation (MLE) technique, which finds parameters that maximize the probability of observing the given data.
3. Unlike linear regression, logistic regression does not use R² (coefficient of determination). Instead, it is often evaluated using metrics like AUC, concordance, log-likelihood, and accuracy.

Logistics Regression Example

Predicting On-Time Delivery at DHL Express

1. Background and Objective

• DHL Express, a global leader in logistics, wanted to predict whether an international package would be delivered on time using logistic regression.
• The goal was to reduce late deliveries and optimize logistics operations.
• To use logistic regression to classify whether a package will be delivered on time (1) or delayed (0) based on known independent variables at the time of shipping.

2. Dataset

DHL collected 50,000 international shipping records and used the following variables:

3. Model Output

The regression model estimated the following coefficients

4. Interpretation

a. Distance and Package Weight

Negative coefficients indicate that longer distances and heavier packages reduce the chance of on-time delivery.

• Weather Condition: Worse weather (rain or snow) significantly increases delay probability.
• Customs Clearance: Every additional hour in customs lowers the odds of being on time.
• Shipping Mode: Road transport is less reliable compared to air.

b. Prediction Example

A shipment from London to Karachi has the following data:

• Distance = 7,200 km
• Weight = 12 kg
• Weather = Rain (1)
• Customs Time = 4 hours
• Shipping Mode = Air (0)

After applying the above values in the logistic regression formula, we may calculate that:

• Logit = 1.75 + (-0.003 × 7200) + (-0.02 × 12) + (-0.65 × 1) + (-0.08 × 4) + (-0.5 × 0) = -21.07
• Probability (p) ≈ 0.0000000069

So, very low chance of on-time delivery in this case due to long distance, poor weather, and customs delay.

5. Result

Here is the impact of using the formula at DHL

• Improved on-time delivery prediction accuracy by 15%.
• Enabled automated risk alerts for packages likely to be delayed.
• Informed route planning and resource allocation.
• Used as part of AIMS Supply Chain Analytics curriculum as a real-world case study.

Linear Regression vs Logistic Regression

Linear regression and logistic regression are both widely used models in data science and machine learning.

1. Linear Regression Model

A linear regression model is used when the dependent variable is continuous. It models the relationship between variables using the least squares method. There are two main types:

• Simple linear regression – with one independent variable
• Multiple linear regression – with two or more independent variables

2. Logistic Regression Model

In contrast, this model is used when the dependent variable is categorical (e.g., true/false, yes/no, 1/0). It predicts the probability of class membership rather than a continuous value.

Thus, the key difference in linear regression vs logistic regression lies in the nature of the outcome variable and the method of estimation. While linear regression outputs continuous values, logistic regression models the probability of a class using a sigmoid/logit function.

Types of Logistic Regression

It can be categorized into three types, depending on the nature of the categorical dependent variable:

• Binary,
• Multinomial, and
• Ordinal.

Each type is used for a different kind of classification problem.

1. Binary Logistic Regression

This is the most common and widely used form, in which the dependent variable is binary, meaning it has only two possible outcomes, such as 0/1, yes/no, or true/false. It is a fundamental tool for solving binary classification problems.

Example

A logistics company predicts whether a package will be delivered on time.

• Dependent Variable: Delivery status (0 = Late, 1 = On Time)
• Independent Variables: Package weight (grams), Distance (km), Weather forecast (Clear or Bad)

This type of regression model is ideal for situations where the outcome is a simple success/failure decision.

2. Multinomial Logistic Regression

In this regression, the dependent variable can have three or more unordered categories. Unlike binary regression, these outcomes do not follow any specific order.

Example

A company needs to predict the most suitable mode of transport for package delivery.

• Dependent Variable: Transportation type (Air, Road, Ship)
• Independent Variables: Distance (km), Package size (Small, Medium, Large), Urgency (High or Low)

Multinomial logistic regression is useful in multiclass classification problems where the categories are mutually exclusive and unordered.

3. Ordinal Logistic Regression

Ordinal logistic regression is used when the dependent variable has three or more categories that follow a natural order, but the distances between categories are unknown or unequal.

Example

A company evaluates customer satisfaction based on delivery experiences.

• Dependent Variable: Customer satisfaction (Low, Medium, High)
• Independent Variables: Delivery time (hours), Shipment cost (Rs), Package condition (Intact or Damaged)

This type of regression is ideal for analyzing ordered categorical responses, such as ratings, satisfaction levels, or grading scales.

Applications of Logistic Regression

Logistic regression is widely used across various industries for predictive analysis involving binary or categorical outcomes. Below are its practical applications:

a. Logistic Regression in Manufacturing

The manufacturers use it to estimate the likelihood of machine part failures. This helps in planning preventive maintenance to avoid costly downtimes and improve operational efficiency.

b. Logistic Regression in Finance

Banks and insurance companies use it to:

• Assess loan or insurance application risk (e.g., high or low risk)
• Detect fraudulent financial transactions

These problems involve discrete classification, making it an effective modeling tool.

c. Logistic Regression in Marketing and Promotions

Online marketing platforms apply it to predict ad click-through rates. This enables marketers to optimize ad content based on user responses to different text, visuals, or targeting strategies.

Logistic Regression in Supply Chain Management

Courses like the AIMS’ online supply chain management diploma or MBA in Supply Chain & Logistics Management teach how logistic regression enhances operational decision-making in supply chain.

1. Predictive Performance in Logistics

a. Supplier Performance

Predicts the likelihood of delayed shipments based on past supplier data.

b. Product Return Probability

For better supply chain management processes, it estimates the chances of a product return using historical sales and customer behavior data.

c. Machine Maintenance Forecasting

Uses machine age, usage, and service records to predict machine failure probability.

2. Interpreting Logistic Regression Outcomes

By analyzing probabilities and odds ratios, logistics professionals can:

• Quantify the likelihood of events
• Make data-driven decisions to minimize uncertainty

3. The Power of Binary Outcomes

The binary nature of logistic regression offers clear, decisive outcomes (e.g., delay/no delay, defect/no defect), allowing businesses to act swiftly and with confidence.

