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Dot-com letdown sobering for automakers

Just over a year ago, in the heady days of the Internet bubble, e-commerce was seen as all things to all people.

Now that the computer-based tools of buying, selling and running daily operations have entered the real world, businesses are learning that it is not as easy as expected.

“During the dot-com frenzy, everyone was anxious to ‘Web-ize’ and ‘Internet-ize’ everything without a real broad eye on whether this is going to bring business value,” said Jim Buczkowski, director of manufacturing and supply chain information technology and e-business infrastructure for Ford Motor Co.

Now industry leaders are taking a long look at what makes sense, he said Oct. 4 during EyeforChem USA, an e-business convention held in Detroit.

Covisint coordination

Covisint LLC, the online exchange program created by the North American automakers, is coordinating technology and product offerings that match the needs of its parent companies and the supplier base upon which it relies for growth.

Automakers, meanwhile, are separating the standard operations best handled by the industry as a whole and those functions unique to their individual businesses.

“The industry takes time to develop a standardized product solution,” said Peter Weiss, senior vice president of global alliances and business development for Covisint.

“We have to have a good and predictable deployment, not just throw it into the laps of the customer,” he said.

“We are working with customers. We are sharing the roadmap and working together.”

Covisint’s first order of business was to become the industry leader for online auctions — buying and selling raw materials, molded interior trim components, seals, gaskets and even used machines. That has happened, Weiss said, with billions of dollars worth of business passing through its circuits.

The key to using the platform to its fullest, though, is when it can be used throughout the supply chain to coordinate production, product development, delivery and assembly so automakers can build a car to a buyer’s order — and do it quickly.

Lower-tier bottleneck

About 70 percent of Tier 1 suppliers are linked to the platform, but only about 35 percent of lower tier companies are tied in.

“It’s not the Tier 1s that are the bottleneck anymore,” he said. “It’s at the levels of the Tier 2, Tier 3 and Tier 4 suppliers.”

The use is trickling down, though. Delphi Automotive Systems Corp. will require its suppliers to use Covisint, and other companies are linking their own network system into the auto supply platform.

The e-business leaders, meanwhile, have to change the culture within the supply community, so smaller companies realize they must not only sign on to electronic commerce but also continually update their information, Buczkowski said.

Every purchasing person, he said, has had the experience of calling a contact number and name, only to find out that the particular person listed no longer is with the company.

“The supplier is going to be responsible for keeping that information up-to-date,” he said. “We can’t move to a self-serve system if we need to track down the people responsible for that information and make sure it is correct.”

Likewise, customers must have trust in their suppliers, Buczkowski said, so they, too, can plug into the system.

Automakers still are reviewing their operations to determine where they can find common links that will allow them to save money, he said.

For example, Ford recently has added holdings such as Sweden’s Volvo Car Corp. and England’s Land Rover sport-utility line. Each of those operations buys parts such as an under-the-hood water reservoir bottle, which have the same functions but may be described differently.

“There’s not that much difference between the washer bottle in a Volvo and one in a (Ford) Focus,” Buczkowski said. “They may be a different shape, but they’re pretty much functionally identical.

“How do you tell the (computer) system that those are not necessarily exactly the same but at least in the same arena, so that when we do strategic sourcing that there ought to be a relationship between those two?”

But there always will be some e-business operations that remain independent.

Collaborative planning, for instance, and online tools related to specific operations, where a company such as Ford can see a real dollar value, likely will remain in-house, Buczkowski said. Mass purchasing can go through a portal such as Covisint that is ready to do business, rather than having individual companies invest in an independent unit.

For any program, though, businesses must study what makes sense, not the latest trend.

“This is not just about saying, ‘Hey, the technology is capable of doing it, so let’s implement it in the business,’ ” he said. “The business process has got to really be formed and be robust.”

You can reach Rhoda Miel at rmiel@crain.com

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