Making circular innovation work

Building circular supply chains

Thijs Maartens and Hans Leijen
Philips Engineering Solutions
June 16, 2022
Today’s agenda

Who we are

Moving towards a Circular Economy

Thijs Maartens
Supply chain: one of the pillars for circularity Sustainability Competence Lead

Learning in practice: challenges for reversing the supply chain

Design of a scalable circular supply chain

Q&A

Hans Leijen
Senior Supply Chain Consultant

© Koninklijke Philips N.V.

 Philips Engineering Solutions
Netherlands
Drachten
External customers

Netherlands
Philips businesses Germany Eindhoven
Aachen
India
Bangalore

North America
Diagnosis Connected Cambridge
& Treatment Care
India
Philips Pune
Engineering
Solutions
Personal Operations,
Health delivery
& services

3 Webinar 16-06-2022 | Philips Engineering Solutions © Koninklijke Philips N.V.

 Global challenges make action an urgent necessity

Overconsumption Growing demand

of resources from an expanding Waste and pollution Climate change
population

1.7x 5 billion 50 million 45% of CO2 emissions

Earth’s resources middle class in 2030 tons electronic waste relate to production

4 Webinar 16-06-2022 | Philips Engineering Solutions © Koninklijke Philips N.V.

 Circular economy

We are adopting innovative business models,

dematerializing, and maximizing the lifetime
value of our products and solutions.

5 Webinar 16-06-2022 | Philips Engineering Solutions © Koninklijke Philips N.V.

 To be successful in our mission towards circular economy we
need a strong foundation and three enabling pillars

Circular value
for our customers, our company and our planet

Circular Circular Circular

product design business models supply chain
Design for circularity: • Service concepts • Reverse logistics
• Upgrades and service • Take-back of used • Reprocessing
• Refurbishment products operations
• Parts recovery • Circular product • Match supply
• Recycling portfolio and demand

Circular vision, strategy and leadership commitment

6 Webinar 16-06-2022 | Philips Engineering Solutions © Koninklijke Philips N.V.
 Our ambitious circular economy
objectives for 2025

25% Embed circular practices

at our sites* and send
of sales from circular
products, services zero
waste to landfill
and solutions All our new products
designed in line with
EcoDesign requirements
Close the loop by offering a trade-in
on all professional medical equipment,
and taking care of responsible repurposing**

* including non-manufacturing sites, such as large offices, warehouses and R&D facilities
** either refurbished at Philips, or locally recycled in line with Philips policies

7 Webinar 16-06-2022 | Philips Engineering Solutions © Koninklijke Philips N.V.

 In our previous webinar we shared our
insights in Circular Product design

Circular design is about creating value for customers

and business in a resource-constrained world.

From linear design… To circular design

Take, make, waste

See our web page > Circular design for disassembly | Philips Engineering Solutions

8 Webinar 16-06-2022 | Philips Engineering Solutions © Koninklijke Philips N.V.

 Today, we will highlight the enabler for the
execution: circular supply chain management

Circular value
for our customers, our company and our planet

Circular Circular Circular

Product design Business models Supply Chain
Design for circularity: • Service concepts • Reverse logistics
• Upgrades and service • Take-back of used • Reprocessing
• Refurbishment products operations
• Parts recovery • Circular product • Match supply
• Recycling portfolio and demand

Circular vision, strategy and leadership commitment

9 Webinar 16-06-2022 | Philips Engineering Solutions © Koninklijke Philips N.V.
 In the circular economy we are adding reverse goods flows
and reprocessing operations to our supply chains
Linear supply chain

Reverse supply chain

10 Webinar 16-06-2022 | Philips Engineering Solutions © Koninklijke Philips N.V.
 Philips has reverse supply chain expertise for large equipment

Large medical equipment Small medical devices Consumer goods

High value, low volumes Mid value, high volumes Low value, very high volumes

How to manage high return volumes?

How to be competitive against new buy alternatives?

11 Webinar 16-06-2022 | Philips Engineering Solutions © Koninklijke Philips N.V.

 Pilot projects helped us to understand the need for reverse
capabilities in the circular supply chain
Our Challenges: Quality and
Case Study for a patient monitor: Compliance
Explore the opportunities of parts recovery
to mitigate shortage of a service part Financial Product
impact design

Scaling
towards
2025
Parts
recovery Sustainability Processes
impact and Systems

Trade-in device Recovered spare part

Ownership

12 Webinar 16-06-2022 | Philips Engineering Solutions © Koninklijke Philips N.V.

 Circular supply chain design

13 © Koninklijke Philips N.V.