4. Train Score in Logistic Regression

The train score measures how well a model fits its training dataset. Common metrics include:

a. Accuracy

Accuracy is the proportion of training dataset samples that were properly classified.

Accuracy = Number of correct predictions/Total number of predictions

b. Log-Loss

Measures how well predicted probabilities match actual outcomes.

Lower log-loss = better performance.

c. Additional Metrics

• F1-Score, Precision, Recall: Crucial for imbalanced datasets
• AUC-ROC: Measures the model’s ability to distinguish between classes

d. Overfitting vs. Underfitting

• Overfitting: High train score but poor test score—model learns noise, not general patterns
• Underfitting: Low train and test scores—model is too simple or undertrained

Best Practice: Ensure train and test scores are close for reliable generalization.

Key Advantages of Logistic Regression

It offers several benefits in machine learning and predictive analytics:

1. Easy to Implement

Machine learning models using logistic regression are easy to train and configure. During training, the model learns patterns in the input and links them to the expected output.

2. Ideal for Linearly Separable Data

When data can be separated by a straight line, logistic regression performs exceptionally well—especially for binary outcomes.

3. Provides Interpretability

Logistic regression provides clear insights into:

• Direction (+/-) of relationships between variables.
• Variable significance helps identify which factors matter most.

Frequently Asked Questions

Q1: What is logistic regression?

It predicts the probability of a binary outcome using a logit link on a linear combination of predictors, estimated via maximum likelihood.

Q2: What is the logistic regression formula?

logit(π) = ln(π/(1−π)) = β₀ + β₁x₁ + … + βₖxₖ, where π is the probability of the positive class and β are MLE-estimated coefficients.

Q3: How do I interpret coefficients?

Exponentiate a coefficient to get an odds ratio: values >1 increase odds of the positive class; values <1 decrease them, ceteris paribus.

Q4: What assumptions does logistic regression make?

Binary dependent variable, linearity in the logit, no severe multicollinearity, and absence of extreme outliers in continuous predictors.

Q5: How is the decision boundary defined?

With two predictors, the 0.5 threshold yields β₀ + β₁x₁ + β₂x₂ = 0; it can be linear or nonlinear depending on features.

Q6: How does it differ from linear regression?

Linear regression predicts continuous values; logistic regression models class probabilities for categorical outcomes using a sigmoid/logit.

Q7: What types of logistic regression exist?

Binary, multinomial (unordered), and ordinal (ordered) depending on the nature of the dependent variable.

Q8: How is it used in supply chain?

To predict on-time delivery, supplier delays, product returns, and machine failures to guide planning and reduce costs.

Q9: Which evaluation metrics should I use?

Accuracy, log-loss, precision, recall, F1-score, and AUC-ROC; compare train vs test to detect overfitting.

Q10: How do I choose a classification threshold?

Start at 0.5 and adjust based on business costs and precision–recall or ROC analysis to balance errors.

Q11: Can I include categorical predictors?

Yes—use dummy/one-hot encoding or contrasts to estimate effects relative to a reference category.

Q12: When is logistic regression the right choice?

When the outcome is categorical, logit relationships are roughly linear, and you value interpretability and efficiency.

Principles of Consumption in the Qur’an

Understanding human behavior and consumption in Islamic economics is deeply enriched by the comprehensive insights of the Holy Quran into human nature. When analyzing Muslim consumption patterns, verses of the holy text serve as invaluable guiding principles of consumption in Islam.

The following Quranic verses highlight traits that influence consumption:

Principles of Consumption in Hadith

The Ahadith of the Prophet Muhammad (SAW) provide invaluable guidance on the principles of consumption in Islam, with particular focus on moderation, contentment, and charity. Here are a few narrations illustrating the value of consumption in Islam:

Consumption in Islamic Economics

Muslim should emphasize on fulfilling both spiritual and material needs according to the following fundamental principles of consumption:

1. The Role of Consumption in Islamic Economics

The goal of Islamic economics is to meet basic needs while simultaneously balancing spiritual and material aspects of life by applying moral and ethical standards as prescribed by Shariah law to consumption decisions. The ultimate goal is the well-being of individuals and society. Core principles of consumption in Islam include the following:

• Using resources responsibly and avoid Israf (wastefulness).
• Consume only halal and lawful goods, and avoid haram items.
• Support the poor through zakat and sadaqah.
• Focus on needs over luxuries.
• Ensure that all spendings are aligned with Shariah guidance.

2. Differences Between Islamic and Conventional Consumption

Conventional economics focuses on material gain and personal satisfaction. On the other hand, the principles of consumption in Islam incorporates spiritual rewards. And, fulfilling ethical and moral needs through consumption is a part of worship.

3. The Purpose of Wealth in Islam

• Islam permits wealth generation, provided it serves higher purposes such as paying zakat or sadaqah (to help the needy).
• Wealth is a blessing from Allah, and it should be used to meet basic needs, support others, and promote social stability.
• Islam prohibits the misuse of wealth and encourages the circulation of wealth to strengthen the economy as well as the society.

8 Key Principles of Consumption in Islam

A study of the Holy Qur’an and the Sunnah of Prophet Muhammad (SAW) reveals the following core principles of consumption in Islam. Studying both the Holy Qur’an and Sunnah of the Prophet Muhammad (SAW) provides us with the following eight core principles of consumption in Islam.

These principles are as follows:

1. Principle of Lawfulness (Halal vs. Haram)

Consumption in Islam must follow the knowledge of halal (permissible) and haram (forbidden).

• Certain items are clearly prohibited, such as carrion, pig flesh, blood, animals not slaughtered with Takbeer, intoxicants, and specific clothing materials like silk and gold for men.
• Also forbidden are idolatry, sculpture-making, fortune-telling, gambling, and betting.

Aside from these, all other goods are considered lawful, and spending on them is permissible.

2. Principle of Cleanliness (Tayyib)

For an item to be lawful under Islam, it must also be pure, clean, and hygienic for human health. Islam forbids spending money on things that are filthy or harmful; As Allah is Pure, He loves purity in what we consume and spend on. Therefore, Islam promotes healthy and safe consumption practices.

