PHILLIPS

Philips Electrical Industries Of Pakistan Limited
ABSTRACT
The report gives detailed information about the supply chain of Phillips in Pakistan. It gives a brief over
view of all the supply chain activities going in Phillips.
Philips: a renowned company for innovations to bring changes in consumer's lives still has a strong
position in their minds. Although there is a flood of cheap and low priced Chinese products in the
market but still Philips has a positive response from the consumers, in terms of quality and reliability of
product also.
This report gives detailed information about the supply chain of Phillips in Pakistan. It gives a brief over
view of all the supply chain activities going in Phillips. In this report I have identified the problems
faced by the company and have come up with recommendations to overcome these problems.
Supply Chain Management of Philips Company is trying harder to meet their regular demands in time
and also emphasizing on sustainable good supplier-dealer relationship. Their Supply Chain management
not only tracks their own department’s performance, but also works with their distributors and monitors
their records to avoid any kind of mismanagement.
Inventory management, which is the most critical and important part of Supply Chain Management, is
handled with the modern tracking system of JD-Edward which is useful not only for the current physical
inventory in warehouse, but also monitor the in-transit goods and distributors and suppliers status of
work.
In general, the workflow in Philips is mostly written and well defined. So the employees know their jobs
very clearly and are able to maintain the workflow in required manner. They don’t have any system of
detecting defect at the place, except in glass factory, but quality control at every step makes these
products reliable and durable.
2
INTRODUCTION
The foundations for what has become one of the world's biggest electronics companies were laid in 1891
when Gerard Philips established the company in Eindhoven, the Netherlands to manufacture
incandescent lamps and other electrical products. Today, Royal Philips Electronics is ninth on Fortune's
list of global top 30 electronics corporations with sales of EUR 32.3 billion in 2001.
Philips, a giant of the worldwide electronics industry, started its business in Pakistan in 1948. Within
these fifty-five years of operations in Pakistan, Philips has grown into one of the leading companies
involved in Consumer and Professional Lighting, Electronic Goods and Domestic Appliance Products,
and employed over 382 skilled people of Pakistan.
In beginning, Philips started its operations in here dealing with only a few consumer domestic products
like Light Bulbs and Radio. The Light Bulb and radio opened an opportunity to an even brighter future
for Philips in Pakistan. Today Philips Pakistan has a strong position in Pakistani market as well as in the
mind of the consumers. Its business operations have spearheaded further to include, local assembly and
manufacturing of Electrical and Electronic Products. It is evident that the company has achieved a
recognizable status as a major Business Unit of Electronic Products and a net contributor to the Pakistan
Economy.
3
Mission
Philips has reinvented itself many times, but through it all our core, the soul of our company, remained
intact. That is because it was part of our company since its inception in 1891. It is the passion to…
"Improve the quality of people’s lives through timely introduction of meaningful innovations."
Vision
In a world where complexity increasingly touches every aspect of our daily lives, we will lead in
bringing sense and simplicity to people
Values
• Delight customers
• Deliver on commitments
• Develop people
• Depend on each other
Brand Promise
We empower people to benefit from innovation by delivering on our brand promise of “sense and
simplicity”
This brand promise encapsulates our commitment to deliver solutions that are advanced, easy to use, and
designed around the needs of all our users.
4
VISION 2010
Philips is on a journey to transform itself into a truly market driven and people centric company. This
involves a strategy that aims to grow the company further in the areas of Healthcare, Lighting and
Consumer Lifestyle. As part of its "Vision 2010" strategy, Philips has simplified its business structure to
align with this strategy by creating three core sectors as per January 1, 2008: Philips Healthcare, Philips
Lighting, and Philips Consumer Lifestyle.
• Vision 2010 aims to fuel growth through sharpened strategies for Healthcare and Lighting, as
well as an integrated approach for Consumer Lifestyle.
• Vision 2010 positions Philips as a market-driven company, people centric with a structure that
matches the needs of our customer base. Vision 2010 confirms we’re a company focusing on
three market sectors: Healthcare, Lighting and Consumer Lifestyle.
As a result of Vision 2010, Philips has announced it expects higher levels of operating profitability. By
2010, Philips expects to more than double its EBITA per share compared to the level expected in 2007.
5
SCM – SUPPLY CHAIN MANAGEMENT STRUCTURE AT PHILIPS -

LIGHTING
SCM at Philips – Lighting is comprises of following Sections / Divisions:
• Procurement and Planning.

