Philips 2007 Annual Report Download - page 91

Philips Annual Report 2007 97
Supplier consolidation
Supplier concentration is a key element in reducing
complexity in the supply chain. For example, Medical
Systems sources sub-assembly units from a limited
number of global suppliers. The drive towards supplier
consolidation continues, with Medical Systems on target
to procure 80% of its BOM from fewer than 100
preferred suppliers.
Sustainability
In support of the Company’s strong commitment
to sustainability, all suppliers with spend above
EUR 100,000 in risk areas are audited, partially with
the help of external, independent auditing rms.
A rigorous program is in place to follow up any issues
that may occur. As part of the Dow Jones Sustainability
Index assessment, the rating for this practice went up
from 81 to 92 in 2007.
Managing sourcing risk
To enhance risk management in the supply chain,
Consumer Electronics has for many years implemented
a dual-sourcing strategy to ensure competitive sourcing
and continuity of supplies. It has done this through strategic
partnerships, mainly in the areas of LCD panels and EMS.
In 2007 the major challenge was to manage the tightening
market in LCD panels. In another example of reducing
sourcing risk, Lighting has established partnership
agreements with those key suppliers on which it
depends for the supply of critical lamp components.
Low-cost country sourcing
Low-cost country sourcing activities have continued
to be a major source of value in supply management.
For example, Lighting utilizes a global supply base
to support its varied manufacturing operations.
A dedicated China Sourcing Group is in place to source
products for both local and export markets. While China
is the main area of attention, other countries are also
under review for further extension of the supply base
presence. In 2007, 58% of BOM spend and 24% of NPR
spend took place in low-cost countries.
E-contract management
E-contract management is being rolled out across
the company. In 2007, EUR 2.6 billion (or 14%) in spend
was managed via e-bidding events, compared to around
EUR 387 million in 2005.
Market intelligence
In 2007 a central-led Supply Market Intelligence and
Services group (SMIS) was created with presence
in key supply markets (China, India, Korea, Japan and
Taiwan). The SMIS teams work closely together with
businesses to identify supply market opportunities.
98 Risk management 112 Our leadership 116 Report of the Supervisory Board 126 Financial Statements