3. Principle of Moderation

It is an important principles, which is essential in all areas of life, particularly financial ones.

• It helps maintain balance between income and expenditure.
• The Islamic Shariah also keeps one away from wasteful spending or extravagance, so a Muslim should ensure financial stability and self-discipline.

4. Principle of Benefit

Principles of consumption in Islam aim at benefiting the body, soul, and community.

• Wealth is a blessing from Allah and should be used to fulfill both individual and societal needs.
• Islamic Shariah discourages spending on frivolous or harmful items and promotes useful, purpose-driven spending.

5. Principle of Morality

Rules for the consumption in Islam and Shariah are governed by ethical standards. While philanthropy and helping the needy are encouraged, spending on immoral content, such as inappropriate films, books, music, or other degrading materials.

Muslims’ spending patterns should be according to Shariah, and they must reflect moral character and social responsibility.

6. Principle of Maximum Welfare

True welfare is achieved when spiritual and material well-being are balanced.

• Muslims are encouraged to direct their spending toward items that promote personal peace, spiritual growth, and social welfare.
• Every purchase should serve a meaningful and beneficial goal, avoiding harm to oneself or others.
• Muslim households can achieve true welfare when both spiritual and material needs are balanced. Spending should prioritize items, such as peace, spiritual growth, and social welfare.
• Every purchase of a Muslim must serve an important and purposeful function, without harm to themselves or others.

For Example:

Donating a portion of your salary to a local charity that provides education to underprivileged children, while also ensuring your own family’s well-being, maintaining a balance between material and spiritual welfare.

7. Principle of Trust (Amanah)

Wealth is a trust (Amanah) from Allah. A Muslim does not possess wealth purely by skill or effort—it is a divine bounty. Therefore, money must be spent in line with Allah’s commands, upholding this trust through ethical and responsible spending.

8. Principle of Gratitude (Shukr)

• Wealth is a gift from Allah that requires expressing gratitude in consumption, according to Allah’s Will.
• True thankfulness is reflected when a person spends money on righteous acts, worship, and helping others, not just for personal luxuries.

For Example

If you are contributing a percentage of your earnings to build a mosque or fund clean water projects in underdeveloped areas, it means your wealth is a means of expressing gratitude to Allah for the blessings you’ve received.

Conclusion

Islamic principles of consumption offer a spiritual and socially responsible alternative to materialistic lifestyles. Consumption in Islam should follow values such maintaining balance in spending, gratitude (Shukr), ethics, and social welfare. Muslims are guided not only toward personal fulfillment but also toward collective harmony. The Qur’an and Sunnah teach us that wealth is a trust or Amanah from Allah, and consumption in Islam should benefit oneself, his or her family, and the society at large.

Learn More with AIMS

For those who wish to explore Islamic economics and ethical consumption in Islam in more depth, AIMS offers flexible, accredited programs, including:

• Globally accredited MBA masters degree in Islamic banking and finance,
• Internationally recognized postgraduate Islamic Banking and Finance Diploma, and
• CIFE Islamic Finance Course offered 100% online.

AIMS’ programs are globally recognized, internationally accredited, and they are offered through an online, self-paced learning system. These programs include in-depth study of consumption in Islam, zakat, halal investments, Islamic financial instruments, AAOIF Shariah Standards, and Islamic Insurance or Takaful.

Shariah-guided purpose of wealth helps you apply the principles of consumption in both personal life and professional practice. By aligning with the Shariah compliant spending habits, Muslims ensure their wealth becomes a source of barakah (blessing) in this life and the Hereafter.

Frequently Asked Questions

Q1: What does consumption mean in Islam?

Using lawful goods and services to fulfil needs in a balanced, purposeful way, guided by Shariah and social responsibility.

Q2: What are the core principles of consumption in Islam?

Halal vs haram, cleanliness (tayyib), moderation, benefit, morality, maximum welfare, trust (Amanah), and gratitude (Shukr).

Q3: How do halal and haram affect spending?

Consume only what is halal and avoid prohibitions such as pork, intoxicants, gambling, and idolatry-related practices.

Q4: What is tayyib in everyday purchases?

Choosing pure, wholesome, and safe items; avoiding what is filthy or harmful to health.

Q5: Why is moderation essential?

It balances income and expenses, curbs extravagance (israf), and supports long-term financial stability.

Q6: How should wealth be used according to Islam?

Meet needs, support family and community, pay zakat and sadaqah, and avoid wasteful or harmful uses.

Q7: How is Islamic consumption different from conventional views?

It integrates spiritual reward and ethical accountability, treating spending as part of worship and social justice.

Q8: How do morality and ethics guide purchases?

Spend on beneficial, dignified items; avoid degrading content and behaviour contrary to Shariah values.

Q9: What is “maximum welfare” in spending?

Direct purchases toward meaningful goals that enhance personal peace and community welfare, while avoiding harm.

Q10: What does Amanah (trust) mean in finance?

Wealth is a trust from Allah; use it lawfully, ethically, and responsibly, with accountability for choices.

Q11: How do Muslims show gratitude (Shukr) through spending?

By prioritising righteous uses—worship, charity, and beneficial projects—over luxury and excess.

Q12: Which Qur’an and Hadith themes guide consumption?

Eat what is lawful and good, support relatives and the poor, practice moderation, give timely charity, and avoid greed.

Categories of KPI in Project Management

Generally, project management KPIs fall into the following four categories:

1. Timeliness

These project management KPIs ensure that the project finishes as scheduled. If delays occur, it is essential to track the source and ensure an updated completion date is maintained.

2. Budget

These project management KPIs determine whether the project remains within the allocated budget or exceeds projected expenses.

3. Quality

They assess if the project is meeting the required quality standards and whether stakeholders are satisfied with the results.

4. Effectiveness

The KPI in project management related to effectiveness evaluates whether time and resources are used efficiently throughout the project lifecycle.

Project management KPIs are thoroughly discussed in the educational programs offered by AIMS’ Institute of Project Management, including the online certificate program in project management, online postgraduate diploma in project management, and an accredited distance learning MBA in project management.

