Philips CE Turns on WebFOCUS "To Make Things Better"

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	SNAPSHOT Organization: Philips Consumer Electronics (CE) is one of the three largest manufacturers of consumer electronics in the world. Challenge: With dozens of factories and some 900 suppliers and production partners, Philips CE needed optimum and cost-effective informational support to ensure the quality of its products and production processes throughout the world. Strategy: Create a worldwide business intelligence environment that is easy to maintain, with one central database to which internal and external users can gain access easily via the Web – and in which the quality of the supplied components, products, and services can be analyzed. Results: The new Web-based system provides reliable information for superior guidance to suppliers worldwide, which has enabled them to produce higher-quality products and improved production processes. The system consolidates all relevant databases, uses a Web browser, and has paid for itself in less than one year through major structural savings. Information Builders Solution: WebFOCUS.

Business Intelligence Software Key to Monitoring and Optimizing the Quality of Consumer Electronics Worldwide

For a leading brand like Philips – one of the three largest manufacturers of consumer electronics in the world – quality control is vital. The costs of the production process are heavily dependent on the quality of the components supplied. And consumers must be assured that when they buy Philips they are buying a fine product. In today's complex and global environment, WebFOCUS provides the necessary insight into supplier quality.

The Trend Toward Outsourcing

The trend toward production outsourcing has gone beyond the computer industry and now is taking hold in the consumer electronics sector. Philips Consumer Electronics (CE) is blazing the trail in this new arena: Philips CE focuses more on product development, assembly, marketing, and branding, while the production of non-vital components and parts is outsourced as much as possible. Specialty suppliers can do that better, and often more economically.

A lot of production is being moved to countries where the rate of growth is high or wages are low, such as China. Philips CE has dozens of factories, and works with some 900 suppliers and production partners. So it is important to closely monitor the quality of the components supplied. Distance and time differences should not pose any obstacle to the monitoring process, which requires delivering information in an innovative and flexible manner – something Information Builders provides through its industry-leading WebFOCUS enterprise business intelligence technology.

Good, Better, Best

Philips is always looking for new ways to offer consumers innovative products. "We strive for zero defects, for top quality," says Koos Dekker, general manager for the Purchasing Process and Support Group at Philips CE. Philips put a program in place for achieving consistently higher quality standards for all of its products and services. This quality program impacts on all staff and processes, in every country and within every business unit – from the top down. Philips calls this program BEST (Business Excellence through Speed and Teamwork).

With BEST, Philips strives to achieve business excellence. Initiatives which have been successful in the past have been integrated into the program ensuring that Philips learns as much as possible from past successes. Speed and collaboration are at the heart of BEST. Everyone at Philips knows that business processes can only be perfected by collaborating optimally with one another and by using practical examples, and the right tools, for example to reduce turnaround times and such. Philips is focused on working smarter – and better – relying on proven business intelligence information systems.

Production Processes Improved

Quality management systems are a recurring theme throughout Philips' corporate history. Ten years ago Information Builders developed Philips' FRR (Failure Registration and Reporting) quality monitoring system – a parts per million (PPM) management system, which records and analyzes the failure of components at the factory. Quality managers can see what the failure rate is for specific components, the suppliers from which they originate, the factories in which they have been used and where the failure occurred. The information this generates serves to improve the production process and offer direction to the suppliers.

Dozens of factories around the world use the software. Jan Mensink, quality expert at Philips CE and the driving force behind FRR, recalls, "Although FRR was state-of-the-art when we created it, it also had its limitations. Installing new versions and functions had to be done locally and manually, a process that sometimes proved problematic. And we did not have the same facilities everywhere. I remember asking a purchasing manager in Beijing when he would be able to start. 'Sorry, we have no computer' was the reply." But that is now a thing of the past.

Investments Protected

The FRR data was stored locally on a database and uploaded once a month using File Transfer to Information Builders' central FOCUS database. A full picture of the suppliers worldwide could be obtained from the central database. In 2002 Philips decided to modernize the information system and further exploit the possibilities offered by the Internet. Mensink says, "We evaluated a number of options. Initially we thought about SAP, because we were standardizing on that worldwide. But we found that the basic reporting function of SAP R/3 was too limited. Building a new system based on SAP was not an option: we did not have the people or the resources. We also looked closely at Lotus Notes. But WebFOCUS turned out to be the best solution, particularly because the existing FRR functionality could be quickly and easily upgraded. Our earlier investments in Information Builders technology remain protected." It was also important that WebFRR integrates easily with other systems. With SAP, naturally, but also with the large central Philips CE database which contains all the codes for components, products, suppliers, etc.

