Philips 2008 Annual Report Download - page 54

Supply management
The Supply Management function has been designed
to create value for Philips by leveraging the scale
of the company, thereby creating a single point of
management and accountability for our supply base.
Our approach in turbulent markets
Given the turbulent global economic climate in 2008,
proactive risk management and mitigation strategies
aimed at ensuring continuity of supply and competitiveness
of sourcing were essential. Initiatives included enhanced
monitoring of the financial stability of the key supplier
base and, where necessary, early intervention to reduce
Philips’ exposure.
Supply Management also assisted in managing the
sourcing risk through a pro-active approach towards
key and sole source suppliers, as well as supporting
sector-specific initiatives such as a dual-sourcing
strategy for LCD panels and electronic manufacturing
services (EMS) in the Consumer Lifestyle sector.
Additionally, Supply Management teams protected
Philips from significant raw material price fluctuations
in 2008, mainly through the use of forward commodity
contracts. Also, 2008 saw progress towards further
outsourcing of bill-of-material (BOM) spending: over
50% of Philips’ BOM spending is now outsourced, albeit
to a smaller, but more focused, number of suppliers.
Our supplier network
The Global Supplier Rating System (GSRS) was further
deployed in 2008, providing structured measurement
of supplier performance and rigorous tracking of
improvement actions. GSRS covered 85% of Philips’
total spend in 2008. Key supplier scores improved 9%
in the year to reach a solid overall rating of 78%.
In 2008, Philips continued to develop the Partners for
Growth strategic supplier network, bringing together
its top 30 suppliers to identify and exploit joint business
opportunities. This initiative was combined with our
supplier sustainability initiative, which ensures mandatory
auditing of all suppliers with spend above EUR 100,000
in risk areas. This involves tracking all sustainability
issues in risk areas and, where necessary, a highly
accelerated resolution of identified issues.
Employees per sector
in FTEs at year-end
2006 2007 2008
Healthcare 27,223 29,191 35,551
Consumer Lifestyle 24,419 23,397 17,346
Lighting 47,739 54,323 57,166
I&EB 8,832 5,888 5,324
GM&S 6,879 5,299 6,011
115,092 118,098 121,398
Discontinued operations 6,640 5,703 −
121,732 123,801 121,398
Employees per sector 2008
in FTEs at year-end
Healthcare
35,551
Consumer Lifestyle
17,346
Lighting
57,166
I&EB
5,324
GM&S
6,011
Philips Annual Report 200854
42
Our group performance
Management discussion
and analysis
18
We care about...
8
Message from
the President
6
Performance highlights
14
Who we are