Top 32 Project Management KPIs

KPIs for project managers serve as essential tools for oversight and evaluation. The project manager reviews progress against established benchmarks such as:

1. Cost Performance Index (CPI)

The CPI measures the financial efficiency of the project. CPI data helps project managers make decisions about the project’s budget and their timely completion. It shows:

• CPI < 1: Project is underperforming
• CPI = 1: On target
• CPI > 1: Overperforming

Formula for CPI

CPI = Earned Value (EV) / Actual Cost (AC)

2. Budget Variance (BV) / Cost Variance (CV)

The BV KPI in project management identifies the gap between earned value and actual costs. It aids in monitoring expenditures during project activities, helping the managers to decide how to distribute the remaining resources for maximum efficiency. The BV values indicate different situation:

• Positive (+) means the project is under budget
• Zero (0) means the project is on budget
• Negative (-) means the project is over budget

Formula for Budget Variance

BV = Earned Value (EV) – Actual Cost (AC)

3. Profitability

This project management KPI assesses whether the project is financially viable or not. This process allows the project managers to drop ineffective projects, discontinue unprofitable activities, and more lucrative clients.

Formula for Profitability

Profitability = Billable Amount – Total Costs

Where,

• Billable Amount = (Billable hours × Rate) + Expenses
• Total Costs = (Hours × Labor Rate) + All Expenses

4. Planned Value (PV)

This KPI in project management sets the benchmark for financial performance for specific milestones.

Formula for PV

PV = Budget at Completion × Planned % Complete

5. Billable Utilization (BU)

BU project management KPI measures the percentage of time spent generating revenue.

Formula for BU

BU = (Billable Hours / Available Hours) × 100%

6. Schedule Performance Index (SPI)

This project management KPI assesses the timeline efficiency of the projects. It eliminates ambiguity and allows the project manager to implement prompt adjustments to optimize resource utilization.

Formula to Calculate SPI

SPI = Earned Value (EV) / Planned Value (PV)

7. Employee Churn Rate (ECR)

The ECR project management KPI reflects the workforce stability of the project. Elevated employee attrition negatively affects project effectiveness.

Formula to Calculate ECR

ECR = (Employees Who Left / Avg. No. of Employees) × 100

8. Resource Capacity (RC)

This KPI in project management estimates effective working hours.

Formula to Calculate RC

RC = Total Work Hours × Project Workdays

9. On-Time Completion Percentage (CP)

The CP KPI in project management is used to track punctuality of project completion. It enables project managers to track and improve operational efficiency.

Formula to Calculate CP Rate

CP = (Projects Completed On Time / Total Projects) × 100%

10. Planned Hours VS. Time Spent (PH vs TS)

This project management KPI compares estimated and actual time. The project manager can track the progress of each employee against the set objectives, with the outcomes reflecting the following:

• Difference > 0: On track
• Difference < 0: Behind schedule

Formula to Calculate PH vs TS

PH vs. TS = Estimated Time – Actual Time Spent

11. Actual Cost (AC)

Measures the total cost incurred for completed work.

Formula

AC = Sum of Direct and Indirect Costs

12. Earned Value (EV)

This KPI in project management quantifies the value of work actually performed.

Formula to Calculate EV

EV = % of Completed Work × Budget at Completion

13. Work Breakdown Structure (WBS) Accuracy

Evaluates how well the WBS aligns with project execution.

Note: Accurate WBS reduces scope creep and improves forecasting.

14. Change Request Frequency

This project management KPI monitors how often changes are requested.

Formula

Change Frequency = No. of Requests / Project Duration

15. Quality Assurance (QA) Compliance Rate

It tracks adherence to predefined quality standards.

Formula

QA Rate = (Compliant Deliverables / Total Deliverables) × 100%

16. Issue Resolution Time

This project management KPI calculates how quickly project issues are resolved.

Formula

Avg. Time = Sum of Time to Resolve Each Issue / No. of Issues

17. Customer Satisfaction Score (CSAT)

It assesses stakeholder satisfaction at project closure.

Formula

CSAT = (Positive Responses / Total Responses) × 100%

18. Project ROI (Return on Investment)

Measures financial return relative to project cost.

Formula

ROI = (Net Benefit – Cost) / Cost × 100%

19. Stakeholder Engagement Index

The SEI project management KPI evaluates stakeholder involvement through surveys and feedback.

Note: Higher engagement correlates with successful delivery.

20. Risk Mitigation Index

This PKI in project management indicates how well risks are identified and managed.

Formula

RMI = (Risks Mitigated / Total Identified Risks) × 100%

21. Task Completion Rate

It shows how many assigned tasks have been completed.

Formula

TCR = (Completed Tasks / Total Tasks) × 100%

22. Rework Rate

Highlights inefficiencies due to errors or changes.

Formula

Rework Rate = (Reworked Tasks / Total Tasks) × 100%

23. Communication Efficiency

This project management KPI is used to monitor the frequency and success rate of stakeholder communications.

Note: Assessed via surveys or communication logs.

24. Training Hours per Employee

Tracks knowledge enhancement within the project team.

Formula

Avg. Training Hours = Total Hours / No. of Employees

25. Schedule Variance (SV)

The SV is a project management KP used to identify deviations from planned timelines in projects.

Formula

SV = Earned Value (EV) – Planned Value (PV)

26. Milestone Achievement Rate

Evaluates whether key milestones are being met.

Formula

MAR = (Achieved Milestones / Total Milestones) × 100%

27. Scope Change Rate

This KPI in project management is related to project scope, and it assesses how frequently the project scope is altered.

Formula

Scope Change Rate = (No. of Changes / Total Scope Items) × 100%

28. Budget at Completion (BAC) Accuracy

Compares estimated project budget with actuals.

Note: Accurate BAC enhances forecasting and control.

29. Team Satisfaction Index

This project management KPI evaluates internal satisfaction and team morale in the projects.

Note: Measured through pulse surveys and feedback tools.

30. Integration Readiness

It assesses how well the project can be absorbed into the client or organizational system.

