Supplier Quality Manual

Together we are inspired to enable best in class value-chain partnerships to

the delight of our customers
Table of Contents
Introduction ........................................................................................................................................... 2
Purpose and Scope ................................................................................................................................. 2
Philips Quality Policy .............................................................................................................................. 3
Philips Supplier Quality Mission .............................................................................................................. 4
Sustainability and Environmental Policy .................................................................................................. 5
Philips Business Organization .................................................................................................................. 6
Key Roles and Responsibilities ................................................................................................................. 7
Supplier.................................................................................................................................................. 7
Procurement .......................................................................................................................................... 7
Supplier Quality ...................................................................................................................................... 7
General Business Principals .................................................................................................................... 8
Purchased Parts Quality Management (PPQM) ........................................................................................ 8
PPQM Approach ..................................................................................................................................... 9
1. Supplier Planning, Classification and Selection ................................................................................. 9
2. Supplier Audits and Certification ..................................................................................................... 9
o Auditing at Supplier ...................................................................................................................... 10
3. Component Specification and Qualification ................................................................................... 10
4. Nonconformance, Corrective and Preventive Action ...................................................................... 12
5. Performance Monitoring and Reporting ........................................................................................ 12
Supplier Initiated Changes..................................................................................................................... 13
Sub-Tier Supplier Controls ..................................................................................................................... 13
Business Contingency Planning.............................................................................................................. 14
Supplier Quality Agreements................................................................................................................. 14
Escalation Process ................................................................................................................................ 14
Purchasing Terms and Conditions .......................................................................................................... 14
Terms, Abbreviations and Definitions .................................................................................................... 16

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Introduction
This manual details the internal set up, roles and responsibilities and Philips way of collaboration with
suppliers. This provides guidance on how the supplier should operate to fulfill their obligation of supply.
We recognize that Philips has a wide variety of suppliers and technologies; the expectations stated in this
manual may apply in different ways, depending on the product or service supplied.
The information provided in this Supplier Quality Manual is intended and shall be considered as
supporting material used in customer supervision by Philips on its suppliers without prejudice to any
existing agreement, purchase order, drawings specifications exchanged between Philips and suppliers.

Purpose and Scope

The purpose of this Supplier Quality Manual is to communicate base level Philips expectations and
requirements. This Supplier Quality Manual is meant for potential or new suppliers to Philips with a focus
on quality and product reliability. This includes, Philips’ Purpose, Supplier Quality Mission, Environmental
and Sustainability Policies, as well as supplier and product life cycles. This Supplier Quality Manual is not
intended to elaborate on detailed supplier qualification requirements.
The expectations and requirement given within this Supplier Quality Manual are influenced by Philips’
quality, regulatory, product, process, and customer requirements to ensure quality products. Suppliers
are critical to Philips success in delivering quality products through their supply of materials, products,
parts, and services. This Supplier Quality Manual delivers an overview of those expectations and
requirements.
The Philips Supplier Portal, or Philips Supplier Representatives can provide further explanation and
guidance on supplier requirements as set forth in existing agreements, purchase orders, drawings, and
specifications. This Supplier Quality Manual does not replace or alter any existing contracts, purchase
orders, drawings, or specifications.

Philips Purpose: Link to: About us | Philips

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Philips Quality Policy

3
Philips Supplier Quality Mission
Together we are inspired to enable best in class value chain partnerships to the delight of our
customers.

✓ To respond to changing environment we need to

improve and implement new capabilities.
✓ Single Ways of Working to build clarity both within
Philips and towards suppliers
✓ Critical product features are defined and
communicated to suppliers
✓ Purchased part quality expectations are clear and risk
based
✓ Supplier capabilities and performance are measured,
tracked and visible.
✓ “Right first time, every time” to become the norm

