Luring the big fish: Automaking's biggest supplier exchange morphs itself from an auction house into the hub of the industry's sourcing transactions - Supplier Business - Global online business-to-business, supplier exchange - Internet/Web/Online Service Information

Automotive Industries, Feb, 2002 by Andrea Wielgat

"What Covisint needs to say to them is, 'if you have an e-procurement system already, if you have a system you use to manage and transact procurement, then we'll just be that for you and we'll help you not have to invest all that money in a procurement system'," Prouty says.

He adds that the whole purpose of Covisint is not to replace the procurement groups with the automotive companies but to give them tools to make them more efficient.

Is Covisint Making a Difference?

English says that Covisint is already bearing fruit and points out that DaimlerChrysler, for example, saved 30 to 40 percent on tooling for two future vehicle programs and Ford shaved $1.5 million off the cost of a $5 million building project.

"Covisint delivered to us what they should have delivered in 2001," says Bo Andersson, GM vice president, worldwide purchasing, production control and logistics. "Now the focus is on how can we continue to develop generic tools that all the customers can use, because if you look at the very foundation of Covisint it is there to be an industry portal."

A major part of the industry is suppliers who, English says, have also reaped the benefits. Key among those benefits is a transparency suppliers have never seen before, along with real-time access to OEMs.

"Real time to their acceleration schedules so you can react immediately under the concept that time is money," said Delphi Automotive Systems CEO J.T. Battenberg in late 2000, as Covisint was just beginning to come online.

MSX International's Vice Chairman and Chief Executive Tom Stallkamp agrees that Covisint and other e-procurement sites are a valid tool but he warns that it is just one of many tools that should be used in modern procurement.

"I think they are often used for info gathering instead of placement of parts," Stallkamp says, "I think we have to be cognizant that people are participating in auctions to see what other people are doing."

For the Tier 2 and 3 supplier community, Covisint is a chance to inexpensively play catch-up with larger companies by leasing the applications found within the Solution Suites. This is where Covisint should concentrate its marketing, say experts. The biggest threat to Covisint is that it hasn't told suppliers why they should be using it.

"One of the issues with Covisint," Prouty says, "is that they're still struggling to come up with a real value proposition that covers everyone."

For AT Kearney's Hoffecker e-procurement is here for the long term, but still should be considered in its infancy. There is much more that companies can do, he says. What Covisint and its contemporaries do right now is just the tip of the iceberg.

"What some companies did and many in the press did was just turn this into something that was bigger than big with immediate results," Hoffecker says. "The reality is like almost anything you implement in a business. It takes time and it takes other people doing it and examples and hard work and a couple of years to make things happen."

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