Note: High readiness reduces transition risks.

31. Lessons Learned Implementation Rate

Tracks the reuse of previous project knowledge.

Formula

LLIR = (Applied Lessons / Total Relevant Lessons) × 100%

32. Earned Schedule (ES)

This project management KPI improves upon SPI by estimating time efficiency.

Formula

ES = Time corresponding to Earned Value on the performance baseline

The above-mentioned 32 essential project management KPIs form a comprehensive system that helps managers monitor financials, timelines, resources, quality, and stakeholder expectations. Whether selecting a single KPI for project management or a full dashboard, aligning KPIs with project goals is key to consistent and measurable success.

Real-World KPI Project Management Case Studies

Case Study 1: IT Industry – Software Development Project

Background

A SaaS company initiated a 6-month project to develop a customer relationship management (CRM) application. Agile project management methodology was adopted, and project management KPIs were used to track productivity and budget control.

Project Management KPIs Applied

1. Cost Performance Index (CPI)

• Earned Value (EV): $120,000
• Actual Cost (AC): $135,000
• CPI = EV / AC = 120,000 / 135,000 = 0.89

Interpretation: The project was underperforming financially.

2. Schedule Performance Index (SPI)

• Planned Value (PV): $130,000
• EV: $120,000
• SPI = EV / PV = 120,000 / 130,000 = 0.92

Interpretation: The team was slightly behind schedule.

3. Billable Utilization (BU)

• Billable Hours: 2,160
• Available Hours: 2,400
• BU = (2,160 / 2,400) × 100% = 90%

Interpretation: The Team maintained high billable efficiency.

Result:

The project was completed with slight overruns, but strong utilization helped recover costs in the later stages. Management revised project sprint planning based on SPI and CPI feedback for future projects.

Case Study 2: Construction Industry – Office Complex Development

Background

A construction firm managed a 10-month office building project with a $2 million budget. The firm used KPIs for project managers to monitor cost, schedule, and quality control.

Project Management KPIs Applied

1. Budget Variance (BV)

• EV: $1,800,000
• AC: $1,950,000
• BV = EV – AC = 1,800,000 – 1,950,000 = –$150,000

Interpretation: Project was over budget.

2. On-Time Completion Percentage (CP)

• Projects Completed On Time: 8
• Total Projects: 10
• CP = (8 / 10) × 100% = 80%

Interpretation: Delivery consistency was strong, but not perfect.

3. Planned Hours vs. Time Spent

• Estimated Time: 20,000 hours
• Actual Time Spent: 22,000 hours
• Variance = 20,000 – 22,000 = –2,000 hours

Interpretation: Time overrun indicated inefficiencies in resource planning.

Result:

Despite the $150,000 cost variance, the firm finished the project within client expectations. Lessons learned included tightening procurement controls and scheduling subcontractor dependencies more closely.

Case Study 3: Healthcare Industry – Hospital System Integration

Background

A private hospital launched a 4-month project to integrate electronic health records (EHR) across departments. The project team used specific KPI for project management to ensure regulatory compliance and resource alignment.

Project Management KPIs Applied

1. Employee Churn Rate (ECR)

• Employees Who Left: 2
• Avg. Employees: 40
• ECR = (2 / 40) × 100 = 5%

Interpretation: Stable workforce retention during change management.

2. Resource Capacity (RC)

• Total Work Hours per Person: 160
• Project Workdays: 20
• Team Size: 10
• RC = 160 × 20 × 10 = 32,000 hours

Interpretation: Sufficient capacity was allocated for successful rollout.

3. Schedule Performance Index (SPI)

• EV: $180,000
• PV: $200,000
• SPI = 180,000 / 200,000 = 0.90

Interpretation: Slight schedule delays due to unexpected data migration issues.

Result:

Despite minor delays, the EHR system was launched successfully with minimal churn and effective team engagement. SPI trends were used to adjust the implementation plan in the final phase.

Why is KPI in Project Management Essential for Project Managers?

Project management KPIs measure how efficiently project processes achieve targeted outcomes. In this section, we’ll explore why KPI in project management is essential for project managers and how it helps in tracking project success and performance.

1. KPIs to Monitor Company Health

KPI in project management serves as a scorecard that reflects the overall health of a company. It’s essential to monitor KPIs across four key areas: Employees, Customers, Processes, and Revenue. These categories align with HR, customer satisfaction, business processes, and strategic goals—ensuring you select the right KPI for project management and broader business impact.

2. KPIs to Measure Progress over Time

A KPI in project management is a quantifiable metric that reveals whether a team or organization is meeting its objectives. KPIs may track revenue, profit margins, customer satisfaction, employee productivity, or product quality. Project managers define and monitor these project management KPIs regularly to evaluate progress and stay aligned with goals.

3. KPIs to Make Adjustments and Stay on Track

Project management KPIs help project managers track both leading and lagging indicators to assess progress toward project goals. These metrics reveal whether a project is moving in the right direction or needs realignment to meet desired outcomes.

4. KPIs to Solve Problems

KPIs for project managers provide the data needed to solve problems and identify opportunities. For example, a drop in sales might be traced to KPIs like the number of outbound calls, attended appointments, or trade show participation. Monitoring the right KPI for project management enables quick corrective action.

5. KPIs to Analyze Patterns over Time

Tracking the same project management KPI across quarters helps project managers identify trends and patterns. Recognizing seasonal dips or recurring issues allows them to plan proactively, like launching system updates or training during slow periods.

Key Features of an Effective KPI in Project Management

Below are the essential traits of an effective KPI in project management, helping ensure accurate tracking and successful project delivery.

• Align with organizational goals to ensure that each project management KPI supports broader business success.
• Help project managers maintain consistent project quality through measurable performance metrics.
• Act as key indicators of time management within the project lifecycle.
• Remain stable unless major shifts in business objectives occur, ensuring continuity of measurement.
• Support project managers in fulfilling responsibilities by providing actionable insights from well-defined KPIs in project management.

Frequently Asked Questions

Q1: What is KPI in project management?