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Sustainability and Environmental Policy
Philips establishes technically and economically viable objectives to optimize the environmental
performance of the organization’s products, services, and activities:
• Our Product Development Objectives include evaluating the environmental impact over the total life
cycle of a product, taking steps toward more efficient use of materials, including packaging; reducing
or eliminating hazardous substances; reducing energy consumption; and contributing to improving
recycling and disposal.
• Our Manufacturing Objectives include environmentally related activities such as emissions into air
and water; use of energy and water; and waste disposal while preventing pollution within our
community.
• Our Supplier Sustainability Program looks for Supplier Sustainability Performance, Responsible
Sourcing of Minerals, Substance Management and Greening the Supply Chain.
Link to: Philips Supplier Sustainability Programs
• We are committed to compliance and harmonization with all applicable laws and regulations and are
prepared to enter into voluntary agreements.
Link to: Philips Environmental, Social and Governance Policies
• Our Supplier Sustainability Declaration (SSD) & Regulated Substances List (RSL) are legal
agreements between Philips and the supplier via which the suppliers are informed about and in which
the supplier commits to achieve.
Link to: Philips Regulated and Substances Compliance
• Our Supplier Sustainability Performance (SSP) Program is a collaborative systematic approach to
improve sustainability of a supply chain through continuous improvements. We base our goals upon
peer best practices to recognized and global references.
• We establish and maintain an environmental management system and audit by means of a
systematic, documented verification process to ensure continuous improvement.
Link to: Philips Expectations on Supplier Sustainability Performance

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Philips Business Organization
Royal (Koninklijke) Philips has three Business Clusters: Diagnosis and Treatment, Connected Care and
Personal Health. Within each Business Cluster are Business Groups. All Philips Business Groups share the
same quality management system and business requirements. Business Groups operate in multiple
markets that require several different supporting suppliers, including logistics, translation, service, etc.

Link to: Philips Consumer Products

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Key Roles and Responsibilities
Philips builds strong partnerships with suppliers in many functional areas to ensure and maintain a focus
on Quality. Philips understand our business segments are different in nature and, in some cases, have
unique roles and responsibilities based on the business or market they represent. Within a partnership, it
is important that the roles and responsibilities within Philips be defined. Key interfacing roles are:

Supplier
As a Philips supplier, your organization is responsible for developing and maintaining a quality
management system to ensure consistent performance in order to deliver quality parts, products, and
services. This includes the suppliers’ responsibility for ensuring compliance to the contract and compliance
to Philips specifications for the part, product or service provided. This includes compliance to Local and
National Regulations/Law.

Procurement
Procurement is the primary integration point linking sourcing with technology, aligning Philips Product
and Supplier Technology Roadmaps, and managing sourced components. Procurement coordinates parts
specifications with R&D Engineering and the selection of potential suppliers according to predefined
criteria. The selected suppliers must meet stringent quality requirements set by Philips.

Supplier Quality
Supplier Quality assures that the suppliers’ Quality Management System (QMS) meets the applicable
Philips’ quality and regulatory requirement. There are processes in place to assure initial selection,
evaluation, approval, and monitoring of suppliers. Philips utilizes PPQM (Purchase Parts Quality
Management) to define these steps. Supplier Quality utilize APQP (Advanced Product Quality planning) to
ensure the right level of risk mitigation is in place within the Supply chain. Supplier quality leverages
Supplier Quality Improvement Programs & Supplier Improvement Process (SQIP & SIP). Both are in place
to drive continuous improvement within Philips Supply chain. All these approaches are supported by the
relevant IT infrastructure.

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General Business Principals
Patient safety, Quality and Integrity always is at the heart of our culture and is part and parcel of our
company’s mission and vision. While pursuing our business objectives, we aim to be a responsible partner
in society, acting with integrity towards our, customers, employees, business partners and shareholders,
as well as the wider community in which we operate.
The General Business Principles set the standard for acting with integrity at Philips. They govern all our
decisions and actions throughout the world and apply equally to our group actions and to our conduct as
individuals. The General Business Principles are an integral part of Philips’ labor contracts and are
available in 30 languages.

Link to: General Business Principals

Purchased Parts Quality Management (PPQM)

Philips developed a comprehensive Supplier Management Approach Program called Purchased Parts
Quality Management (PPQM). The PPQM method is used for the Quality Management processes related
to purchasing controls, there are 5 Steps:
• Supplier Planning, Classification and Selection
• Supplier Audits and Certification
• Component Specification and Qualification, including Advanced Product Quality Planning (APQP),
Receiving Inspection and Change Control
• Nonconformance monitoring, Corrective and Preventive Actions, including Supplier Corrective Action
Request (SCAR)
• Supplier Performance Monitoring

The PPQM provides a systematic approach to purchasing controls at both the supplier and within Philips.
Philips utilizes PDLM (Product Development Launch and maintenance) as an infrastructure for the APQP
process.

