Component suppliers shun online trading exchanges

23 May 2001
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24 May 2001 | Robin Parker

Automotive component suppliers are not joining business-to-business exchanges, a leading consultancy has warned.

Cap Gemini Ernst & Young's (CGEY) survey of 60 suppliers in the US, Germany, the UK and France, found 40 per cent had no firm plans to move onto a business-to-business exchange. Of the remainder, almost half had not decided which exchange would suit them best.

The findings surprised Lance Doughty, head of UK automotive practice at CGEY. "We've been promoting business-to-business marketplaces as a potential supply chain integration enabler, but there was a low recognition rating of the available ones," he said. "Amazingly, less than half recognised the name Covisint."

Covisint, which is the only multi-manufacturer exchange directly aimed at the sector, incorporates purchasing and supply chain integration. Doughty believes this will enable Covisint to consolidate its position eventually.

"It has taken longer to establish than we expected," he said, "but the fact that it's not recognised yet does not mean that it won't be successful." First-tier manufacturers that had heard of it were keen to use it, he said.

However, the survey found that manufacturers see exchanges as a means to remain competitive and reduce inventory and indirect costs rather than integrate their supply chains better or as a way to standardise their systems on Covisint.

"Expectations for the benefits of using Covisint were unfairly high," a spokesman for Covisint in Detroit told SM. "The reality is that it will take a lot of effort and communication. Around 900 companies are registered to use our product."

Covisint had handled $1 billion of business by the first quarter of this year, he said. It started trading last November.

Doughty acknowledged that there were many pressures on suppliers. Among the hardest hit were suppliers to higher-tier manufacturers which are merging and consolidating.

SMmay2001

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