A KPI is a measurable metric that shows how well a project meets objectives across timeliness, budget, quality, and effectiveness.

Q2: How does the Cost Performance Index (CPI) work?

CPI = EV ÷ AC. Less than 1 means over budget, 1 is on budget, greater than 1 is under budget; use it to guide spending decisions.

Q3: How do you calculate the Schedule Performance Index (SPI)?

SPI = EV ÷ PV. Below 1 means behind schedule, equal to 1 is on plan, above 1 is ahead; track trends to adjust sequencing and resources.

Q4: What are the four categories of project management KPIs?

Timeliness, Budget, Quality, and Effectiveness—together they reflect delivery reliability, cost control, standards, and resource use.

Q5: Which KPIs help manage budget and profitability?

Budget Variance, Actual Cost, Planned Value, and Profitability; these reveal cost drift and overall financial viability.

Q6: What’s the difference between leading and lagging KPIs?

Leading KPIs predict performance (capacity, training); lagging KPIs confirm outcomes (ROI, on-time completion). Use both.

Q7: How do you implement KPIs effectively?

Align with business goals, define formulas and targets, baseline early, review trends, and adjust plans with clear ownership.

Q8: What is Earned Schedule (ES)?

ES converts earned value into time, improving schedule forecasts versus SPI on time-based baselines—useful for time-critical work.

Q9: How can KPIs improve stakeholder satisfaction?

Track CSAT, communication efficiency, and milestone achievement to surface gaps early and keep stakeholders informed.

Q10: What KPI mistakes should teams avoid?

Too many metrics, vague formulas, mid-project changes, and ignoring trends. Keep a focused set and act on insights.

Q11: How does KPI project management support Lean Six Sigma?

KPIs quantify defects, cycle times, and rework to enable DMAIC; this aligns measurement with lean six sigma improvement.

Q12: Which KPIs reveal resource risks early?

Billable Utilization, Resource Capacity, and Employee Churn Rate highlight overloads, capacity gaps, and retention issues.

Purpose of Various Types of Supply Chains

The different types of supply chains and their specific purposes play a crucial role in businesses by optimizing operations, increasing efficiency, and lowering production costs. The diversity in types of supply chains arises due to varying needs, operational complexities, and the company’s specific goals such as company size, product nature, industry, and market demands.

Below are several key aspects that contribute to the development of various types of supply chains:

1. Large and Small Businesses

This is one aspect that influences the types of supply chains. For example, larger businesses that enter fast-changing markets acquire strategic supply chains for flexibility, while small companies often rely on linear supply chains.

2. Efficiency and Cost Optimization

These two factors also influence the types of supply chains. Companies seeking to reduce costs may choose direct or collaborative supply chains to minimize intermediaries.

3. E-commerce Businesses

E-commerce businesses require fast customer delivery services and typically opt for direct supply chains.

4. Automotive Businesses

The automotive industry needs to manage multiple suppliers simultaneously. In this case, complex supply chains help companies optimize operations, stay competitive, and improve efficiency.

5. Sustainability and Compliance Needs

Companies with environmental or social responsibility goals implement green supply chains to reduce waste, carbon emissions, and ensure ethical sourcing.

6. Global Expansion

Multinational corporations utilize global or extended supply chains to manage operations across borders and serve diverse markets.

7. Innovation & Personalization Demands

Businesses requiring frequent product updates and customization often opt for flexible or hybrid supply chains to balance agility and efficiency.

8. Digital Transformation

Digitally driven businesses use digital supply chains that leverage AI, IoT, and big data for predictive analytics, real-time tracking, and automation.

Key Features of Different Types of Supply Chains

Types of Supply Chain Management Based on Functional Purpose

Every business has unique operational needs, product flows, and market pressures. These variations require tailored supply chain strategies to maximize efficiency, responsiveness, and sustainability.

The table below outlines various types of supply chains, their functional purpose, and where they are best applied, helping organizations choose the right model based on their industry, scale, and goals.

7 Types of Supply Chain Management Models

As discussed earlier, every supply chain business has unique features and requirements, which is why different operating types of supply chains have been developed. Supply chain graduates study supply chain management in detail during logistics management and supply chain diploma or MBA degree in supply and logistics management to develop the skills needed to effectively manage supply chain processes.

These types of supply chain management models demonstrate how materials and production are accomplished and delivered.

1. Continuous Flow Model (CFM)

CFM is intended for supply chain stability and consistency. It is highly effective in businesses with steady and predictable product demand.

a. Applicability:

Well-suited for businesses with continuous manufacturing processes, such as food producers or automobile manufacturers.

b. Example:

A dairy company that continuously produces milk to meet the demand from consumers.

c. Advantages:

Reduces the risks associated with the supply chain management, such as stockouts, enhances efficiency, and ensures a stable production rate.

d. Disadvantages:

Lacks flexibility in adapting to unexpected demand shifts or supply chain disruptions.

e. Real-World Case Study:

A good example of the continuous flow model is Coca-Cola. The company has a highly predictable demand for its products, which allows for a continuous flow of production. The company uses a continuous flow model to maintain steady production and distribution, ensuring product availability in global markets.

2. Fast Chain Model (FCM)

FCM is designed for businesses with short product life cycles, fast-changing demands, and a strong need for rapid responsiveness.

a. Applicability:

Ideal for fashion retailers, electronics manufacturers, or businesses handling seasonal or trend-driven products.

b. Example:

Fashion retailers that quickly design, manufacture, and deliver clothing driven by new trends.

c. Advantages:

Allows swift adaptation to market trends, minimizes the risk of overstocking, and aligns with shifting consumer preferences.

d. Disadvantages:

May incur higher costs.

e. Real-World Case Study:

Zara, the Spanish fashion retailer, is a prime example of the Fast Chain Model. Zara’s supply chain is designed to quickly respond to the latest fashion trends, producing and distributing new collections to stores in as little as two weeks. This enables Zara to offer trendy items that match current consumer demand, minimizing excess inventory.

