Value-Chain Commentary -- Covisint Just One Shop In The Mall

Dec. 21, 2004
The online auto exchange will have to compete with other 'stores' to win suppliers' business.

It was supposed to be a one-stop shop for automakers and their suppliers. Covisint, the online business-to-business marketplace that connects suppliers to automakers, instead looks to be just another store in the mall. Developed by DaimlerChrysler, Ford, General Motors, Nissan, Renault, Commerce One, and Oracle, the e-business exchange was billed as a tool that would revolutionize the way business was done. At the site, auto suppliers pay the exchange to participate in auctions, selling their products to automakers. Other Covisint tools aid in product development and procurement. Think of it as a place to go to get all your shopping done. Apparently, the idea has not been as attractive to suppliers as originally hoped. Many automotive suppliers see Covisint as just one part of their e-business strategy. "We believe our participation in Covisint will complement our own initiatives and represent another important tool in our ongoing efforts to eliminate duplicate efforts in purchasing and vehicle development processes," says Joseph Magliochetti, chief executive officer of Dana Corp. The use of other business-to-business exchanges is also part of that strategy. "Of course, there are many other exchanges under way," he says. "Some articles are suggesting that there may eventually be as many as 20 or 30 exchanges that we will need to connect to in order to advance product development with our various customers." Participation in an online exchange has to demonstrate value for all parties that participate in it. The bottom line is that suppliers don't want to be the only ones doing the giving. That opens up the field for competition. "By definition, an exchange involves providing one item in return for another," Magliochetti says. "So it stands to reason that any worthwhile exchange will need to provide value to all participants -- not just its architects." ArvinMeritor Inc. recently had reporters participate in a mock online auction to demonstrate part of its e-business strategy. Competing to sell the company our product -- a coffee mug -- each of us placed several bids, watching the status of the auction on our respective computer screens in real time. The company-hosted auction was one example of how ArvinMeritor would do business over the Internet. The auto supplier said it considered Covisint as a single component to its strategy. That strategy also includes utilizing Covisint's competitors and taking the "do-it-yourself" approach by hosting its own auctions. By no means is Covisint a forgotten fad, though. Last month, Peugeot SA bought a stake in it with the hopes of saving as much as 15% on some purchasing lines. Delphi Automotive Systems announced that it would launch a supplier portal hosted by the e-business exchange to enhance communication and data management with more than 5,000 global suppliers. The idea of having one destination to get everything needed is an exceptional one. But how many of us do all our shopping at one store? Although some stores offer everything from food to clothes to furniture, rarely do we shop at one exclusively. Suppliers have a similar attitude. E-business is a way to enhance business, not revolutionize it. They will use several tools to create value. As such, Covisint will have to compete with the other stores in the mall to win business.

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