DETROIT - Three of North America's largest auto suppliers and the Big 3 are developing a messaging service to streamline the way they send and receive documents.
The idea is to make Covisint a central messaging hub. Suppliers and automakers would send purchase orders, shipping schedules and other documents to Covisint via the Internet. Covisint would then put the data into a desired format and send it.
The goal is to drive cost out of the supply chain by centralizing the sending and receiving of information. But that means other suppliers would have to overcome past skepticism of Covisint to use it.
Robert Paul, a senior vice president at Covisint LLC, in Southfield, Mich., says, "We're taking massive complexity out of the electronic communication in the supply chain with a single communications port."
The suppliers are Lear Corp., Johnson Controls Inc. and Delphi Corp.
The messaging service, which one analyst estimates will cost between $4 million and $6 million, will be tested this summer. An industry debut is planned in November.
Automakers and suppliers exchange business data via Electronic Data Interchange, or EDI. Data are sent through a direct communication link from a supplier's computer to an automaker's computer, or through third-party networks.
The more customers a supplier has, the more connections are required.
A study noted that each EDI transaction costs about $8, but by exchanging these documents over the Web, the cost is about $1 per transaction. General Motors sends nearly 50 million EDI documents or transactions annually to suppliers.
"This jointly developed messaging service will help to reduce this expense and improve the flow of information among the supply base," Delphi CEO J.T. Battenberg III says.
Kevin Prouty, automotive research director at research firm GartnerG2 of Stamford, Conn., says the success of the service is critical for Covisint, which has struggled since its founding in 2000.
"I think this is the last best shot they have at being relevant to the industry beyond just reducing piece price," he says.
Suppliers and automakers will pay a subscription fee to use the hub.