• Purchasing.
• Vendor Management.
• Logistics
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ORGANIZATIONAL STRUCTRE
Sr. Director Lighting
Supply Chain Manager
Dy. Manager
Outbound Logistics
Manager Purchasing &
Vendor Management
R/M Store Officer

Deputy Manager
Purchase
Manager Planning &

Customer Services Purchase Officer
Procurement
Officer Vendor Officer
Procurement
Officer (Local) Quality Officer
(Vendor)
Planning
Assistant
7
PHILLIPS DISTRIBUTION SCHEDULE AT THE WHOLESALE LEVEL
Order (place by
Whole Seller)
Manufacturing
Warehousing/
Distribution
Transportation
Received by
Whole Seller
Payments
8
TRANSPORTATION STRUCTURE
Manufacturing Unit of
Philips
Warehouse
Self Distribution Network
Factory Whole Sellers

outlet
Places can not be

covered by company Consumers
Consumers
Retailers
Consumers
9
SUPPLY CHAIN MANAGEMENT TOOLS:
10
Supply Chain Activities are controlled by organized planning tools like:
• Demand Planning / Annual Operation Plan (AOP).

• Monthly Sales Plan
• Historical Database (Production Capacity Planning)
• PCL plan (production, commercial, logistics)
DEMAND PLANNING / ANNUAL OPERATION PLAN (AOP)
The demand planning meeting is held every month in which all the line mangers like sales, production,
purchase etc are involved which are headed by the supply chain manager.
MONTHLY SALES PLAN
Monthly Sales Plan is design to forecast the annual demand and supply of sales.
HISTORICAL DATABASE (PRODUCTION CAPACITY PLANNING)
Historical databases are responsible for the production planning.
PCL PLAN (PRODUCTION, COMMERCIAL, LOGISTICS)
PCL plan meeting is held at every month in which line mangers of production, commercial and logistics
participate to plan the production forecast sales forecast and raw material planning.
Supply chain processes by implementing the following attributes to their systems.
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• They have their own order desk it means that based orders of customer, production is planned
accordingly
• Procurement and delivery planning is to increase the efficiency of fulfilling orders
SUPPLIER RELATIONS
Philips vendors are divided into following categories Global and local. While global vendors provide
already finished good but as far as local vendors are concerned they provide packaging material and
spares while glass shells .coils wires and gases are produced locally. Philips Management believed that
for good supplier relations communications is very important. They share lot of vital information to their
supplier’s customer orders to improve vendor relationships.
Vendor Management Section is responsible for maintain Supplier Monitoring and ratings based on order
fulfillment, lead time and efficiency and provide different promotions and favors.
MATERIAL REQUIREMENT PLANNING (MRP).
They do material planning based on demand forecast and customer orders, they maintain different lead
times for different customers according to their value.
When Philips selected APEX to supply it with product, Philips urged APEX to implement an MRP
system so Philips would have the confidence that APEX would be able to meet its on-time commitment
to Philips. After evaluating the current offerings, Philips selected E-Z-MRP as ideal for APEX's
operation. APEX acquired the system through Unity World Class Corp's Taiwan branch. Philips also
required APEX to implement Nocturne from Healex Systems, both to accept Philips requirements for
product from APEX as a supplier, and to communicate APEX's raw material requirements to its own
suppliers.
A simple enhancement to the E-Z-MRP system was created by Beach Access Software to export the
information required by Nocturne to inform APEX's suppliers of APEX's requirements for raw-
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-materials. The program runs automatically each night and creates text files in Nocturne's format to
communicate supplier information, part descriptions, inventory transactions, and a weekly bucketed
demand forecast for each part.
This information is all the data Nocturne needs to inform each of APEX's suppliers of what they should
be shipping to APEX and when, so that APEX will have the raw materials on hand to meet its
commitments to deliver finished product to Philips.
Both systems were implemented in a matter of weeks and are currently providing Shanghai Apex
Electronics with integrated manufacturing and supply chain management systems unusual for a
company its size. The supply chain flows from Philips SAP system through Nocturne to APEX's E-Z-
