LG is expanding its win-win cooperation system, which previously focused on first-tier partners, to include second- and third-tier suppliers. The initiative aims to enhance the stability of payment collections for suppliers and broaden technical and financial support to establish a sustainable supply chain ecosystem.
On July 6, LG held a signing ceremony for the "LG-1st, 2nd, and 3rd Tier Supplier Win-Win Agreement" at the LG Science Park in Magok, Seoul, with the Fair Trade Commission and representatives from first, second, and third-tier suppliers. The event was attended by approximately 170 participants, including Fair Trade Commission Chairman Joo Byeong-ki and CEOs from seven LG affiliates, including LG Electronics, LG Display, LG Innotek, LG Chem, LG Energy Solution, LG Household & Health Care, and LG Uplus.
The core of this agreement is the expansion of the win-win payment system. This system ensures that payments made by large corporations to first-tier suppliers are reliably passed down to second-tier and below suppliers. LG plans to maintain a 100% cash payment ratio for first-tier suppliers and increase the "win-win payment rate"—the percentage of payments reaching second-tier and below suppliers—to over 10%, the highest among domestic corporate groups.
LG will also provide incentives such as regular evaluation bonuses and financial support to first-tier suppliers utilizing the win-win payment system. Since second-tier and below suppliers may face delays or non-payments, ensuring payment stability from the primary contractor is essential to reducing supply chain risks.
Industry experts believe that if the win-win payment system expands to second- and third-tier suppliers, it will significantly reduce uncertainties in payment collections based on the primary contractor's creditworthiness, thereby alleviating financial burdens on suppliers.
Last year, LG's seven affiliates paid approximately 13.5 trillion won to first-tier suppliers through the win-win payment system. If a similar amount is disbursed this year, around 1.3 trillion won is expected to be passed on to second-tier suppliers based on the creditworthiness of LG affiliates.
LG also plans to allocate over 10% of its approximately 900 billion won growth fund to support second-tier and below suppliers. Additionally, LG will open a welfare mall for employees of partner companies, operated similarly to those for LG affiliates, to assist suppliers with relatively weaker welfare benefits.
Support for technological competitiveness will also be strengthened. Since 2019, LG Electronics has provided technology and funding for smart factory transitions to over 250 suppliers. LG Display operates joint research and development and joint patent application programs with its suppliers, while LG Innotek offers training centers to enhance AI capabilities and production technology education for suppliers.
LG Chem provides free analysis and testing processes at its technology research institute and CS campus, and LG Uplus supports consulting costs for small suppliers seeking ISO and Inno-Biz certifications. LG Household & Health Care has incorporated payment-linked contract procedures into its internal electronic contract system, allowing suppliers to naturally request linkage conditions.
Chairman Joo Byeong-ki of the Fair Trade Commission stated, "The competitiveness and sustainable growth of large corporations are completed on a healthy industrial ecosystem that grows together with suppliers. I hope the win-win culture that starts at LG will deeply take root among first, second, and third-tier suppliers."
Ha Beom-jong, head of LG's Management Support Division, said, "Through this win-win agreement, we will promote the expansion of the win-win payment system, increase support for second-tier and below suppliers, and strengthen the foundation for fair trade. We will also expand the scope of win-win cooperation beyond business relationships to include local communities and youth."
* This article has been translated by AI.
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