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Business Partners for Win-Win Growth

Global Procurement & Procurement Staff

For the effective management of its vast network of suppliers, LG Electronics groups its business partners into “direct suppliers,” who provide the raw materials and parts used for manufacturing products, and “indirect suppliers,” who provide services and other products such as advertisement and IT services. The Procurement Center is in charge of managing direct suppliers, and HQ’s General Procurement(GP) manages indirect suppliers.
In 2013, LG Electronics spent KRW 32.5 trillion in the form of direct purchases, and 76% of this amount, KRW 25 trillion, was spent in Asia including Korea. We conducted business transactions with over 1,000 suppliers in Korea and approximately 3,000 suppliers overseas, and made transactions of KRW 100 million or higher with more than 77% of them (approximately 3,000 suppliers). LG Electronics maintains a list of over 7,000 registered suppliers (existing suppliers included) as potential business partners. In 2013, we conducted business transactions with 40 new suppliers, including 11 Chinese companies.
In 2013, LG Electronics spent approximately KRW 1.2 trillion in Korea in the form of indirect purchases. We conducted business transactions with approximately 1,000 suppliers, and close to 50% of our suppliers made transactions of KRW 100 million or higher with LG Electronics. HQ’s GP collaborates with individual subsidiaries on managing indirect purchases made at overseas subsidiaries, and this system is being extended to more subsidiaries and business areas.
LG Electronics has established a purchasing unit at each of our major production subsidiaries. As of January 2013, a total of 2,010 employees (Korea: 866/Overseas: 1,144) are tasked with procurement. Since we established sustainable management as our corporate direction, we have strived for Win-Win Growth with our suppliers, and established dedicated business units in 2011 to renew our commitment.

Pro Amount Direct Purchases

Amount and Percentage

Philosophies and Principles for Win-Win Growth

LG Electronics established “3 Philosophies and 5 Principles for Win-win Growth,” and makes diverse efforts, such as making the information available via our win-win growth website, to ensure that all our employees from procurement and related departments fully understand our philosophies and principles for win-win growth and put them into practice.

Support Programs for Win-Win Growth

LG Electronics implements differentiated support programs to help our suppliers acquire world class competitiveness in quality, production, and technology. Also it continues its efforts to strengthen suppliers’ capabilities in the next generation of technologies. And LG Electronics makes continuous efforts to ensure the financial stability of our supplier’s by providing direct/indirect funding support and improving payment schedule/period and provides training and HR support to 1st tier and 2nd tier suppliers. LG Electronics intensified its drive for Win-Win Growth through internal process innovation and established a wide range of programs to promote communication with suppliers.

Read more_ ‘Support Programs for Win-Win Growth

COMMUNICATION WITH SUPPLIERS

- Open dialogue with suppliers

Through various communication programs, LG Electronics provides encouragement for suppliers and listens to their opinions and challenges, while also guaranteeing transparency in all business transactions.

< Suppliers Communication Programs >
Programs Operation Cycle Details
Supplier Portal Opened Convenient online communication with LG Electronics (inquiries and suggestions on procurement transactions) is available with all relevant systems integrated
New Supplier Registration System Opened Companies can apply to become a new supplier for LGE using this system, at which time they will be automatically connected to LGE’s purchasing personnel after an automatic screening process.
Supplier Suggestion System Opened Every supplier’s suggestions on work process improvement will be taken into account for R&D, general management activities, and mutual growth.
Suppliers’ Satisfaction Survey 1/ Year Surveys on LGE’s overall capabilities in such areas as purchasing, product quality, R&D, and design will reveal any potential problems.
Evaluation & Awards for Existing Suppliers 1/ Year Incentives and penalties will be imposed by regularly evaluating each existing supplier’s business results and transactions.
Global Suppliers Day 1/ Year LG Electronics will share its vision and achievements with its top 300 suppliers, LG affiliates, and LGE’s major executives and purchasing personnel.
Procurement Executive Council 1/ Quarter As the top organization to make decisions on purchasing, the committee evaluates suppliers, reviews satisfaction surveys, and examines ways to support business partners.

- Supplier Grievance Process

LG Electronics offers a supplier grievance reporting channel on the corporate website (www.lge. com) and the Win-Win Growth website(www.lgesuppliers.com/winwin) to gather supplier complaints and grievances, and to address the issues. We commission a third party assurance agency to conduct supplier satisfaction survey on business transactions and Win-Win Growth programs to gather frank feedback, promote communication, and effectively resolve supplier grievances.

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