in both personal protective equipment and scanning technology. Welcome to the employees of Metrologic Instruments, Inc., a leading manufacturer of data capture and collection hardware and software, and Norcross, a leading manufacturer of protective and safety equipment for the fire service, utility and general industrial worker segments. Metrologic will integrate with Honeywell Imaging and Mobility, which was formed earlier this year with the acquisition of Hand Held Products, Inc., providing compelling opportunities in rapidly expanding sectors such as retail, industrial, and healthcare. Norcross will join Honeywell Life Safety creating an exciting adjacency with our Fire Systems and Gas Detection businesses and sharing common distribution channels.
Doing a great job for our customers every day also makes all the difference in the world. It’s much easier to ask for new business from a satisfied customer than it is trying to search out new customers. That’s why we’ll continue to track Quality and Delivery metrics for all manufacturing and service sites, and recognize employees and teams who have done something really exceptional to deliver service to the customer through our weekly Chairman’s Award for Everyday Heroes and quarterly Team Performance Award programs. You can read about our top Quality and Delivery sites for the second quarter as well as our Chairman’s Award winners and Team Performance Award recipients on Inside Honeywell.
In Productivity, our Procurement function continues to reduce the number of suppliers, by 4 percent so far this year, and we’re gaining momentum. We’ve also increased our purchasing in emerging regions by 6 percent year-over-year. Our eSourcing initiative, which evolves our sourcing practices with electronic tools to eliminate errors and shorten time spans for competitive bidding, has taken off and demonstrates a One Honeywell mindset in Procurement. To date, Honeywell has completed eSourcing events resulting in $40 million in annualized savings.
Cash is what gives us the freedom to grow. We can’t repurchase shares, do acquisitions, or pay dividends unless we’re generating cash. High-quality earnings, controlling capital expenditures, and reducing working capital are the drivers of strong free cash flow. To meet our $3.4 billion cash goal for 2008, we must continue to reduce working capital. We need to continue pushing for at least a 10 percent improvement in working capital turns each year. We also need to continue improving our Sales, Inventory, and Operations Planning processes. Reducing working capital, while still exceeding our customers’ expectations for quality, delivery, value, and technology is a reflection of improved operating practices and makes us a better company. Every Honeywell employee can have an impact on working capital in some way, and I need everyone to do their part.
Each year the Premier Achievement Awards remind us that People are the ultimate differentiator. This year’s winners are terrific examples of how having the right people focused on doing the right work can make all the difference. We will commemorate the accomplishments of the 2008 winners next week with a celebration in New York City. This year’s winners are Tom Hart, John Todd, and John Zimmerer of Aerospace; Tim Darkes and Joe Mosher of Automation and Control Solutions; Josh Ensign and David Paja of Transportation Systems; and Jack Boss of Specialty Materials. Congratulations!
Our Enablers – Honeywell Operating System (HOS), Functional Transformation (FT), and VPD – are critical to driving efficiency and service quality, and bringing world-class products and services to market faster and more cost effectively for our customers. When we think about doing a great job for customers every day, we never want to forget the significance of our manufacturing operations and the work being led by our plant managers. It’s why HOS is important. Getting HOS done right will create a 20-year competitive advantage for us. We now have 97 sites in 20 countries that have started the HOS full-scale deployment process. We are confident that by the end of 2008 we will have deployments addressing more than 70 percent of our total manufacturing cost.When we reach 100 percent, it’s going to be impressive. While the initial focus of HOS remains on manufacturing, it’s encouraging to see some excellent application of these principles in non-factory environments, such as application engineering, customer integration centers, and distribution centers. We need to continue to accelerate our efforts in this area.
In addition, we continue to utilize our Health, Safety and Environmental Management System (HSEMS), which is integrated directly in HOS. Since the HSEMS was launched in 2005, our safety incident rate has decreased by nearly 39 percent and our annual environmental incidents per dollar of revenue have decreased by 44 percent. These are strong results, but they must be sustained and continually improved. Health, Safety and Environmental excellence is an important part of how Honeywell does business as we grow throughout the world.
