General Motors plans to move 30,000 suppliers and more than $87 billion in purchasing activity to its new, Web-based GM TradeXchange by the end of 2001.
GM suppliers will be required to use TradeXchange. Dealers, although not required to use the site, can use it to buy goods and services.
'This is the only way that we will do business,' said Harold Kutner, group vice president of worldwide purchasing.
TradeXchange will be where GM buyers, suppliers, aftermarket companies and service businesses buy and sell goods in a fast, highly automated process. The Web site will be a marketplace where GM's supply network will come together to do business.
Kutner estimated the potential volume of business in the GM supply chain at more than $500 billion.
GM TradeXchange is expected to begin operating in North America in the first quarter of 2000 and overseas in the second quarter. Buyers and sellers will have three main avenues for doing business: online catalogs, a bid-and-quote system and Internet auctions.
A parts supplier could use TradeXchange to bid on GM business, receive electronic parts designs, sell excess raw materials or even offer unused factory capacity to bidders.
GM is building TradeXchange in partnership with Commerce One, an electronic-commerce company based in Walnut Creek, Calif. The goal is to build TradeXchange into an all-purpose Internet purchasing portal, with news and information, auctions and links to vertical industry e-commerce sites such as eSteel and others, Kutner said.
TradeXchange already has built an online connection to W.W. Grainger Inc., a supplier of maintenance, repair and other nonproduction industrial goods.
TradeXchange is expected to generate revenue for GM through user fees. Kutner said the fees have not been set but could range from 0.25 percent to 0.5 percent of each transaction.
The cost of using TradeXchange would be more than offset by the huge potential savings from automating the hundreds of thousands of purchase orders that GM annually generates around the world, Kutner said. If the cost of handling a purchase order is $100, TradeXchange has the potential to reduce handling costs to as little as $10, he said.
Commerce One went public at $21 a share in July, despite never having shown a profit. Last Wednesday, the day after the company announced its agreement with GM, Commerce One shares closed at a 52-week high of $254.