Philips Employing the Bid Optimization Strategic System (BOSS) Developed by the MS Department About Philips The Royal Dutch Philips Electronics Ltd. (Philips) is one of the world’s largest electronic companies. As a multinational company operating on a global scale, its work units and business partners form a very complicated transportation network stretching over the world. This network involves shipping, air and land routes. Philips’ annual logistics cost is about US$ 10 billion, with US$ 2 billion spent on sea freight, another US$ 2 billion on air freight and air courier, and the rest on truck transportation. Challenges Faced by Philips Strategic procurement of transportation services is one of the challenges faced by Philips. It is done on a year basis and is a very difficult and fallible task. Relevant data of the procurement exercise comprises numerous cost factors, non-cost factors, preferences and restraints. Moreover, since the lanes fall in many different zones, the procurement process is done by various logistics managers in disparate parts of the world. Worse still, the process is undertaken by mainly using Excel spreadsheets and emails. The computations involved are complicated and error-prone. As a result, a lot of time and money have to be spent on examining and verifying the data. Solution Brought About by the MS Department In 2004, Philips started to collaborate with Prof. LIM Leong Chye (Head of the MS Department) and his research team. The team successfully enhances the efficiency of the procurement exercise by the Bid Optimization Strategic System (BOSS). This system involves knowledge in management sciences, computation techniques and artificial intelligence. It streamlines the procedures in the procurement exercise and thus helps Philips to sharply reduce its cost. BOSS can be employed in different transportation modes, including sea freight, air freight and air courier, and truck transportation. As mentioned above, the new system streamlines the procurement exercise of Philips. It realizes and integrates many innovative functions, such as forecasting the procurement volume of every business unit based on historical data. It can also help to manage information of the logistics companies when Philips is negotiating the price with them. Through statistical techniques, BOSS can examine and correct data in the system, and thus provide a reliable price baseline for Philips when logistics companies are making quotations. This can enhance Philips’ bargaining power in the negotiation process. BOSS can also help Philips to formulate strategies against the logistics companies. It can collect and analyze monthly transportation information and details in the contract. This renders Philips in a better position when they are procuring the transportation services. Effectiveness of BOSS After adopting the BOSS-FCL system, Philips can save over 10 % of its transportation cost, which is about US$ 20 million every year. Moreover, since errors are reduced in the data and a clear procurement procedure is defined, Philips can cut the manpower needed for 1500 hours of work. When it is applied in all transportation modes, including land transportation in Europe and Asia, BOSS can enable Philips to save more than US$ 1 billion annually.