Many dot.coms and online exchanges have disappeared as quickly as they have appeared. But with the support and ownership interest of the Big Three automakers, Covisint (www.covisint.com) might be an exception to the rule. The comprehensive exchange has slowly developed by integrating the most popular aspects of fledgling dot.com exchanges. But, the toughest battle may be getting all the parts suppliers on board.

Professor Fariborz Ghadar, William A. Schreyer Chair of Global Management, Policies & Planning and Director of Center for Global Business Studies, The Smeal College of Business Administration at Pennsylvania State University (www.smeal.psu.edu) told Advanced Manufacturing, "The introduction of such comprehensive exchanges makes sense, and will just be a matter of time until the right alignment of tools is provided, proven, and accepted in order to attract the necessary amount of players. With product life cycles decreasing and development costs increasing, it is imperative to have a dependable and productive means to keep products competitively priced for the consumer."

Mike Wujciak, Vice President, Global Automotive Group, Cap Gemini Ernst & Young (www.cgey.com) says that Covisint may be the tool to provide that answer for the automotive industry, "OEMs need to look beyond procurement issues. With Covisint being a cafeteria-based program, firms that are hesitant to participate in fear that they will be beat-up on price need not participate in the procurement aspect to benefit from the other tools. The people running Covisint come from OEMs and auto manufacturers alike, so they understand the complex automotive supply network."

Above: The Covisint trading exchange is linking up with specialized firms such as www.powerway.com (left) and www.supplysolution.com to leverage their e-business gains.

Tools of the trade

Obviously, when embarking on a new means of operation, the customers which in Covisint's case are primarily the automotive components suppliers need to know what benefits the exchange will provide to actually help them improve upon existing operational procedures. In addition to the highly publicized auction-format procurement functions, Covisint uses real time services powered by Supply Solution (www.supplysolution.com) providing the user with powerful and comprehensive supply chain management solutions including the ability to seamlessly interface with various tiers and quality assurance documentation management provided by Powerway (www.powerway.com). The overall intent of the system is to clean up the product development process.

Supply Solution entered into a partnership with the new exchange in March to offer its real time services so that an automotive components producer (ACP) can effectively and realistically monitor the needs of its specific components within the automotive supply chain. Essentially, this Web-based supply chain application enables buyers and sellers alike to communicate their inventory levels, consumption, forecasts, and other key information to each other in real-time. Undoubtedly, if this tool is used to its potential, such an offering could take a lot of costly and unnecessary guesswork out of inventory management and part production planning processes.

Covisint also uses similar real-time tools to manage and maintain auctions that can be structured from the buyers end or the sellers end. A recent DaimlerChrysler press release says that such transactions have been seamless even on large transactions like their recent award worth over 3.5 billion Euros.

Powerway, known for its PPAP and AQPQ documentation processes, is developing and offering a comprehensive online service that once implemented and integrated into the production process, promises to help streamline the documentation process of part tracking and approval. Powerway's senior vice-president for corporate strategy and marketing, Steve Desutter, says: "The goal of Powerway is to provide the Covisint users tools to shorten the product development time using standardization of processes throughout all of the tiers involved in providing a specific part or system. Essentially, the requirements and specifics are easily established and modified so that anyone involved in the process has a strong understanding of what is necessary and expected in terms of documentation."

Keys to success

Industry analysts agree there are a few crucial aspects if Covisint and any other dot.com exchange for that matter intend to be fruitful in the long-term. The service must be cost effective, stable and secure, and provide the user with a significant and useful offering that can measurably improve upon or enhance existing methods. If Covisint is truly able to meet the many goals that it has set forth (Figure One), the firm should see long-term success and acceptance.

But to meet these goals it will be necessary for the exchange to convince everyone within the complex and comprehensive automotive supplier chain that Covisint offers valuable benefits to everyone involved in the process. That will take time, says Dan Jankowski, Covisint's vice-president of corporate communications. "Although the organization goals will not be immediate, as more people come on board the exchange will be able to better eliminate the burden of mundane and / or non-essential tasks that currently clutter the automotive supply chain."

Jankowski says the firm would be able to complete the tasks ahead by offering numerous tools each tailored or meeting specific needs of industry players in an open yet secure and reliable Web-enabled environment.

At what cost?

Probably the biggest hesitation that automotive component suppliers have in joining Covisint is the fear that the exchange will be used primarily as a tool to drive down the already low profits through the use of auctions and more widespread bidding wars.

Many components suppliers say they won't join until they have no choice if they want to continue supplying the automotive companies. Covisint will also have to overcome the bad experiences that some component suppliers might have had dealing with similar online ventures such as large-scale online autions.

Ian Barrie, the president of Advanced Precision (www.adv-precision.com) located in Mississauga, Ontario, says those models are seen as a tool to force supplies to lower prices.

After careful consideration Advanced Precision decided not to join Covisint. Barrie says that most seasoned upper-Tier suppliers have been through various cost reduction programs essentially playing the cat and mouse game to hold off as long as possible without giving more than absolutely necessary to retain the business.

"The electronic tools provided by Covisint are useful, but it is how these tools are expected to be applied. If these tools were truly applied to reduce the cost of the purchasing process and / or the manufacturing process and there was trust between the suppliers and customers there could be an expectation of cost reduction," says Barrie.

Much like a cable television system, Covisint offers the basic, enhanced, and premium services as well as some pay-per-use options, says Covisint's Jankowski. He says that any firm that performs automotive work should consider trying out the service to see if it works for them.

Contributing editor Peter Fretty writes regular technology features for Advanced Manufacturing magazine. You can reach him by email at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

SIDEBAR

B2B TOOLS

The key to successful Web involvement centres on the ability of a firm to effectively place complete and appropriate information into its online offering. SAQQARA, a San Jose, California technology applications firm offers what it calls information-rich enabling services.

Operating with the philosophy "you can't buy what you can't find," the firm has created specific tools to help firms "transform data into information-rich internet ready catalog formats that are accurate, complete and easily searched with tools that simplify catalog management and updates," says SAQQARA vice president of marketing, David Spenhoff.

Furthermore, as a B2B tool with a product focus on primary manufacturers, net marketplaces, and distributors, SAQQARA product manager Kyle McNabb says that the offering is easily geared toward specific target audiences including engineers, service personnel, and individuals within the sales and distribution networks. Since SAQQARA does not take ownership of the end product, it is easy to allow distributors to integrate the Web-enabled catalog with its own online system, thereby allowing easy interaction between systems.

Howell Evans, information systems manager for Molex, based in Lisle, Illinois is responsible for its multi-lingual website therefore having first-hand experience with the SAQQARA product offering. Molex is the world's second-largest manufacturer of electronic, electrical and fiber optic interconnection products and systems. With 19,000 employees in its product development centers, 54 manufacturing facilities and sales offices on six continents, the ISO 9000 certified firm needed a way to effectively communicate its product offering to both internal and external customers.

According to Evans, "With the capability of producing over 100,000 different parts, it is very difficult for a customer to find the part that suits their specific application. Auspiciously, the SAQQARA product offers the customer a parametric search ŒStep Search' providing a basket of parts that fit the need. A key feature is the fact that the program will not guide the customer to a part that is not a stocked component. Therefore, it allows for the proper manipulation of the product line limiting stagnant parts."

Above: Molex Web publisher Annelise K. Madsen uses authoring tools that help improve accuracy of information.