Auto Trading Exchange Still Stuck In Low Gear

By Chuck Moozakis

The trading exchange started by the Big Three automakers is still sputtering along a year after its founding.

Covisint, which started operating online in November after a lengthy federal review, has attracted only 40 of the 30,000 manufacturers that supply DaimlerChrysler, Ford Motor Co. and General Motors. Experts agree that it will require far more participation for car producers to realize the 15 percent cost savings on supplies initially promised.

What's more, while the exchange has processed more than $1.5 billion in orders so far, its features have not evolved much beyond basic procurement functionality, and it is still without a CEO.

"They are still very much in flux," said Gartner Group analyst Lora Cecera. "The original expectation was that they would be much further ahead" in delivering services and attracting participants, she said.

Covisint said it hopes to attract members with new features it rolled out last month with the help of SupplySolution Inc.'s iSupply supply chain management package. Because iSupply is already used by more than 750 auto suppliers, Covisint hopes it will spur adoption of the exchange, said Covisint supply chain lead Chris Steele.

"Our customers told us we have to hook up with these guys," Steele said. "We have to have the services and applications that our customers want to use."

ISupply provides Covisint members with real-time information about materials fulfillment, pulled directly from suppliers' ERP and legacy systems. Through that conduit, the auto companies and their suppliers can measure inventory and determine when parts need to be ordered.

ISupply will link with SupplyConnect, Covisint's homegrown Web-to-EDI translation software. Steele declined to disclose how much Covisint will charge for iSupply; prices typically begin at approximately $400 per month for the hosted software.

The addition of the software is part of Covisint's attempt to help manufacturers corral planning--one of the thorniest and costliest issues that auto companies confront. "Planning in this industry isn't good," said Don Perchard, Covisint's product manager for supply chain. Existing apps and tools "don't take into consideration all of the complexities of the auto industry," he said, specifically the vast number of suppliers.

The availability of that data will also play a key role as the automakers tap Covisint to support their respective build-to-order strategies. Indeed, GM's consumer Web site, called GMBuyPower, is improving the product configurator that lets consumers select features. When it launches in July, it will rely heavily on application integration middleware from SeeBeyond that will connect with Covisint for supplier communications. This way, suppliers can replenish parts as they're ordered from consumers.

But will these activities convince suppliers to climb aboard? "I don't think suppliers and automakers will build their whole supply chain strategy around a single solution," said AMR Research analyst Kevin Prouty. "I think Covisint still has to show [potential users] a compelling reason to come to its site."