POSCO forms close ties with suppliers
By Kang Seung-woo
While basking in the spotlight as one of the top players in the global steel industry, POSCO has pushed for cooperative growth with its subcontractors as part of creating a healthy corporate ecosystem with small and medium companies.
In order to seek true mutual growth that includes lower-tier subcontractors, the world’s third-largest steelmaker has stood in line with the government’s efforts to support them, which has had relatively little benefit from the supposed win-win cooperation program.
The company operates the program through all fields of business including financial support, technological partnership, purchase and sales cooperation and education and training under the POSCO Family win-win cooperation motto of 3T, or “Trust, Together, Tomorrow,” strengthening support to not only primary subcontractors but also lower-tier partner companies.
“So far, the win-win cooperation program between major companies and smaller ones have just been focused on the first-tier subcontractors, so POSCO will beef up its efforts to lend more support for lower-tier subcontractors,” Chairman Chung Joon-yang said.
POSCO, a leading player in the cooperation between large and smaller companies, announced measures to stand up for distressed lower-tier subcontractors in June 2010.
The steelmaker patched up contract conditions to enable unit prices from second- to fourth-tier partners to be adjusted when those from first-tier subcontractors are altered to help them benefit from the new tariffs. In addition, research and development (R&D) support and free use of research laboratory equipment are offered to strengthen the technology and competency of the human resources in those companies. When first-tier subcontractors support the win-win cooperation program for the lower-tier counterparts, POSCO provides incentives to the supplier relationship management.
The firm is also active in improving technology and human resources.
In a bid to support the growth production from subcontractors, the steel company last year formed a consortium with 20 partners including six second-tier firms and set up a 1 billion won ($881,000) fund with the Ministry of Knowledge Economy with 600 million won from POSCO.
In addition, it opened its Techno Partnership to lower-tier subcontractors in 2011.
The Techno Partnership is a customized technology support program to activate regional economies and improve technology competitiveness of small- and medium-sized enterprises (SMEs) and those who participate in obtain a wide range of support including diagnosis, advice and education relating to technological problems in products and the production process from the best specialized personnel possessed by the advisory group as well as support for test and research facilities usage and solutions for onsite problems. As of November 2011, POSCO agreed to the partnership with a total of 36 lower-tier subcontractors.
In terms of financial support, it currently operates various programs such as the Win-Win Guarantee Program, Win-Win Cooperation Special Fund and POSCO Partner Assistance Fund with a budget of 730 billion won to help solve financial difficulties and support the liquidity of mid- and small-sized businesses.
What stands out more is POSCO’s efforts to assist SMEs have been relayed by its primary partners, as they have joined the win-win cooperation program including a benefit-sharing system with their subcontractors, becoming a role model for mutual growth between large companies and smaller counterparts.
The system, introduced in 2004, involves sharing profits that occur when a SME completes a joint assignment with POSCO based on its ideas on extending the life of a facility, cutting costs and localizing imported items.
As a reward for efforts to develop mutual growth activities, the steelmaker awarded high-performing primary subcontractors in November last year at the POSCO Family Mutual Growth Festival. It was divided into six sessions including management innovation, technology cooperation, mutual cooperation, and results sharing, as well as the newly created session for cooperation between small- and medium-sized companies.
“This year was meaningful in creating the framework for symbiotic development, going beyond mutual growth with small and medium enterprises,” Chung said.
“I will ask all of you to help POSCO Family’s mutual growth activities to lead the cooperative growth between large companies and SMEs and eventually contribute to the competitiveness of the local industry.”
Meanwhile, POSCO became the first company in Korea in April last year to expand the fair trade compliance program (CP) to its second-tier partner companies, strengthening the firm‘s differentiated mutual growth activities including fostering promising SMEs into global middle standing companies. It has operated the CP since 2002.
In addition, it is helping to start up venture businesses, suggesting a new model for mutual growth. It has gathered ideas for fresh enterprises from not only its executives and employees but others including college students, jobless young people and those from small- and medium-sized companies, looking to expand its fields beyond the steel industry.
The campaign for mutual growth is reflected by its chairman’s drive to help local venture firms grow, the company said.
“As part of seeking mutual growth, POSCO needs to look to a number of ordinary people as well as the company’s staff in coming up with ideas for new business,” he said.
In October, it announced that it will set up a 260 billion won fund to support mutual-growth with SMEs. Of the amount, 160 billion won will be used for profit sharing and 50 billion won will be operated by the Large and Small Business Cooperation Foundation. 30 billion won will be used to back establishment of venture companies, while 20 billion won is to help companies dealing with POSCO to develop into global companies.