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PPQM Approach

1. Supplier Planning, Classification and Selection

This procedure is about Supplier Selection, Classification, and Qualification and applies to all Philips
organizations.

The process of selecting suppliers for materials, components, finished devices or services is an integral
part of Philips commitment to the highest quality products and services to our customers. When
Purchasing is pre-selecting the supplier, Supplier Quality will make a technical and/or a QMS assessment
to ensure suppliers have the correct capability.

Each supplier must be qualified according to the Philips Selection, Classification, and Approval process
before being added to the Philips Approved Supplier List (ASL). The process includes an audit, risk
classification, and official approval by Philips. Suppliers are considered qualified once placed on the ASL.

Recognizing the degree of oversight and management within various industries, Philips has established a
modified assessment process used to evaluate companies for inclusion within our ASL. **
**Out of scope of this procedure are suppliers of:
• Products purchased by R&D or other functional groups that will not be used in the manufacturing of
Philips finished product or finished product qualification (including design verification)
• Prototype parts, tools, equipment (manufacturing aids)
• Non-production test equipment and supplies
• Part risk classification for it is a function of the Research and Development process

2. Supplier Audits and Certification

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Philips has a global audit process in place and executes Quality Management System, Manufacturing
Processes and Product Audits. An audit can be triggered by supplier qualification, surveillance, or for
cause. Philips manages their audit schedule globally to leverage resources for both Philips and suppliers.
o Auditing at Supplier
Supplier should ensure that the periodic reviews of the effectiveness of the Quality Management System
are performed and documented. Suppliers should allow external audits, including unexpected audits from
Philips or third-party agencies ensuring compliance with industry standards.

3. Component Specification and Qualification

Philips utilizes the Advanced Product Quality Planning (APQP) methodology to proactively provide
visibility and improve communication between stakeholders during product development. This is a risk-
based approach to ensure consistent product quality from the first production batches.

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The scope of APQP applies to all Philips entities engaged in Product Development, Launch and
Maintenance (PDLM) and all our suppliers of components and products intended to be used with, in, or as
a Philips finished product.
The purpose of this process is to provide a clear and robust framework to control industrialization of new
products and changes to existing products, within the supply base. It defines the activities, deliverables,
acceptance criteria and responsibilities for both Philips and our suppliers (including identification of any
documentation needed that support the process). The result is a product quality plan for manufacturing
products, which consistently meet customer requirements.

The structured approach of APQP ensures our suppliers implement process controls and provide objective
evidence to demonstrate that purchased parts consistently meet all Philips engineering design
requirements and specifications. Early supplier involvement is a key enabler.
Through the correct application of APQP, we can ensure our products are right first time, every time.

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4. Nonconformance, Corrective and Preventive Action
The following requirements Nonconformance and Supplier Corrective Action Reports applies to all Philips
organizations.
Philips has methods in place to detect problems at an early stage when prevention has failed. Philips will
work closely together with our supplier to correct any problems and to minimize the impact on our
customers. The use of 8D and Plan-Do-Check-Act (PDCA) problem solving tools are expected from
suppliers in these cases.
Suppliers listed on Philips’ Approved Supplier List (ASL) are expected to have similar quality controls,
corrective, and preventive action systems.
The web-based Philips SCAR IT tool provides access to the supplier so that they can update the status of
their investigation, corrective, and preventive actions directly in the system. This enables the teams from
Philips and the suppliers to focus on the effectiveness of the activity.

