Philips Healthcare: Service Parts Supply Chain

As a result of working with Accenture, Philips Healthcare has taken its service parts and logistics process out of the back office into the front office. This move allows Philips staff who deal with customers on a daily basis to make the right decision on behalf of the customer about where the part needs to go and how the part is to be delivered.

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In 2006, Philips Healthcare realized that its supply chain processes and systems were outdated and having a significant negative impact on customer service levels.

Based on research that confirmed that customer service and parts delivery were rated by customers as its most pressing areas for improvement, Philips Healthcare embarked on a supply chain transformation with Accenture, using a team of more than 100 people from both companies.

The global Philips Healthcare service parts supply chain handles more than 100,000 orders and return transactions per month, supplying hospitals with service parts for systems like computed tomography or patient monitoring. A key consideration throughout has been the fact that Philips Healthcare handles medical equipment that saves lives, not just spare parts for machines.

One of the key objectives was to move Philips Healthcare’s service parts supply chain, its operations and distribution model from a “next-day” solution to a “same-day” solution to facilitate immediate service parts delivery where necessary.

As Robert Hermans, senior director supply chain transformation, says: “We really wanted to make a business change. The program is unique in three respects: it introduced best-in-class processes for our organization, our solutions and our systems. At the same time, the program standardized ways of working between different departments, while simultaneously repairing processes that were broken.”

The program started in January 2007, and went live successfully in North America in May 2008—and in Europe in October 2008, affecting more than 3,000 Philips Healthcare employees worldwide. The rapid establishment of the North American processes and simultaneous go-live of 13 European countries was unprecedented in its scale and approach within Philips Healthcare.

Before the new systems and processes were made operational in Europe, they were subjected to thorough user acceptance testing. This testing was executed by more than 100 representatives from the call center and logistics operations of 13 European countries. The European team came together in one location to test the logistics and finance processes of the improved service part supply chain. This user acceptance testing required careful preparation and disciplined execution by the testers. The result: users rated the new systems and processes very highly indeed.

Accenture has taken Philips Healthcare a step closer to achieving high performance and the service parts supply chain processes have started delivering benefits: They provide a 10 percent year-on-year material cost productivity gain. Among other attributes, a consistent order-to-receipt process was created to eliminate delivery variability as well as reduced defective-on-arrival and improved repaired parts quality. Another important aspect is the 50 percent reduction in freight cost and lead time when using a direct shipping model.

Stefan Kuhn, Philips vice president, Service Parts Supply Chain, says: “We have chosen Accenture for their supply chain and program management expertise, especially as it relates to large-scale transformation programs. In a transformation effort of this scale you need a strong partner, a partner with a clear supply chain vision and with proven program delivery capabilities. That’s what we have found in Accenture and in the team supporting us.”

Mark Euwe, senior executive, Accenture, says: “The SPS blueprint program was successful because it is an excellent example of real teamwork between Accenture and Philips Healthcare. We have also seen a tremendous amount of top management commitment being reflected in the number of resources freed up to make this happen, and in the business priorities set up to guide this program.”

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