The race was on at the turn of the century to form virtual, multi-party supplier platforms in order to improve purchasing and supply arrangements between the Tier 1 suppliers and OEM buyers. Amidst the dotcom frenzy, every industry suddenly had at its disposal a vast array of virtual exchanges. The two big names to emerge from that era relevant to the automotive industry were Covisint and SupplyOn.
Established in 2000, Covisint was seen from the outset as primarily servicing the needs of the big three North American OEMs, since its main interested parties were DaimlerChrysler, Ford and General Motors. It retained this image despite the addition of PSA Peugeot Citroen and the Renault-Nissan Alliance. In late 2003, for numerous reasons, the Covisint business began to unravel, disintegrating over the following months until the remnants were swept up by private equity, leaving the still unproven SupplyOn business model the clear winner.
SupplyOn processes transactions totalling over €50bn annually.
Two other interesting organisations which appeared around the same time were newtron AG and TecCom GmbH. Newtron develops, markets and supports software for every stage of the purchasing process, and has been operational since 1998. In addition to a host of Tier 1 supplier customers, the company’s software and services have underpinned every Daimler supplier auction since 2007. According to its website, newtron supports 200 companies buying from over 44,000 suppliers. However, newtron’s clients extend beyond the automotive industry to sectors like mechanical engineering, construction, office supplies and the service industry. In 2008/09, the company says it supported transactions totalling over US$25bn, equivalent to approximately €18bn at current rates.
TecCom was established at the Automechanika trade fair in 2000, and with a wide range of leading automotive suppliers as shareholders, now claims to be the leading B2B platform for the independent automotive aftermarket; the organisation has also created an interesting process for identifying the authenticity of aftermarket parts.
Where Covisint suffered for being seen as “the North American option”, SupplyOn has overcome its early image as “the European alternative”, and is now represented in three key automotive regions
In terms of OEM-Tier 1 relationships, however, it is SupplyOn which has set the standard, and which this month celebrates its tenth anniversary. Some vital statistics: headquartered at Hallbergmoos near Munich, Germany, it boasts over 7,500 customers in over 70 countries, and its 80 employees generated sales revenues of over €20m in 2009. The most vital of statistics, however, is the transaction volume: according to its website, SupplyOn processes transactions totalling over €50bn annually. Although known primarily for its automotive activities, SupplyOn also offers the manufacturing and aerospace industries its services in the fields of sourcing, logistics, finance, quality and engineering.
Where Covisint suffered for being seen as “the North American option”, SupplyOn has overcome its early image as “the European alternative”, and is now represented in three key automotive regions, with presence in North America and Asia – including a growing position in China – in addition to its base in Europe.
Despite Covisint welcoming PSA and Renault-Nissan, Volkswagen resisted joining, and in late-2001, announced plans to begin co-operating with SupplyOn, turning up the heat on the already faltering Covisint. At the same time, Volkswagen was developing its own supplier portal, VWGroupSupply.com, which it launched in 2003. However, Volkswagen’s relationship with SupplyOn was never intended to extend into stakeholder territory, so while Covisint was established by OEMs, SupplyOn was formed “by suppliers for suppliers”, and remains that way. Currently, its shareholders are Bosch (38.5%), Continental (22.5%), ZF (15.25%), Schaeffler Group (15.25%) and SAP (8.5%). In 2004, BMW established a similarly close partnership with SupplyOn.
As demonstrated by the failure of so many virtual supplier exchanges set up at the same time as SupplyOn, the competition in the field of e-procurement is fierce, and the success stories are few.
Clearly, suppliers have much to gain by co-operating on an independent, transparent, wide-target platform, leading to benefits for a wide number of potential OEM customers, rather than a select few. Clearly, also, multiple-OEM-organised purchasing platforms can create suspicion and a perceived lack of transparency. Much stronger are close-knit, carefully developed OEM purchasing organisations, either within a self-contained group, as demonstrated by the Volkswagen Group, or within a well-established alliance, like the Renault-Nissan Purchasing Organisation (RNPO). Time will tell whether the planned joint Fiat/Chrysler purchasing organisation can be as successful as RNPO. In 2009, the estimated purchase value of RNPO was over €55bn. By 2014, Fiat and Chrysler plan to have a joint purchasing power of over €60bn. According to VWGroupSupply.com, the Volkswagen Group’s purchasing volume stands at over €75bn, almost all of which it conducts online.
As demonstrated by the failure of so many virtual supplier exchanges set up at the same time as SupplyOn, the competition in the field of e-procurement is fierce, and the success stories are few. Get the model right, however, and a well-organised e-marketplace can prove hugely lucrative.