Xavier Institute of Management

XIM University, Bhubaneswar

Business To Business Marketing
End Term Examination
MBA 2020-22
Max Marks: 40 Time: 2hrs

Read the case and answer the questions in the space provided.

In 2016, Philips introduced the Supplier Sustainability Performance (SSP) program to replace

the traditional approach of auditing. Insights from data analysis showed the reliance on
auditing was insufficient to drive sustainable improvements and often leads to audit fatigue. 

The SSP approach was a systematic approach to improve sustainability of supply chain, focus
on continuous improvement against a set of recognized and global standards. It focuses on
building collaboration, transparency, providing clear commitment guidelines, and ensuring
suppliers meet the targets. It encouraged suppliers, industry peers and cross-industry peers to
adopt Philips’ approach. The focus is on ensuring structural, proactive improvement rather
than simply reacting to issues that arise, underscoring Philips’ desire to invest in relationships
with suppliers who follow sustainable practices.

Philips’ requirements are adopted by the suppliers to develop the Frame of Reference, which
covers management systems, environment, health & safety, business ethics and human
capital. For each, the maturity level of suppliers is identified in the Program Execution
Wheel, and supplier is assessed against the Plan–Do–Check–Act (PDCA) cycle. Suppliers are
then categorized through the Supplier Classification model, which differentiates on the basis
of supplier maturity, which provides supplier-specific proposals for improvement. The SSP
process is monitored and adjusted through continuous feedback loops. The outcome of the
SSP assessment is a supplier sustainability score ranging from 0 to 100. This score is based
on supplier performance in environmental management, health & safety, business ethics, and
human capital. 

The company annually measures supplier performance against the core elements as described

in the Frame of Reference. The process involves four key stages: select, identify, agree, and
execution. The outcome of assessment is a supplier sustainability score ranging from 0 to 100,
based on suppliers’ self-assessment with supporting evidence (30% of total score) and
Philips’ validation (70% of total score). Depending on results of assessment, the company
categorizes suppliers into four classes: BiC (Best in Class), SSIP (Supplier Sustainability
Improvement Plan), DIY (Do it Yourself) and PZT (Potential Zero Tolerance). The PZT is
a temporary status, if any Potential Zero Tolerances – which refer to unacceptable violations
of Philips Sustainability Agreement – is identified.

Philips defines six Zero Tolerances:

 structurally faking or falsifying records

  structural child and/or forced labor 
 immediate threats to the environment or violations of regulatory requirements
 immediate threats to workers’ health and safety
 failure to comply with regulatory and/or Philips requirements with regard to, for
example, regulated substances and conflict minerals
 structural failure to comply with regulatory requirements on workers’ monthly income

  

Tailor-made improvement plan 

Depending on supplier classification, Philips develops a tailor-made approach that supports

continuous improvements through training and sharing best practices. For example, suppliers
assigned to the status of BIC only need to complete a self-assessment on an annual basis.
Suppliers classified as SSIP are subject to an on-site assessment in addition to desk-based
validation to verify their actual situation and develop an improvement plan.

For PZT suppliers, Philips takes immediate action to verify whether there is structural Zero
Tolerance. If the conclusion gives rise to a structural Zero Tolerance, the supplier will be
required to propose a mitigation and/or resolution plan and provide regular updates and
evidence. Zero Tolerances will be internally reported to the procurement commodity leads,
procurement leadership team and corresponding business units.
Impact on supplier performance

Each year, more than 200 suppliers actively participate in the SSP program and additional
suppliers are added to the program each year. In 2020, approximately 302,000 workers were
impacted through the program as labor conditions improved, the risk of serious injury was
reduced, and the negative environmental impact of suppliers brought down. Philips’ measures
and monitors the impact of the SSP engagement through a year-on-year improvement rate.

Apart from the inclusion of additional suppliers annually into the award-winning SSP
program, Philips is working to improve the program and make it efficient and effective
through its research consortium with Eindhoven University of Technology and
the Jheronimus Academy of Data Science (JADS). The focus of this consortium is on
applying the latest insights in data science and machine learning methods in order to make
the SSP program more efficient in determining the sustainability maturity of suppliers. From
the consortium, a machine learning tool was developed that is able to predict the sustainability
performance of suppliers, based on a set of generic indicators. Moreover, it helps in
predicting the year-on-year improvements of suppliers that are part of the SSP program,
allowing further specification of the engagement intensity towards individual supplier needs.

In 2020, a different machine learning tool was developed, which is able to predict expert
scorings on detailed pieces of evidence, thereby reducing the time spent on assessments. This
leaves more room for experts to support suppliers in their capability building, by sharing best
practices and creating business cases that enable improvements. Philips launched its newly
developed SSP IT platform, which fully supports the entire engagement process, from
onboarding to data analysis. It is set up in such a way that other companies can easily start
using the system for their own supplier engagements. The program design also enables
various codes.

Philips has ramped up its cross-industry engagement, advocating for further adoption of the
SSP approach. The SSP program design enables various codes of conduct to be
included. Through public speaking and 1-on-1 conversions, Philips is making the SSP
approach available to other companies that want to make a sustainable impact in their supply
chains.
1. Determine the importance of proper balance of commitment, trust, transactions and
collaboration as an integral element of Philips strategies in product development (10
marks)
2. Where are key areas of conflict when determining levels of service and profitability?
What are some methods that can be used to calibrate a profitable relationship and high
levels of supplier service and support? (15 marks)
3. Explain the importance of supplier management in developing effective marketing
communication strategies. Suggest IMC tools that may be used to communicate
organization’s collaborative approach, discuss message objectives and media
platforms that may be used. (15 marks)