|
by Jeff Moad, MA Editorial Staff   | 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. [Click to continue] |