|2001 Management Briefing Seminars index|
English, who became the head of Covisint May 1, addresses the Management Briefing Seminars this morning.
Generally, automakers and Tier 1 suppliers have been the primary users of Covisint since it first went live in October 2000. Suppliers in the lower tiers say they have had little or no contact yet with Covisint.
Covisint was conceived and developed last year by Ford Motor Co., General Motors and DaimlerChrysler. Nissan, Renault and Peugeot later joined as minority equity partners.
So far the bulk of the transactions on Covisint have been initiated by the automakers that are using it primarily for procurement.
For example, GM said this morning that it has pushed $96 billion worth of procurement through the exchange, primarily components purchased for the next several model years.
Some supplier executives still question the basic Covisint business model. Revenue from online auctions is unlikely to be enough to support the organization. Its success may be linked to supply chain management and collaborative engineering tools.
"I'm struggling to see this model work," one executive said.
Tier 1 suppliers generally view Covisint as one of many e-business tools at their disposal, and certainly not the only game in town.
"Covisint isn't the catchall, but we will participate in it," said Steve Hanley, vice president of Dana Corp.'s Modules and Systems Group. Dana was the first Tier 1 supplier to begin developing a private exchange to better collaborate with its own supply chain.
Gentex Corp., a supplier of self-dimming mirrors, has not yet joined Covisint as a registered member.
"We're still looking at it," said Kenneth La Grand, executive vice president and director of Gentex. "There could be some benefits."
La Grand said that he does not see any benefits at this time in using Covisint's auction capabilities. Gentex may find some use for engineering collaboration tools on Covisint, he said.
"But we would first evaluate the service and its cost," La Grand said.
Interior supplier Johnson Controls Inc. has been very vocal about its dual strategy — it will use Covisint where it makes sense and it is moving forward quickly with its own e-business initiatives. That includes three separate Internet portals, one each for OEM customers, its own supply chain and its employees.
"If our customers want us to channel through Covisint, we will," said John Waraniak, director of e-business speed at Johnson Controls. "But some of our customers, such as BMW and Volkswagen, will not use Covisint, so we must have a dual strategy. No exchange can ever get 100 percent of the spending in any industry."
Johnson Controls has used Covisint's Virtual Project Workspace, a Web-based tool designed for product collaboration and electronic sourcing. But the supplier also has chosen a technology company, MatrixOne Inc., to provide it with collaboration tools to use with its supply chain, Waraniak said.
DuPont Automotive, a Tier 1 supplier of paint, has registered as a Covisint user. DuPont is looking for specific tools, such as demand forecasting, said Terrence Cressy, DuPont director of communications and government affairs.
"Some of our businesses have, in the commodity area, participated in auctions on Covisint," Cressy said. But DuPont uses multiple marketplaces, including a plastics exchange.
"We hope that all of these exchanges will learn to coordinate," Cressy said.
John Sanderson, CEO of Siemens Automotive Corp., supports the idea of online auctions.
They make purchasing of commodity-type items more efficient, but suppliers need guarantees that the competing bidders are legitimate and have the engineering and manufacturing capability needed for the product, he said.
"As long as there can be an absolute guarantee, I think online auctions can be very efficient," Sanderson said.
Siemens has operated two pilot programs on Covisint using its collaborative engineering tools.
Then there are those who want to talk to Covisint but get nothing but silence.
Matt Coffey, president of the National Tooling and Machining Association, which represents toolmakers working throughout the automotive supply chain, said he spoke with Covisint representatives a year ago seeking information he could pass on. He has not yet received it.
So far, he said, those toolmakers have had little input from Covisint, although they will need to access engineering data for parts.
"I don't think they've even approached the small suppliers yet," Coffey said. "The focus of the industry so far has been much more on the larger commodity suppliers, rather than the engineering."
Those contacts likely will step up, though, in light of Delphi's announcement that it will force its suppliers to use Covisint.
"There's nothing like a requirement to get something all the way through the chain," Coffey said. "Often, change has to be forced down the supply chain."