About Philips Supply Management

In recent years, Philips has transformed its activities from Purchasing to Supply Management. Today, we look beyond traditional ‘purchasing’ boundaries to the entire value chain. And we act as One Philips, using standardized programs and tools that are aligned company-wide.

The ever more rapid pace of innovation means we also work closely with suppliers. We involve them early in product development to help us innovate quickly and to meet our customers’ expectations. Where possible we design in standard solutions to better capture value and reduce the lifetime costs of our products. To do this effectively, we constantly review our supply base and build strong relationships with strategic suppliers.

Today’s electronics industry is characterized by an accelerating pace of innovation and greatly reduced product lead-times. This is reflected in the changing nature of Philips’ supply base and the relationships with our suppliers.

A very high percentage of components and products is now purchased, rather than manufactured in-house. Overall, some 90 percent of our Bill of Materials comes from outsourcing, long-term partnerships, Original Equipment Manufacturers and Original Design Manufacturers.

Competitive networks
There is also an emerging shift from competing industries to competing networks. Best-in-class companies are those who successfully integrate their suppliers in both innovation and business fulfillment. These new relationships are based on creating a win-win for both parties through mutual trust, long-term contracts, accountability and stretch targets.

Creating value together
To address these challenges, Philips Supply Management organizes its processes in multi-disciplinary, commodity teams. We work with a limited and clearly classified set of suppliers in both business-to-business and business-to-consumer markets. Our formalized relationship management enables us to embed sustainable joint value creation through strong relationships with strategic suppliers.

Leveraged supply management
We leverage Philips’ supply management through consolidated commodity buying at corporate level and aim for operational excellence through best-in- class processes. We focus on world-class management through a detailed organization of the entire supply chain, selecting the best suppliers in terms of total cost of ownership, including quality, reliability and timely delivery. This allows us to create a solid supply base and intensify our relationships.

Policies and Procedures

Philips General Business Principles of integrity, fair trade, non-discrimination and equal opportunity apply to both our corporate actions and to the behaviour of individual employees on company business. Our employees must also act in accordance with the Supply Management Code of Ethics.

Philips uses a standard General Purchase Agreement (GPA) and standard contracts based on processes common to all our businesses. In addition, we have standardized processes for measuring and evaluating supplier performance, and for reporting the results.

Supply Markets

We work with a limited, carefully-selected supply base of Non-Product Related (NPR) and Bill Of Materials (BOM) suppliers. And outsourcing is a key part of our Supply Management strategy.

Outsourcing reduces Philips’ operating and capital costs while increasing flexibility, and decreasing time to market and to volume. It allows us to leverage our core competencies, and provides access to our suppliers’ technologies and skills.

Most of our top 20 suppliers are Electronic Manufacturing Services (EMS), Original Design Manufacturers (ODMs) or Original Equipment Manufacturers (OEMs). We focus on suppliers that can work closely with us through early involvement in the innovation process. Our goal is to build long-term relationships with key strategic suppliers who share in the risks and rewards of innovation.