Closed Loop BI

It took a little over six months to get WebFRR, the new Web-based version of FRR, operational. "We transferred the historical data to WebFRR. We can look back as far as 2001," says Herman Dijkman, who was involved in the development and maintenance of FRR – first at Philips and later with Atos Origin – and now is working with WebFRR.

"Users anywhere in the world need only a browser to access the system – any time, anywhere. The physical installation of client software on every user PC is a thing of the past. Management and maintenance are now done centrally from Eindhoven. The WebFRR database is fed directly, partly manually and partly automatically, from SAP. We are working diligently on further developments."

WebFRR offers "closed-loop business intelligence": the users not only are provided with information, but they also can use the browser to make changes to the central WebFRR database. Dijkman praises the system's user-friendliness. "You can create your own reports very flexibly by applying filters to the information in an intuitive way. Those filter settings are saved for the next time. The response times are very short, even for wide-ranging queries. WebFRR offers a wide variety of output formats: Word, Excel, pdf and e-mail." Mensink adds, "We are looking at ReportCaster from Information Builders; it automatically generates and distributes set reports at fixed times. That would be useful for management meetings."

Integration of the Production Chain

WebFRR gives real-time insight into quality by component, factory, supplier, organization, region, etc. The system provides aggregated management information and trend analyses, but also offers the option of drilling down to more detailed levels. WebFRR helps with further integration of the production chain. It is not just Philips CE's own factories and internal suppliers that have access to the information for which they are authorized; external suppliers do too. A total of 28 factories (internal and outsourcing factories) where Philips CE products are produced are now connected to the system. Mensink says, "We can have a new factory or supplier online within half an hour." Subject to authorization, everyone can see exactly what the failure rate is and what is causing it.

"We no longer have arguments with our suppliers as to where the fault lies. The system reveals the truth. It is easier to perform retrospective costing," says Dekker. Philips distinguishes two "feedback loops" with the suppliers: tactical and strategic. Tactical feedback relates to day-to-day operations. According to Dekker, "The fact that the suppliers themselves have real-time access to WebFRR has considerably cut the "feedback loop" from weeks to hours. This visibility increases the motivation to tackle problems quickly, both at the suppliers and at Philips' own sites. Quality improvements are achieved far more rapidly. Strategically the system helps us to evaluate our suppliers' long-term performance and to establish our negotiating position and the supply base strategy. WebFRR reports provide an important underpinning for our purchase management process."

Hunger for Information

WebFRR satisfies a great hunger for information that exists both inside and outside of Philips CE. Quality managers want to know exactly how things are going inside the factory. Suppliers want to know how their products are performing in order to be able to respond faster and make improvements quickly. After all, if their components are underperforming, it will cost them money and – if the problem is structural – could even cost them business. Buyers need pertinent information in order to be able to guide their suppliers. The system also helps Philips to improve its product development. "If you know that a specific part suffers early or frequent failures, you can decide to choose a different part or to change the design so that it no longer needs to be used."

Rapid Payback

WebFRR shows a convincing ROI. Fixed annual costs have been cut from 200,000 euros to 60,000 euros. The one-off investment was 130,000 euros. WebFRR paid for itself within one year. "On top of that there are the returns from process improvements," says Dekker. Mensink and Dijkman are already working on the next function: expanding existing reporting with financial information.

"WebFRR currently only records the failure of components, and not the associated costs. Sometimes you need to replace a faulty part during production. The value of that part is sometimes a fraction of a euro cent, but tracking it down and replacing it can cost dozens of euro in labor costs. We want to know more about this in order to be able to manage it better," adds Dekker. Purchasing management also wants to use WebFRR to record what the failure rate is after the products have left the factory and have been sold (Field Failure Rate). It then will also be possible to analyze and further improve that part of the product cycle. After all, it may be that components that have passed through all the quality checks in the factory still break down prematurely during everyday use. Mensink says, "There too, the need to replace a small part during the guarantee period can result in substantial costs."

With Field Failure Rate recording and analysis, Philips will have completed the quality circle. What goes into and comes out of the factory will be checked with WebFOCUS. It is clear that by using WebFOCUS, Philips CE has laid a solid and future-proof foundation for its information provision.

The Best Solution: WebFRR

For Users Information easily accessible via the browser Information consolidated in one place One truth Platform for integrated management information Faster decision-making based on unambiguous information Extremely user-friendly and flexible user interface Rapid familiarization, virtually no need for training Strategic purchasing – suppliers guided and monitored more effectively

For IT Able to respond rapidly to changes in information needs Greatly simplified management Everything through the browser – no local installation or configuration Greatly simplified infrastructure Functionality can be easily expanded Proven reliability Virtually unlimited scalability

For Business Flexible, easily expandable platform in terms of users and applications Better use of existing investments Lower management and communications costs Future-proof platform for enterprise business intelligence Better insight into the business and the performance of the various countries Other users can be easily served