5. Performance Monitoring and Reporting

Philips continuously monitors and reviews the performance of the supplier through various methods,
including Quality Notifications, PPM nonconformance and other running metrics.
Suppliers to Philips are required to have a comprehensive corrective and preventive action program and
are required to allow Philips or third parties to perform an audit or inspection when indicated at any time
(for Cause). Philips Audit Program audits suppliers based on their risk classification indicated on the Philips
Approved Supplier List (ASL). Philips suppliers must be fully committed to maintain their Approved
Supplier status by continuously demonstrating excellent quality performance.
Philips will communicate the results of Supplier Oversight Monitoring activities like quality performance,
individual performance, and correlation between DPPM, Supplier QA, Philips Source Inspection, ORT
(Ongoing Reliability Testing), CTX audit results, and SCAR responsiveness on a regular basis with the
supplier.
Philips recognizes the need and highly appreciates the use of statistical data analysis in driving continuous
quality improvements.
The Supplier Quality Improvement Program (SQIP) is a structured program offered to suppliers to boost
their Quality Management System performance and drive consistency. It is aimed at augmenting a
supplier QMS to ensure robust and sustainable quality management activities are taken.
The Supplier Improvement Process (SIP) is a structured process that helps suppliers get back on track with
their operational Quality KPI’s. Customer control points, pass throughs, DPPM/Internal Yields/ SCAR’s/OEE
are typically the focus of this kind of partnering activity.
Both SQIP and SIP are intended as a partnership between Philips and our supplier partners to ensure we
can deliver the best quality, efficiently and effectively on a consistent basis.
Link to: Supplier Lifecycle Management

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Supplier Initiated Changes
Supplier agrees to provide prior notification, at the earliest date possible, of any change in location/
manufacturing location, inspection/control plans including test methods, material composition, process
methods and controls that the Supplier intends to implement, and which can affect the product(s) or
service(s) provided to Philips or Philips finished devices.
Unless Supplier provides a Catalog Part, it is understood that Supplier shall not implement any such
changes until Philips has determined the impact of the change(s) on product(s) or service(s) provided and
approved the change in writing.
Changes to Catalog Parts require notification to Philips, but not prior approval before implementation.
This includes, but is not limited to, the following types of changes:
• Product or service design changes
• Manufacturing process changes that may affect design and/or production specifications
• Change of manufacturing or service facility location
• Change of Supplier name
• Changes that have a significant impact upon your quality system
• Changes to regulatory status (including regulatory inspection findings impacting the product, the
service or environmental compliance status)
• Change in Certification status
• Any changes, such as those outlined above, that are made by sub-tier suppliers.
Link to: Supplier Initiated Change Request (SICR)

Sub-Tier Supplier Controls

Suppliers are responsible to manage their sub-tier suppliers and supply chains to ensure that raw
materials and components used in the manufacture of Philips products, parts or provision of services meet
Philips specifications and comply with the requirements in the applicable agreement in relation to these sub-
tier suppliers. As such, suppliers shall apply appropriate controls to ensure that their suppliers comply and
are capable of meeting specified requirements. Suppliers are required to manage both directed and non-
directed sub-tier suppliers and to maintain part qualification and quality for products purchased through
them.
Philips’ expectation is that the supplier has installed a formal purchasing and supplier control process to
manage sub tier suppliers. These controls are expected to include:
• Supplier Planning, Classification and Selection
• Supplier Audits and Certification
• Component Specification and Qualification
• Nonconformance, Corrective and Preventive Action
• Performance Monitoring and Reporting, including sub tier auditing programs
• Change Control
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Business Contingency Planning
Philips expects their suppliers to have a comprehensive crisis management approach to deal with
potential disruptions. This approach should include a plan of action, communication plans, escalation
procedures, and roles and responsibilities. The plan shall address the recovery time needed for a variety
of business interruptions, contact information for key locations, supply chain risk assessment for
equipment, material, supplied components and labor, etc. This shall be specific to Philips products and/or
services provided.

Supplier Quality Agreements

Philips will determine if a Quality Agreement is needed. Once the need is determined, it is our expectation
that the supplier will work with Philips to put this Agreement in place and always abide by it. A Change
Notice Agreement can be used in lieu of the Quality Agreement when Philips deems this appropriate.

Escalation Process
Philips and the supplier shall hold each other mutually accountable to the highest quality standards and
business practices. To that end, Philips has established an escalation process whereby we can assure such
compliance. Escalation may include higher levels of action up to and including disqualification. The intent
is to foster trust and a partnership based upon 2-way communication.

