Philips' Refurbishment Plans: Cats Aren't the Only Ones with Nine Lives
[Editor's Note: During our recent Circular Economy Business Delegation Tour, we visited the Philips North America Bothell healthcare manufacturing and refurbishment center, and we were hooked. The closed loop business model infiltrates every single facet of the center's operations, and the employees we met were incredibly passionate about the company's position as a global leader in this movement.]
In 2050, approximately 9 billion people will live on this planet, all aiming for a good quality of life, health, and well-being. As the population continues to age, there is a growing demand for integral value-based healthcare solutions. Energy-efficient lighting is essential, driving progress toward digitalization and integrated lighting solutions.
Philips’ three domains—Healthcare, Lighting, and Consumer Lifestyle—are positioned well to address these mega trends. In 2013, Philips adopted a fundamental rethinking of its strategies and defined a new mission and vision to make the world healthier and more sustainable with meaningful innovation, and it set the goal to improve the lives of 3 billion people a year by 2025.
As part of this commitment, Philips has been applying some of the principles of circular economy, where the more effective use of materials enables the creation of more value, by saving costs and developing new markets, or by growing existing ones.
Philips’ circular business models create value and help gain market share.
Lighting as a Service
In this business model, Philips sells a service, not a product, focusing on maintenance and repair agreements and service support that provide technology upgrades, extending product life and enabling reuse.
In 2013, Philips signed a 10-year performance contract with the Washington Metropolitan Area Transit Authority (WMATA) to upgrade the lighting in 25 parking garages. Over 15,000 lighting fixtures were converted to an innovative, custom-designed LED solution that provides white light exactly when and where it is needed.
As a result, energy usage has been reduced by 68%, or 15 million kWatt hours, per year, and realtime data on energy consumption are now available. A first of its kind, the new Philips system not only makes the garages brighter and safer for WMATA’s 66,000 parking garage customers, but also removes over 11,000 metric tons of carbon dioxide from the environment. Philips monitors and maintains the lighting solution, which is financed through energy cost savings—thereby requiring no upfront capital costs. Furthermore, Philips provides spare parts and extracts material value from end-to-life components through recycling.
Managed Services in Healthcare
Philips Healthcare’s strategy is to enable healthcare providers to deliver lower-cost care with better outcomes through:
- Innovative business models, such as managed equipment services, and outcome- and solution-based models that avoid capital expenditure and focus on access to technology and functionality.
- Integral lifecycle management that provides options like upgrades, refurbishing, and reconditioning of hardware.
To date, Philips has more than 40 deep, long-term global partnerships with care providers, delivering such customer benefits as cutting MRI waiting times in half and reducing technology spending by more than a third, all while improving clinical quality. Two such alliances here in the United States—most recently with Westchester Medical Center Health Network (WMC Health) and, in 2013, with Georgia Regents Medical Center (GRMC)—represent unprecedented multiyear enterprise partnerships ($500 million and $300 million, respectively). Healthcare providers invest in Philips Health System’s leading imaging, patient monitoring, ultrasound and clinical informatics solutions, bridging products, consulting, and value-added services that include Philips Lighting and Personal Health as well. Under a unitary payment structure, Philips assumes the risks and accountability for the ownership, management, and maintenance of the medical technology.
Refurbishing Imaging Systems
Refurbished healthcare products offer medical facilities access to high-quality systems within budget. They also enable Philips Healthcare to reuse vital components, driving circular economy value creation.
In Best, Netherlands, we refurbish our MR, interventional X-ray, surgery, and CT equipment. In Cleveland, Ohio, and Bothell, Washington, we refurbish our PET/CT and SPECT scanners, and our ultrasound equipment, respectively.
Sold under the Diamond Select program, Philips’ refurbished systems are used products that perform as if they were new; the same warranty conditions also apply. Our goal is to optimize the reuse of components while maintaining high-quality standards.
The establishment of refurbishment business allows Philips to optimize the collaboration between its design (R&D), production, and refurbishment groups. With reuse in mind, the design and development approach will be enhanced in order to reenter a maximum amount of preowned product elements into the production process once their first lifecycle ends.
Refurbished products are sold for 60% to 85% of the equivalent new system price. Philips’ share in the Original Equipment Manufacturers (OEMs) refurbished equipment market is about 25%.At Philips, designing and delivering innovative solutions for a changing world is our mission and our passion because we believe the future can not only be different, it can be better.
[Editor's Note: This article originally appeared in Achieving a Circular Economy: How the Private Sector is Reimagining the Future of Business.]