|
by Jeff Moad, MA Editorial Staff Posted on Friday, November 03, 2006 3:10:08 PM   | Abstract: | Online auctions drove a wedge between automotive OEMs and suppliers. Now the supply chain looks to recover through collaboration, not confrontation. |
Not long ago, large automotive manufacturers believed they had discovered the Holy Grail of supply chain efficiency: online auctions. Inspired by the dot-com bubble and convinced that auctions would significantly expand the global supplier base, increase supplier competition and dramatically drive down costs, General Motors, Ford and Daimler/Chrysler all poured tens of millions of dollars into online exchanges. The big three automotive OEMs invested an estimated $500 million into Covisint LLC, a joint venture that, among other things, featured online auctions and procurement tools. Ford sank an estimated $200 million into its own online procurement and auction project, dubbed Everest. Then the Grail sprung a leak. While many larger tier one automotive suppliers embraced the exchanges, thousands of smaller suppliers did not -- they were convinced that the auctions were little more than thinly-veiled attempts by the OEMs to play suppliers off against one another, drive down costs and erase supplier profit margins. Growth slowed and, a year ago, the big three OEMs split up the Covisint joint venture, selling the auction business to Freemarkets Inc. (later acquired by Ariba) and the messaging infrastructure business to software vendor Compuware Corp. Last summer, Ford announced it had shut down the Everest project, blaming internal change management and external supplier enablement problems. "Suppliers saw the auctions as a tool to be used by the OEMs to bring in bidders from Taiwan and China and drive down the price points of existing suppliers," says Kevin Mixer, research director at AMR Research Inc. in Detroit. "Finally the OEMs realized that what they were really auctioning off was the good will and relationships with their suppliers. The auctions damaged some supply chain relationships." Automotive partners are now attempting to undo some of the damage by launching a wide range of technology-driven initiatives aimed at supply chain collaboration rather than confrontation. Intended to streamline a wide range of processes, including supply chain visibility, product development and strategic sourcing, these initiatives -- unlike the divisive auctions -- are being mainly driven from the bottom up by suppliers. The Automotive Industry Action Group (AIAG), for example, is a trade group undertaking a series of technology-based standards initiatives, which are supported by automotive OEMs, suppliers and technology vendors. The Inventory Visibility & Interoperability (IV&I) Project is the one that's farthest along. Intended to improve inventory visibility throughout the supply chain, the IV&I Project will allow suppliers to use any software tool that complies with the standard to get online access to inventory-level information at customer and supplier sites. Currently, many OEMs and some tier one suppliers require that their suppliers use a specific software tool such as the Supply Visualization tool from QAD Inc. (Carpinteria, CA) to track manufacturing inventory levels. Unfortunately for suppliers, the tools and processes required by OEMs for tracking inventory are different. So suppliers are forced to support and use multiple tools and processes to keep on top of inventory levels. Different Strokes
That leads to mounting inefficiencies as supply chains lengthen. According to a recent study by AIAG, useful supply chain visibility information, on average, takes a week to trickle through each tier in the supply chain, says Pat Snack, a General Motors executive working on the IV&I Project. It estimates that the IV&I Project could save automotive manufacturers and suppliers $255 million each year by eliminating those inefficiencies. Page : 1 2 3 ... NEXT |