Purchasing Terms and Conditions

Philips often enters into a purchasing agreement with its suppliers. If a purchasing agreement is not in
place, then purchases shall be covered by Philips General Conditions of Purchase.
Link to: General Conditions of Purchase

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Supplier Quality Management System (QMS) Requirements

Suppliers shall have a Quality Management System (QMS) in place that is established according to
applicable governing standards and regulations (e.g., ISO 9001 or equivalent). For suppliers who are
certified, Philips requires that they maintain standard certification status. For suppliers who are not yet
certified to the specified ISO standards, it is preferred that they have a plan in place to become certified.
Should certification be suspended, expire, or change in status, Philips shall be notified. Philips may specify
additional industry or performance standards to be achieved by its suppliers in alignment with current
quality objectives.

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Terms, Abbreviations and Definitions
Term Definition
AOP Annual Operational Planning
APQP Advanced Product Quality Planning
Approved Supplier A supplier who has been successfully evaluated and whose approval has
been documented in the Approved Supplier List for the purpose of
supplying specific goods and services.
Approved Supplier List A list of suppliers who have been evaluated and approved to deliver
devices, components, or services.
CAPA Corrective Action Preventive Action: Corrective Action - Action taken to
eliminate the cause of an existing nonconformity, defect, or other
undesirable situation in order to prevent recurrence. Preventive Action -
Action taken to eliminate the cause of a potential nonconformity, defect or
other undesirable situation in order to prevent occurrence.
cGMP Current Good Manufacturing Practice
Commodity A term used to describe a category of inventory items or services.
Control Plan A document that identifies key manufacturing or service process steps or
inputs and how those items will be sustained.
Cpk Process Capability Index is a snapshot or a series of snap shots of a process
at specific points in time and is used to assess the “local and timely”
capability of a process. Process Capability is the comparison of the Voice of
the Customer (Specification Requirements) and the Voices of the Process
(Control Limits).
Corrective Action Action taken to eliminate the cause(s) of non-conformities/failures in order
to prevent recurrence.
CTX Critical to Process (CTP), Critical to Safety (CTS) & Critical to Quality (CTQ).
DfX Design for Excellence - The X in DfX stands for Value, Costs, Quality,
Manufacturing, Logistics, Risk Management, Reliability and Sustainability.
EUMDR European Medical Device Regulation
FDA The United States Food and Drug Administration, authorized to conduct
inspections on behalf of the United States government.
General Business Philips is committed to ensuring the highest standards of business conduct
Principles and has incorporated this commitment in its General Business Principles and
underlying policies. General Business Principles set the standard for acting
with integrity.
GDP Good Documentation Practice.
GMP Good Manufacturing Practice
NPI New Product Innovation.
OEM Original Equipment Manufacturer: Finished devices, drug, or biologics used
or sold by an organization or establishment, in which the external supplier
to an organization holds legal title, design, manufacturing, and regulatory
responsibility.
ORT Ongoing Reliability Testing
PDCA Plan-Do-Check-Act, also known as the Deming Cycle, is a methodology for
Continuous Improvement.
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Term Definition
PDLM Product Development, Launch and Maintenance
PEPF Philips Excellence Process Framework describes all business processes for
Philips. The PEPF consists of three value chains forming the organizations
end-to-end processes: Idea to Market (I2M), Market to Order (M2O), Order
to Cash (O2C), supported with a set of management and enabling processes.
PPM Parts Per Million
Ppk Process Performance index (k) that incorporates and estimate of the long-
term process standard deviation analysis. Process Performance index is an
index of process performance related to both dispersion and centeredness.
PPQM Purchased Parts Quality Management
Product A product is a raw material, component, assembly, software, or service.

Preventative Action Action taken to eliminate the cause(s) of potential non-

conformities/failures to prevent their occurrence.
Quality Agreement A document that defines the general relationship for quality activities
between two entities.
Quality Risk The potential for use or patient injury if a finished device contained or was
manufactured using a supplier’s nonconforming item, or if a service did not
conform to Philips requirements.
SCAR Supplier Corrective Action Request made to a supplier because of an
identified quality issue. Response shall cover both corrective and preventive
actions.
Services Service Suppliers are Consultants, Contract Manufacturers, Distributors,
R&D, Calibration, etc.
SICR Supplier Initiated Change Request
SIP Supplier Improvement Process
SLM Supplier Lifecycle Management
SQIP Supplier Quality Improvement Program
Sub-Tier Supplier An organization or business entity that provides products or services to a
Supplier.

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