Siemens is planning cost-cutting of up to €6bn over the next two years.
The savings are part of the 'Siemens 2014' programme, which also sees the German industrial giant aim to become less bureaucratic and more competitive.
"Relative to competitors, we did not achieve the targets for new orders and profitability we had set our sights on" — Peter Löscher
Procurement will generate the lion's share of the €6bn of efficiencies, according to Siemens CEO Peter Löscher.
"We expect procurement to contribute €3bn to earnings in the coming two years, particularly through the greater integration of procurement and supply chain management with engineering and R&D, for example, to improve design-to-cost," he said on Thursday.
Siemens expects to save another €0.5bn over the next two years by optimising its research and production structure, and streamlining processes and project management.
Improving its marketing set-up, doing away with duplication and cutting bureaucracy will also contribute to the cost cutting.
"We will reduce the complexity of our internal processes and regulations and give our businesses greater entrepreneurial freedom and more time to focus on customers. So, we will significantly reduce the number of directives from corporate and sector headquarters for the global business and the regional companies," Löscher said.
The cost cutting was announced on Thursday, alongside the company's results for fiscal 2012.
"We achieved the second-highest earnings in our company's history. However, relative to competitors, we did not achieve the targets for new orders and profitability we had set our sights on," Löscher added.
Siemens's revenue for the year was €78.3m, up around seven percent compared with 2011. However, its new orders fell by 10 percent and profit dropped to €7.5bn, down from €9.4bn last year.