MRP system, and from E-Z-MRP through Nocturne to APEX's suppliers. APEX's experience proves
that it isn't necessary to be a large manufacturer in order to take advantage of the increased
competitiveness and profitability that sophisticated supply chain techniques provide.
ORDER FULFILLMENT
Supply Chain Management Department of Philips maintains CSL (Customer Service Level) to
improve efficiency in their order fulfillment. They calculate their order fulfillment level on which
number of Customer Orders received, how many of the orders are fulfilled.
Philips Lightening maintains 97% of order fulfillment level in the lighting order delivery.
CYCLE TIME
Philips maintain cycle time and reorder level for regular items(locally purchased but not for valuable
items that are import outside. the categorization of items is made through abc analysis in A category
they have items imported from outside .they give C category to locally purchase items. They also do
MOQ (material order quantity).
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COMPLAINS/REPLACEMENTS
Quality assurance department is responsible for complains and replacements based on customer
feedback.
Typical supply chain comprises of the following flow.
Philips Pakistan
Supplier Manufacturing Dealer/Distributor Retailer Consumer
SCM SCOPE AND ACTIVITIES
In Philips Pakistan, managing Supply chain is the most critical part. Especially in the case of Consumer
Electronics and Domestic Appliances and Personal Care, where the company is just engaged in imports
of demanded goods, the efficient and smart supplies and proper distribution network is essential.
While as far as lighting division is concerned, there are manufacturing activities in full strength and
providing right material, at right time, and in right quantity is most important. There are some parts of
manufacturing processes, which needs continuous flow of work because of there nature, it become
necessary to maintain their flow of manufacturing and maintaining its raw material as well as its FG
inventory at adequate level of consumption. This is only possible when the production and supply
managers can manage timely activities.
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SCM IMPLEMENTATION OVERVIEW
Lighting Manufacturing Activities
Lights manufacturing activity is started from purchasing of different parts of bulbs and tube lights,
which are being made in the facility of Philips Pakistan. Production process starts from Flair cutting
machine, from where filament of a bulb has started to be made. Then there is stem machine, which
needs ready flairs to form stems, then to mount it and then to prepare Molly Wire, and after pumping
step, where filament is fixed in bulb’s shell, cap is fixed on it. During the whole series of steps, we saw a
demand pull for every previous step to provide required amount of item at right time. The whole process
was in very timely sequence and to check the final product, there were some other people and machines
to verify the status of bulb, either it are perfect or have any defect. Each and every item is checked at the
last stage of production as per quality standards.
More or less the same process was for tube light making, but the machines were quite different.
From flair cutting to pasting caps on both sides of tube light, there were several steps like; Coating,
Sundering, Sealing, Wiping and Pumping. The last step was checking the tube lights. Because when the
light is not turned on within eight seconds, they put a green mark on it and send here to save time of
production flow. Here we check it and if it is right then we forward it other wise throw it in our recycle
store.”
Third major department of Lighting Division is Glass factory. This glass factory is responsible to
provide shells for tube lights. Few years back, there was a plant of making bulb shells also but now
because of increasing labor expense, company closed this plant and now purchasing it from the market.
However, this glass factory produce shells 24 hours of the day and 7 days a week because if there will
be any break in production, the glass material may become damaged.
There was recycling store behind this glass factory where all rejected bulbs and tube lights were stored
and from there these are brought to the furnace for turning it into liquid glass once again.
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CONSUMER ELECTRONICS AND DOMESTIC APPLIANCES & PERSONAL

