Auto exchange shifts gear for B2B

Car makers' online exchange has big plans for supply chain management.

Covisint, the business-to-business exchange for the car industry, last week celebrated its first birthday by detailing plans to move beyond online procurement and become an overarching supply chain management system. Firms in all sectors are watching Covisint to judge the success of B2B platforms.

Covisint has had a rough ride since it was formed on 25 February last year by General Motors, Ford and DaimlerChrysler. US regulators investigated whether Covisint constituted a cartel that could keep out smaller firms, before granting it approval. And since its launch, enthusiasm for online exchanges has been dulled by several closures, data privacy fears, and debate over whether such exchanges harm buyer-seller relationships. Covisint's failure to appoint a chief executive has also been noted.

At a London conference last week, Olaf Koch, e-business vice president at DaimlerChrysler, said, "Everyone says Covisint is not there because it has no chief executive. But we had to wait seven months for the [regulators] to let us create the 325 events we now have, and we have had over $1.5bn in transactions and 140 catalogues online."

Covisint plans to supplement its current online bidding system with its Virtual Workspace toolkit in the next two months. The environment will allow component makers and car-design teams to collaborate on new designs. Covisint is also talking to other car manufacturers about membership.

Koch added that efficiency rather than price-gouging is the most important aspect of exchanges. "The [car] industry was pretty much connected with tier-one suppliers but there were lots of different systems," he said. "That's what's driven us to one standardised platform to drive supply chain management with one transport technology and one backbone. It's cheaper, simpler and more flexible."

According to Ford research, the £100 it costs to process a purchase order can be reduced to under £10 online. Analysts have predicted Covisint could cut up to £2,000 of costs from a £13,000 vehicle. Covisint is considering a flotation this year, and has said it may offer its tools to other business sectors.

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