CG Group on June 19 announced that it decided to make a package-purchase of maintenance, repair and operation (MRO) commodities for its 11 major subsidiaries starting on July 2, aimed both at enhancing the efficiency of its procurement process and cutting costs. It chose iMarketKorea, one of Korea's largest e-marketplaces, as the outsourcing company for the purchasing of MRO products.

Eight months ago, CG Group organized a task force to be in charge of integrating its MRO product procurement process. The task force eventually decided to offer, via B2B marketplace, its MRO package purchase for 11 of its subsidiaries. This will be expanded to all 64 of its subsidiaries later on.

Since e-marketplaces were first launched in Korea, large companies have used them by participating as shareholders. However, this marks the first time that a non-shareholder client company (such as CJ Group) has made large-scale product purchases via e-marketers.

iMarketKorea has over 270 client companies in which Hanwha Group is engaged as a non-shareholder. But the number of its subsidiaries placing orders to iMarketKorea is small.

Chang-Hwan Lee, director of the strategic purchasing team at CJ, said that "Innovating in the area of our product procurement system has been an important task for the group. Besides the benefits of cost reduction, this contract with iMarketKorea is significant in that procurement can be integrated into one process. Previously, procurement had been handled independently by our subsidiaries."

This procurement by 11 subsidiaries had been estimated at approximately KRW 50 billion annually, and estimates are that integration will cut costs by about 15% a year. CJ anticipates an increase in work efficiency through integration of the MRO procurement system into iMarketKorea. It had previously been managing 1,200 individual MRO delivering firms.

CJ Group and iMarketKorea are currently working on system linkage for the opening of an online purchase system scheduled for July 2. They are also at the final stage of negotiations in terms of selection of items and their price.

CJ's decision is expected to have a ripple effect on the product procurement practices of domestic companies. In contrast to countries like the US, which utilizes online marketplaces for 20% of total MRO procurement, the corresponding figure in Korea is only around 10% (sales in the domestic MRO market are around KRW 20 trillion per year). CJ Group's participation in e-marketplace is thus also expected to bring about changes in Korea's overall e-market business picture.