CARE DIVISION
Philips Pakistan is now involved in trading of Consumer electronic (CE) and Domestic Appliances &
Personal Care (DAP). They forecast the demand and send orders according to it, to the mega factories
located in their regional Hub. To forecast the demand, Sales Personnel follow the turnover of their
dealers and present their findings to the management, to forecast the future demand.
Pakistan is divided in 11 zones of sales. The zonal Sales Officers are responsible to take input from
dealers to prepare forecast for next order.
PLANNING HORIZON
M+2 (where M= current month)

Revise plan each month but have to send order before two months due to lead-time of at least two
months. The meeting is held on first Sunday of every month, where sales officers and managers analyze
the demand and forecasts and prepare suggestions to present in top management meeting.
While Factory Planning is on weekly basis and W+3 method s used over there. (where W = week)They
adjust their supply plans every week to ensure the in-time deliveries of order.
PLANNING METHOD
Bottom up approach means to take input from the last member of marketing channel.11 Zonal sales
officers take input from dealers of their areas in last days of the month (3rd week). These zonal sales
officers coordinate with the dealers and distributors with their planning and forecast and on the basis of
their turn over and capacity, prepare their own forecast to send to the management.
Top down method is related to the analysis part of forecasts provided from area sales managers. It is also
called Monthly Planning review. Marketing Manager, National Sales manager, Finance Manager,
Supply Chain Manager and GM attend the meeting and report from sales people is considered to
forecast the demand.
16
PLANNING TOOLS
Filocity Software: to send and update orders to the regional headquarter, Singapore. Filocity is the
software to communicate with the regional headquarters, Singapore. One can browse in detail to access
the required category or a particular product to order. But it is necessary order the item before three
months at least, due to its lead-time, other wise the cell is seized automatically and can’t be changed.
Every item has its limited quantity, which is shown in column and at that particular time, order can’t
exceed from it.
Filocity is also used to calculate MOQ (Minimum Order Quantity), Container Load, Transit time of
goods, and Custom Clearance.
To keep in touch with the regional mega factories, Philips Pak. is using “JD-Edward” system. Files sent
daily to the main office from 11 pm to 12 to adjust the supplies with current needs. Although it is a very
big organization and it was surprising to hear that they don’t have ERP system, “Philips actually don’t
have need for the SAP implement. Even in India where our 4 factories are installed, they are also using
the same system to communicate with the Singapore management. Anyways now we are going to
implement ERP .It is being establishing in India now a days and by the 2007, we’ll go for SAP in
Pakistan also”.
INVENTORY TIME PERIOD
In Lightening Division The maximum time for inventory is 21 Days; they also realize the fact that
inventory is nothing but inefficiency. They also told us that they have done priority ABC Analysis for
their items.
All the imported items are assigned the A category while local items are characterized as B or C
category. Reorder Level and Minimum Order Quantity is set only for Local Items because more
Decision making is involved for Imported Items.
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For Consumer Electronics (CE), they carry the inventory for just one week. The inventory order time is
40 days from which 30 days are needed for transition of goods. While inventory has to be kept for 10-11
days and the safety stock has to keep of one week (to manage any emergency situation).
To gather information about demand, there is a CMI (Consumer Marketing Intelligence). In which sales
persons collect the information about consumer insights, competitive environment, technological
changes, and current scenarios like seasonal changes or intensiveness. These factors directly affect
forecasting the demand.
RELATIONS WITH DISTRIBUTORS / DEALERS
The dealers prepare plans for their future sales and coordinate it with company’s forecast procedure. For
the best coordination of time and delivery of goods between dealers and the company, they educate their
dealers and share information to them. Sales managers keep in touch with the distributors and make
them aware of upcoming events and the new products of company. To meet with their target sales, they
keep monitor their weekly sales and strategies to ensure smooth sales progress in whole months. It helps
dealers and the company to avoid uneven procedures for sales like low sales in first and second week
while to achieve target, they start pushing the product in the market and create unfavorable situation for
retailer and consumers.
MAJOR DISTRIBUTORS
• Synergy: Islamabad.
• Vital Computers: Karachi.
• Star Computers: Lahore.
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FORWARD \ BACKWARD INTEGRATION
They prepare Blast (Raw Material) within their own factory, while their major distributors are mostly
outsourced. For raw material, they have local and foreign vendors.
WAREHOUSE
There are two large warehouses in the premises of Philips Pakistan. One is to store imported goods like
TV, Audio/ Video Systems, MMDs, Domestic and Personal care appliances, etc. While other is to store
the locally manufactured goods such as Bulbs, Tube lights, automotive lights, and other accessories.
There are large and very high warehouse in which extra space till ceiling is considered as the waste. As
these are constructed very old, that’s why company has to bear this wastage of space and it can’t be
utilized.
SUPPLY CHAIN PLANNING TOOLS / SOFTWARE’S
Currently Philips is using JD ADVERD based software to manage their inventories and supply chain
management. They also told that they are planning to implement SAP- ERP system.
Implementation of SAP ERP System:
Phase 1: In the first phase SAP is implemented in Consumer Electronics division.

Phase 2: Lightning Division is automated in the second phase.
COMPETITION
• In Lighting products: Low priced Chinese products like Osaka.
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MARKET SHARE
• More than 60% share in lights market.
CUSTOMER SEGMENTS
• Household customers.
• Businesses related to the food and services like restaurants and medical institutions.
• Corporations and institutions for professional equipments.
PROBLEMS
• Lack of distribution to the retailers