3. Efficient Chain Model (ECM)

ECM in supply chain management emphasizes cost optimization by streamlining logistics and SCM operations.

a. Applicability:

Suitable for large-scale manufacturing processes that produce high volumes and low-cost products.

b. Example:

Large consumer goods manufacturers focus on high-volume production to maintain competitive pricing while ensuring quality.

c. Advantages:

It enhances operational efficiency, lowers costs, and reduces waste.

d. Disadvantages:

Less flexible in responding to changes in supply chain disruptions or market demand.

e. Real-World Case Study:

Walmart, as an example, uses the Efficient Chain Model by leveraging its massive scale and cost-efficient operations. By implementing just-in-time inventory systems and negotiating favorable contracts with suppliers, Walmart is able to pass on cost savings to consumers while maintaining efficiency in its supply chain.

4. Agile Supply Network Model (ASNM)

The Agile Supply Network Model is designed to quickly adapt to market changes and growing customer needs, emphasizing responsiveness and flexibility.

a. Applicability:

An ideal model for businesses experiencing high variability in customer demand, such as those in the technology and fashion sectors.

b. Example:

Technology companies that need rapid adjustments to innovations and changing consumer preferences.

c. Advantages:

Enables swift responses to market shifts, delivers excellent customer service, and handles unpredictability effectively.

d. Disadvantages:

Often results in higher operational costs and requires advanced forecasting and response systems.

e. Real-World Case Study:

Apple exemplifies the Agile Supply Network Model. As a technology company, Apple constantly faces rapid changes in consumer demand and technological advancements. Its supply chain is highly responsive, with quick adaptation to new product launches and updates. However, this flexibility comes at a high cost, with Apple’s premium pricing strategies offsetting the higher costs associated with agility.

5. Virtual Supply Chain Model (VSCM)

VSCM leverages digital technologies to share real-time information, enabling continuous collaboration with partners without physical infrastructure. It focuses on data-driven decision-making and flexibility.

a. Applicability:

Ideal for businesses operating in e-commerce or relying on digital networks.

b. Example:

Amazon, an online retailer, uses virtual networks to manage inventory, suppliers, and customer orders.

c. Advantages:

Improves visibility, enhances coordination, and minimizes overhead costs.

d. Disadvantages:

Vulnerable to cybersecurity risks and heavily reliant on robust digital infrastructure.

e. Real-World Case Study:

Amazon is a key example of the Virtual Supply Chain Model. By using advanced digital tools such as cloud computing, Amazon can manage a global supply chain without the need for physical infrastructure. This enables the company to have real-time visibility and coordination across its vast network of suppliers, fulfillment centers, and customers.

6. Custom Configured Model (CCM)

CCM is developed to address specific customer or market needs, enabling businesses to offer personalized products or services.

a. Applicability:

Suitable for companies offering specialized products or services where customization is a primary focus.

b. Example:

Automotive manufacturers that allow customers to customize their vehicles’ features rely on supply chains to efficiently accommodate diverse specifications.

c. Advantages:

Delivers high levels of personalization, boosts customer satisfaction, and improves market diversity.

d. Disadvantages:

It can be more complex to manage and may result in higher costs.

e. Real-World Case Study:

Tesla offers a customized car manufacturing process where customers can choose different features for their vehicles. This model requires a flexible and responsive supply chain to accommodate the vast range of options and configurations available to customers.

7. Flexible Chain Model (FCM)

FCM combines efficiency and agility, allowing businesses to adapt quickly to changes while remaining cost-effective.

a. Applicability:

Ideal for companies experiencing seasonal peaks or requiring frequent adjustments in production levels.

b. Example:

Agricultural businesses that adjust supply chain strategies based on seasonal crop yields.

c. Advantages:

Strikes a balance between cost efficiency and adaptability, handling seasonal variations and demand fluctuations.

d. Disadvantages:

Managing the balance between efficiency and flexibility can be complex.

e. Real-World Case Study:

Coca-Cola is also an example of a Flexible Chain Model when adapting its production to meet demand during peak seasons, such as the holiday season. By adjusting its supply chain strategies, the company can balance cost-efficiency with the flexibility needed to manage seasonal demand.

10 Essential Stages in the Development of Different Types of Supply Chains

• Stage 1: Strategic Planning and Procurement in Supply Chain Management.
• Stage 2: Enhancing Production Efficiency in Supply Chain Operations.
• Stage 3: Inventory Optimization Strategies for Effective Supply Chain Management.
• Stage 4: Distribution and Logistics Optimization in Supply Chain Management.
• Stage 5: Demand Forecasting and Planning in Supply Chain Operations.
• Stage 6: Vendor and Supplier Relationship Management in Supply Chains.
• Stage 7: Risk Management and Building Resilience in Supply Chain Systems.
• Stage 8: Technology Integration for Streamlined Supply Chain Operations.
• Stage 9: Sustainability and Ethical Practices in Modern Supply Chains.
• Stage 10: Effective Customer Relationship Management in Supply Chain Systems.

How to Choose the Right Types of Supply Chains for Your Business?

Choosing the right type of supply chain depends on several factors that vary from business to business.

• For small companies, a simple linear supply chain may be sufficient, as it’s cost-effective and easy to manage.
• Larger businesses, however, need more complex, strategic, or agile supply chains to remain flexible and responsive in fast-moving markets.
• The industry you operate in also plays a crucial role. For example, businesses with global operations, a global supply chain is essential, especially for managing international sourcing and logistics.

The key is to match your business’s size, industry, demand type, and operational goals with the characteristics of the most suitable supply chain. Ultimately, the right choice will help optimize efficiency, reduce costs, and improve customer satisfaction.

Frequently Asked Questions

Q1: What are the main types of supply chains?

The main types include lean, agile, flexible, green, global, hybrid, digital, cold, and service supply chains—each suited for specific industries and goals.

Q2: Why do different supply chain types exist?

Different industries have unique operational goals, cost structures, and market demands. Supply chain types evolve to meet those needs efficiently.

Q3: What is a lean supply chain?

A lean supply chain focuses on minimizing waste and reducing costs while maintaining steady production—ideal for retail, electronics, and fashion sectors.

