Siemens 2012 Annual Report Download - page 192

1 A. To our Shareholders
21 B. Corporate Governance 49 C. Combined Management Report
50 C. Business and economic environment
64 C. Financial performance measures
69 C. Results of operations
82 C. Financial position
93 C. Net assets position
95 C. Overall assessment of the economic position
96 C. Subsequent events
97 C. Sustainability
111 C. Report on expected developments and
associated material opportunities and risks

Strengthening Siemens’ innovation power by leveraging our
supplier network is another strategic priority. With our Siemens
Supplier Forum we have established a platform for the regular
dialogue on CEO level with our top strategic suppliers, aiming to
ensure long-term cost leadership, realize shared growth poten-
tial and sustainably increase innovation capabilities. To promote
outstanding suppliers for their excellence, we have introduced
the Siemens Supplier Awards for a number of categories.
As in previous years, the supply chain management organiza-
tion had to face external challenges in fiscal . Although
the strong pricing pressure in supplier markets declined com-
pared to fiscal , we see indications from the geopolitical
environment that prices may increase again in the near future.
Despite this possibility, we expect to maintain the procure-
ment savings gains and overall productivity increases for
Siemens that our supply chain management organization has
achieved in recent years.
Another important topic for our supply chain management is
sustainability in our supply chain. We require all of our suppli-
ers to comply with the principles of our Code of Conduct for
Siemens Suppliers and to support its implementation in their
own supply chains as well. We also continued with worldwide
on-site sustainability audits by external experts to ensure the
compliance with our standards and to encourage sustainable
business conduct throughout our entire global supply chain.
In addition, we further rolled out our Siemens Energy Efficiency
Program for suppliers. We work with our suppliers to conduct
environmental and energy efficiency checks of their own facili-
ties, so they can identify opportunities for reducing their con-
sumption of energy and other resources. In this regard, we
draw upon the expertise and know-how gained in connection
with our own environmental program and our Environmental
Portfolio. By the end of fiscal , more than  of our sup-
pliers worldwide have completed these comprehensive assess-
ments and nearly  others are involved in the program.
.. Production
In-house production is an important cornerstone of our opera-
tions. Siemens operates more than  major production and
manufacturing plants in more than  countries worldwide,
including facilities at certain joint ventures and associated
companies. A major production and manufacturing plant is de-
fined as a facility at Business Unit level in which raw or source
materials are transformed into finished goods on a large scale
by using equipment and production resources such as ma-
chines, tools, energy and labor. Around  major production
and manufacturing plants are located in the region Europe,
C.I.S., Africa, Middle East; around  major production and
manufacturing plants are located in the region Americas and
around  major production and manufacturing plants are lo-
cated in the region Asia, Australia. With around  major pro-
duction and manufacturing plants, the Energy Sector accounts
for the greatest proportion of these, followed by the Infrastruc-
ture & Cities Sector (around  major facilities), the Industry
Sector (around  major facilities) and the Healthcare Sector
(around  major facilities).
Key elements of our production strategy include sustained im-
provement in the cost position for our products and solutions,
and locating production sites geographically to support the de-
velopment of new markets. China, for example, is one of our
largest growth markets, and we have established our presence
there with around  major production and manufacturing
plants. One of the most significant features of our production
activities is the diversity of products, volumes and processes:
The spectrum of our products ranges from hearing aids to a
-tonne steam turbine; production volume can be anything
from a single customer-specific order to high-tech serial pro-
duction; and production processes range from automated pro-
duction in clean rooms to manual final assembly of major in-
stallations on construction sites.
We designed the Siemens Production System (SPS) in our
aim to continuously improve our global production processes.
The SPS is our structured approach to designing and operating
the production operations of Siemens in accordance with so-
called “lean” principles. These principles aim to reduce or elim-
inate activities in our business processes that add no customer
value. This helps us satisfy the increasingly demanding re-
quirements of our customers while streamlining our cost posi-
tion and those of our customers compared with competitors.
With the implementation of lean principles in our production
operations, we aim to simultaneously achieve both shorter lead
times and higher quality in our processes, products and solu-
tions. This enables us to react even more flexibly to our custom-
ers’ demands and to increase our delivery reliability. By now,
the SPS has already been established in more than  of our
major production and manufacturing facilities worldwide.
It is our strategy to ensure that all of our production and man-
ufacturing facilities apply lean principles and that these prin-
ciples are also adopted by other functions such as administra-
tion or engineering. For the latter purpose, we have widened
the range of our lean expert qualifications by adding specif-
ic training programs for employees engaged in adminis-
tration. By the end of fiscal , a total of more than 
employees have joined (and in part already completed) lean
expert qualification programs for production and / or adminis-
tration.