• They should reduce the lead time of their shipment, as some of their products are imported from
Denmark they doesn’t reach on time to the distributers
• Their prices are high as compare to other brands
• The energy savers are always short in market
• They should work on their marketing side like do advertising of their new products
• They don’t have any system of detecting defect at the place, except in glass factory,
20
RECOMMENDATIONS
• Phillips should manufacture all their products in Pakistan so that they can be available to the
customers whenever they want
• People are not aware about the health care products of Phillips so they should bring some
awareness in them through advertising
• They should give special discounts to their regular customers for brand loyalty
• They should higher some qualified personnel who can bring new ideas and manufacture all the
products in Pakistan
• Currently they are not using SAP and ERP so we recommend that they should start using it
• They should use MPS system which will help them to identify the forecasting factor of each
production plan. The MPS indicates the shortage or the excess of the finish goods; it’s a kind of
forecast through which you can have a finish good picture for a specific Production plan or the
requirements of upcoming production
21
CONCLUSION
This report is objectively prepared to know how they are working according to the new era of supply
chain management. How they utilize their resources, manpower, and capacity. How they plan to work
effectively for their supply chain process which includes material management, logistics management,
procurement, warehousing, and effective supply of finished goods to the customers.
Philips, a giant of the worldwide electronics industry, started its business in Pakistan in 1948. Within
these fifty-five years of operations in Pakistan, Philips has grown into one of the leading companies
involved in Consumer and Professional Lighting, Electronic Goods and Domestic Appliance Products,
and employed over 382 skilled people of Pakistan.
Now, when it has to close its CE & DAP manufacturing in Pakistan, Philips still has a vast range of
quality products to manufacture and providing its customer from its mega factory. During the visit it was
revealed that the company is striving hard to attain its lost leader’s position and for this purpose is
emphasizing on innovation rather that following the market trends. As Philips introducing not only new
products, but providing services to the organizations and institutions for installing lights in a new and
enhancing way but offering trainings for lighting and their installation services.
In general, the workflow in Philips is mostly written and well defined. So the employees know their jobs
very clearly and are able to maintain the workflow in required manner. They don’t have any system of
detecting defect at the place, except in glass factory, but quality control at every step makes these
products reliable and durable.
22
LOCATION OF OFFICE & PLANT

Philips Pakistan
Philips Electrical Industries of Pakistan Limited

F-54, SITE
Karachi 75730
2560071-82, 2579315
REFERENCES
Mr. Qazi
Sales Manager
Mr.M. Tahir
Retailer
Mr. M.Faisal
Retailer
http://www.philips.com.pk/
http://www.philips.com/about/company/missionandvisionvaluesandstrategy/index.page
http://www.lighting.philips.com.pk/pk/en/Portal?xml=knowledge/trends
23

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Philips Electrical Industries Of Pakistan Limited

SCM – SUPPLY CHAIN MANAGEMENT STRUCTURE AT PHILIPS -

SCM at Philips – Lighting is comprises of following Sections / Divisions:

• Procurement and Planning.

Sr. Director Lighting

Supply Chain Manager

R/M Store Officer

Manager Planning &

PHILLIPS DISTRIBUTION SCHEDULE AT THE WHOLESALE LEVEL

Self Distribution Network

Factory Whole Sellers

Places can not be

SUPPLY CHAIN MANAGEMENT TOOLS:

• Demand Planning / Annual Operation Plan (AOP).

DEMAND PLANNING / ANNUAL OPERATION PLAN (AOP)

MONTHLY SALES PLAN

HISTORICAL DATABASE (PRODUCTION CAPACITY PLANNING)

Historical databases are responsible for the production planning.

PCL PLAN (PRODUCTION, COMMERCIAL, LOGISTICS)

Supply chain processes by implementing the following attributes to their systems.

MATERIAL REQUIREMENT PLANNING (MRP).

Typical supply chain comprises of the following flow.

Supplier Manufacturing Dealer/Distributor Retailer Consumer

SCM SCOPE AND ACTIVITIES

SCM IMPLEMENTATION OVERVIEW

Lighting Manufacturing Activities

CONSUMER ELECTRONICS AND DOMESTIC APPLIANCES & PERSONAL

M+2 (where M= current month)

INVENTORY TIME PERIOD

RELATIONS WITH DISTRIBUTORS / DEALERS

• Star Computers: Lahore.

SUPPLY CHAIN PLANNING TOOLS / SOFTWARE’S

Implementation of SAP ERP System:

Phase 1: In the first phase SAP is implemented in Consumer Electronics division.

• In Lighting products: Low priced Chinese products like Osaka.

• More than 60% share in lights market.

• Lack of distribution to the retailers

• Their prices are high as compare to other brands

• The energy savers are always short in market

LOCATION OF OFFICE & PLANT

Philips Electrical Industries of Pakistan Limited

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