Q4: What is an agile supply chain?

An agile supply chain emphasizes speed and responsiveness to market changes, making it suitable for fast-moving industries like tech and fashion.

Q5: What is a hybrid supply chain?

A hybrid supply chain combines lean and agile models to balance cost efficiency with flexibility, handling both stable and fluctuating demands.

Q6: What are digital supply chains?

Digital supply chains use AI, IoT, and real-time analytics for automation and visibility—vital for smart manufacturing and e-commerce.

Q7: How do global supply chains operate?

Global supply chains manage sourcing, production, and logistics across borders to serve international markets efficiently and compliantly.

Q8: What is a green or sustainable supply chain?

A green supply chain integrates sustainability by minimizing emissions, waste, and promoting ethical sourcing aligned with ESG objectives.

Q9: What are the stages of supply chain development?

There are ten key stages—from strategic planning and procurement to sustainability and customer relationship management.

Q10: How can businesses choose the right supply chain type?

Businesses should align supply chain type with size, industry, demand patterns, and sustainability goals to balance cost and responsiveness.

Aariyah and Islamic Social Values

Lending small things temporarily is seen as a high moral value in Islam, for which moral inducements are given. The borrower is advised not to look upon the borrowed item as his own but to return it promptly after use.

“The responsibility for returning the thing borrowed is on the borrower.”

Ariyah is closely associated with the values of generosity, social solidarity, and the ethics of community welfare.

Concept of Aariyah from Quran and Hadith

Aariyah in the Quran

Although the term “Ariyah” is not explicitly mentioned in the Qur’an, the concept is deeply embedded in the spirit of Islamic teachings. Verses encouraging kindness, trust, and returning what is borrowed are foundational to the practice of Aariyah:

These verses support the notion that lending and returning items responsibly is part of righteous behavior.

Ariyah in the Ahadith

The Prophet Muhammad (peace be upon him) emphasized helping others and lending without compensation as acts of virtue:

Ariyah as a Benevolent Act

Ariyah is a benevolent contract that allows one to benefit from another’s property without charges. It enables borrowers to:

• Increase their access to resources.
• Fulfill basic or urgent needs.
• Perform actions otherwise beyond their financial means.

In Islamic banking and finance education, Aariyah is discussed as a socially responsible contract and a moral alternative to commercial lending.

Practical Application of Ariyah in Islamic Banking and Finance

In modern Islamic finance, Ariyah can be structured into contracts where a lender allows temporary use of an asset, such as lending a building for religious or charitable purposes without rent. Though not a profit-making contract, it reflects Islamic values of cooperation and community service.

For example, an individual might lend their farmland for community agricultural use or allow the use of equipment to someone starting a business. The property remains under the ownership of the lender, and the borrower must return the item in its original condition unless damaged beyond their control.

Conditions for Ariyah in Shariah

Islamic law outlines the following conditions:

1. Defined Period and Time:

The borrowing duration should be agreed upon in advance.

2. Clear Usage Authority:

The lender may specify how the item should be used.

3. Proper Documentation and Witnessing:

It is preferable to have two male witnesses, or one male and two females, especially for significant items.

4. Pledge as Security:

A pledge may be requested to ensure the return of the item.

Guidelines for Keeping an Ariyah

The lender has the right to demand the return of the item even before the agreed time.

• If the item is lost despite the borrower’s due care, the borrower is not liable.
• If negligence is proven, the borrower must compensate the owner.
• With the owner’s permission, the borrowed item may be lent to another.
• Parents must not use or lend immature children’s belongings; doing so requires compensation if lost.
• Upon the owner’s death, the borrower must return the item immediately and refrain from further use without the heir’s consent.

Comparative Insight – Ariyah VS Other Contracts

To better understand Ariyah, we compare it with Amanah (trust), Qard (Islamic loan) and Ijarah contract in Islamic banking and finance:

Contemporary Relevance

The principle of Ariyah can be integrated into ethical finance and non-profit operations. In humanitarian contexts, Ariyah contracts can provide needed items without financial strain. AIMS Education cover this subject thoroughly in their online Islamic banking diploma and certification in Islamic Finance, helping students apply classical jurisprudence in today’s financial practices.

Final Words

Ariyah exemplifies the Islamic ethos of generosity, mutual aid, and community support. Unlike Qard, it does not involve consumables or monetary value but rather centers on lending usable goods without expectation of return or profit. The simplicity, flexibility, and moral strength of Ariyah make it a valuable tool in Islamic finance and personal ethics. For Islamic scholars and practitioners in Islamic Banking and Finance, understanding Ariyah is essential for preserving ethical standards and promoting socio-economic justice.

Frequently Asked Questions

Q1: What is Ariyah in Islamic jurisprudence?

Ariyah is a gratuitous lending of a non-consumable item for temporary use, with the obligation to return the same item afterward.

Q2: How is Ariyah different from Qard (loan)?

In Ariyah you return the same item; in Qard you repay an equivalent value of a consumable such as money.

Q3: Is Ariyah permissible in Islam?

Yes. Scholars consider it permissible and praiseworthy as it supports those in need and strengthens social solidarity.

Q4: What teachings support Ariyah?

Qur’anic commands to return trusts and do good, and Hadiths encouraging helping others and lending without compensation.

Q5: What are the conditions of a valid Ariyah?

Agree on duration, specify allowed use, prefer documentation and witnesses for significant items, and allow a pledge if needed.

Q6: Who is liable for loss or damage?

The borrower is not liable if due care is shown; negligence triggers liability to compensate the owner.

Q7: Can a borrower sub-lend the item?

Only with the owner’s permission; otherwise it may exceed the authorized use and create liability.

Q8: How does Ariyah compare with Amanah, Ijarah, and Qard?

Ariyah: free use of non-consumables; Amanah: safekeeping; Ijarah: paid lease; Qard: consumable loan repaid in value.

Q9: What are modern examples of Ariyah?

Lending tools to a small business, allowing community use of farmland, or providing a building for charity without rent.

Q10: What happens if the owner dies?

The item must be returned immediately; further use requires explicit consent from the heirs.