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.
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 Group Purchasing 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 Group Purchasing
We leverage Philips’ Group Purchasing 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.