 We apply a structured approach to design a circular business
and supply chain to meet future demands

Circular vision Circular supply chain design Deploy

& strategy and scale
Reverse SC network and processes

Planning and control

Organization
Systems and tools
KPIs

14 Webinar 16-06-2022 | Philips Engineering Solutions © Koninklijke Philips N.V.

 Our 4-step design approach for the
circular supply chain

1 Define scope and requirements

2 Identify options

3 Select the supply chain architecture

4 Detail supply chain design

15 Webinar 16-06-2022 | Philips Engineering Solutions © Koninklijke Philips N.V.

Reverse SC Network and Processes

Reverse supply chain network and processes

a diverging network, offering circular alternatives for new products and parts

Regional
Regional
Refurbish
Recovery partner Products
Market
Recovery partner
Market
Market
Market
Market

parts
Trade in deal

Philips Regional Spare parts

Philips
Philips
Philips
Trade-In Regional
Philips
customer
Philips
customer
Collection
collection
collection devices
recover Recover partner
Recovery parts
partner
customer
customer
customer
customer network Recovery
customer Production materials

recycle
Regional Raw materials / components
Regional for production sites / suppliers
Recycle
Recovery partner
Recovery partner
Raw materials / components
for other applications

16 Webinar 16-06-2022 | Philips Engineering Solutions © Koninklijke Philips N.V.

Reverse SC Network and Processes

The processes of linear and reverse supply chains seem

similar, but there is significant differences

Linear supply chain Reverse supply chain

Converging Diverging

Pull based on demand Push based on trade-in

“Unlimited” supply Limited trade-in supply

Distribution Collection

Buy-sell chain Service activities across the chain

Production and assembly Refurbishment, parts recovery

and recycling
Trade of new products Import and export constraints

17 Webinar 16-06-2022 | Philips Engineering Solutions © Koninklijke Philips N.V.

Reverse SC Network and Processes

Circular processes
Reprocessing operations require new capabilities and skills

Processes Capabilities

Refurbishment Planning and logistics

and repair
Operational capabilities

Parts recovery Quality and regulatory assurance

Industrialization
Recycling
Tracking and data management

18 Webinar 16-06-2022 | Philips Engineering Solutions © Koninklijke Philips N.V.

 Planning and Control

Planning cycles to match trade in supply and circular demand

Focus on circular added value and opportunities

Planning cycle Description

Circular Business Define circular product portfolio

Planning and target quantities

Sales & Operations 12-18 months demand and supply plan

Planning (S&OP)

Sales & Operations 3-6 months rolling demand and supply

Execution Planning outlook
(S&OE)
Execution Execute orders, identify and mitigate issues

19 Webinar 16-06-2022 | Philips Engineering Solutions © Koninklijke Philips N.V.

 Organization

Organization: can we mirror the roles for the reverse supply

chain activities?

Do we integrate reverse activities in our

existing linear organization?
or
Should we organize reverse functions
with focus on circular business and
operations?

20 Webinar 16-06-2022 | Philips Engineering Solutions © Koninklijke Philips N.V.

 Systems and tools

Systems and tools enabling data driven decision making and

operations

Decisions on circular business and supply chain design

require scenario based supply chain and financial models

New or adapted IT applications are needed to support

circular decision making and operations
Examples:
– Installed base management with use and repair history
– Order management and execution of trade-in and collection
– Activity based pricing in the reverse supply chain
– Data driven leveraging between new and reprocessed supply

Dashboards and KPIs to monitor circular business results

and operational performance

21 Webinar 16-06-2022 | Philips Engineering Solutions © Koninklijke Philips N.V.

 The key for success: design, develop and deploy the circular
supply chain in a balanced roadmap

Circular roadmap
Drive circular
Business business
Business
Deliver
Enable reverse
Supply Chain SC Supply chain circular value
RD
R&D
Design circular
R&D products

22 Webinar 16-06-2022 | Philips Engineering Solutions © Koninklijke Philips N.V.

 We can support you in your circular journey – end-to-end

How can we help you?

Circular value creation

Circular Circular Business Circular Supply

Product design innovation Chain

Thijs Maartens Hans Leijen

Sustainability Senior Supply Chain
Competence Lead Consultant
Circular vision, strategy and roadmapping
www.engineeringsolutions.philips.com

Let’s make circular innovation work together!

23 Webinar 16-06-2022 | Philips Engineering Solutions © Koninklijke Philips N.V.