|Advantages of offering a single portal
DaimlerChrysler, one of the founding partners of Covisint, is evaluating whether Covisint has the interest and the capability to host its single portal, said Jim Carleton, director of DaimlerChrysler's e-Extended Enterprise.
"We're looking at their technology, their timeline for some of the capabilities that we want and those kinds of things," Carleton said. "It's a workshop right now. They've got to answer certain questions like any business relationship. Covisint has to tell us whether it's important for them."
The move to a single portal hosted by Covisint would change the way DaimlerChrysler and its suppliers do e-business, saving time and money. Now DaimlerChrysler has multiple portals for its suppliers, including one for suppliers to Chrysler group.
Carleton would not reveal how many supplier portals the automaker has worldwide.
DaimlerChrysler spends about $100 billion annually in global purchasing. Chrysler group's share is $40 billion.
Covisint has not said how much the member automakers are saving by using Covisint for procurement and other services. But one analyst thinks meaningful savings will not occur until automakers restructure their procurement organization with Covisint as a core part of it.
"They still have the same procurement organization today that they had two years ago," said Kevin Prouty, senior research analyst at AMR Research in Boston. "It's when they really start reorganizing their procurement organization that I'll say Covisint has had a significant impact on them."
If Covisint hosts the portal, DaimlerChrysler would follow in the footsteps of Delphi Automotive Systems Corp.
Delphi in June became the first and only Tier 1 supplier to say it would build a single supplier portal and have Covisint host it. The move allows Delphi to avoid the cost of the technology to build and maintain its portal.
Required for suppliersDelphi is requiring all its 5,000 suppliers to join Covisint before they can use the portal. Covisint says it has registered 1,700 companies since the end of July. Suppliers will pay $33 per month for each person who needs access to the portal.
"It just made sense to us to share the infrastructure," said Rick Radecki, Delphi's e-business director.
Delphi did not want to end up with multiple portals for its suppliers, he said.
"We want to move to the Web anything we are now manually communicating with suppliers," Radecki said.
DaimlerChrysler is particularly interested in what Covisint provides and what it plans to offer in supply-chain management software tools.
"There are some available solutions out there," Carleton said. "But I don't think any of them really comprehend the complexity of the auto industry. I think they were really designed a lot more for the retail chains where it's far more simple than trying to put 15,000 vehicles a day into a schedule and managing 60,000 parts coming from countries around the world."
But companies that provide supply-chain management software are starting to comprehend that complexity, Carleton said.
Delphi's supplier portal will be co-branded with Covisint. Some of its functionality is expected to be ready by the end of this month.
Delphi is no stranger to the Internet. The largest automotive supplier began using electronic auctions to reduce cost and improve the efficiency of purchasing in 1997, three years before Covisint was created. Since then, Delphi has held nearly 100 online auctions for transactions of more than $1 billion, Radecki said.
Getting to critical massThe focus at Covisint has been on establishing the company with the large, global automakers and Tier 1 suppliers, said CEO Kevin English. But if Covisint is to succeed, it must achieve critical mass - enough users to make it profitable - as quickly as possible, English said.
"Ultimately, as we establish ourselves securely in the automotive industry, we will seek to engage other, similar global industries," English said. He cited as examples the heavy equipment, farm equipment, marine, trucking and motorcycle industries.
It makes sense for Covisint to want to expand into the heavy-truck industry, said Prouty, the AMR Research analyst.
DaimlerChrysler, for instance, owns Freightliner LLC, a manufacturer of medium- and heavy-duty trucks.
"So you can see how that's going to happen," Prouty said. "But I think Covisint definitely has to make sure that automotive stays in focus for the foreseeable future."