Functional Transformation is like HOS for our core functions. Delivering quality services to the businesses more efficiently and at lower cost is essential to our future. To accomplish this, HR is changing the reporting structure of center of excellence (COE) employees from the businesses to four centralized COE organizations to eliminate duplication of work while increasing quality and speed. In addition, HR administrative work is moving to an expanded Services organization that will free HR generalists to focus on strategic support for key business leaders. Real Estate is on track to achieve $26 million in annualized savings this year through more efficient use of space, while absorbing $16 million in increased cost from growth. Key accomplishments include opening an office in Hyderabad, India, which enables further growth in the region, and announcing the upcoming consolidation of offices in southern California to create an engineering COE in Los Angeles. Meanwhile, IT continues to implement SAP with five new sites enabled, moving toward the goal of having half of our business on this enterprise resource planning tool by year’s end. Thanks to rigorous deployment plans, Honeywell is slightly ahead of our overall transformation savings plan for 2008.
VPD helps us recognize and implement new ideas to strengthen our New Product Introduction (NPI) process by developing high-value offerings faster. Success depends on our ability to leverage VPD across the functions, establish cross-business collaboration, and increase our knowledge sharing. Partnering with Specialty Materials’ Procurement and Legal functions, UOP implemented a standardized process streamlining the execution of research and consulting agreements, a key activity in NPI. The process is expected to reduce the cycle time by 40 percent and improve user satisfaction by eliminating rework. ACS is reducing the thousands of electronic components used in product development to a standardized list from a few preferred suppliers. This initiative will make selection during product design faster, and lead to better cost leverage and improved supply chain efficiency. While these are examples of good progress, there is much more that we can do to understand what our customers want and deliver it with greater speed.
Each of our Enablers is built on our Six Sigma foundation. That’s why it’s important for all employees to understand the tools and how to use them in their daily work. We are making good progress toward our goal of Green Belt certifying 1,500 employees this year. So far, 73 percent of employees have met their Six Sigma requirements, but we need that number to be 100 percent. If you haven’t been through classes, review your requirements with your manager and enroll as soon as possible. If you’re a new employee, check with your manager to determine your Six Sigma requirements and ensure you’re working toward completing your training. Six Sigma is helping drive a One Honeywell culture united by common processes and systems, and is an important way the company can improve and grow.
deployed our Humanitarian Relief Fund immediately following the devastating earthquake in China's Sichuan province. Honeywell donated $1 million and to date, employees have donated an impressive $285,000 to assist those who have been affected in the region. Honeywell is actively working with Operation USA and our local resources in China to identify specific reconstruction projects. I recently was invited by the White House to join a delegation visiting the region. We were the first non-Chinese delegation to visit the area. It was a powerful experience to see the devastation and meet with local and national leaders to discuss China’s detailed plans to rebuild. Thanks to the generosity of our employees, Honeywell will be able to provide critical assistance in the communities that need it most. It’s been terrific to see the outpouring of employee support.
This summer, Honeywell will welcome 28 teachers from Bergen and Hudson counties in New Jersey to the first-ever Honeywell Institute for Ecosystem Education in partnership with the National Audubon Society. They will investigate the forested regions of the New Jersey Highlands and freshwater regions of the Hackensack Watershed, and develop methods for integrating natural systems studies into their curriculum. This new program complements other summer science programs including SciGirls in Baltimore, MOST in Syracuse, and Honeywell Educators @ Space Academy. This year, the Space Academy program awarded scholarships to 345 teachers from 18 countries and 45 states.
The Honeywell-Nobel Initiative events were a resounding success earlier this year with visits to three technology and engineering universities in Beijing, China; Pune, India; and Brno, Czech Republic. The program has now visited 11 campuses and touched thousands of students and faculty around the world. Nearly 2,500 students have signed up to apply for Honeywell Innovators scholarships or just stay in touch about career or business opportunities. Later in the year, the Honeywell-Nobel Initiative will travel to Hyderabad, India; Monterrey, Mexico; and Tianjin, China, to enrich and inspire even more students in their pursuit of scholarship and innovation.
Thanks for all your hard work in delivering another terrific quarter. The only way we can continue to perform like this is to have all 125,000 of us around the world working together with a common goal of making the company more successful. Whether you’re implementing HOS, going after FT, driving VPD, looking at acquisitions, or working with the customer, you have to be thinking, “How can I make this better?” I know I can count on you to drive great results in the second half of the year.
Thank you,