Tying It All Together

If they wandered down to the basement of the massive Cobo Center in Detroit, attendees at this year's SAE World Congress found two rather large booths — dwarfing their nearby neighbors — touting the services of Covisint and FreeMarkets. Not unlike the battle that pitted F.W. Woolworth and S.S. Kresge at the beginning of the 20th century, these two 21st century “procurement facilitators” are vying for the allegiance of their buying public — in this case purchasing decision makers for both automakers and major suppliers.

Covisint LLC is the new guy on the block, formalized in December as a consortium effort by the U.S. Big Three automakers and later joined by Renault SA and Nissan Motor Co. Ltd. Through Covisint, the automakers aim to offer their partsmakers a full suite of supply-chain management tools, including procurement of parts and materials as well as collaborative product development and other payment and logistics services. Technology partners for Covisint include Commerce One and Oracle.

A key competitor in many ways is FreeMarkets, a six-year-old effort to provide a convenient, efficient electronic environment for industrial customers (both automotive and non-automotive) to link buyers and sellers of anything from raw materials to key product components or office supplies. It is similar in many ways to other online auctions that move metals, chemicals and other materials such as Rubbernetwork.com, Trade-Ranger.com, and Materialnet.com. Primarily a procurement tool, FreeMarkets recently has branched out by acquiring Adexa Inc. to offer the potential for its own form of collaborative product development. It also offers asset management software and an asset exchange service to liquidate excess materials or equipment. And, importantly, it boasts some of the same key automotive customers as Covisint: Dana Corp., Delphi Automotive Systems and Visteon Corp.

Most business-to-business Internet-based efforts are focusing heavily on providing a forum for electronic auctions — a place where a buyer can post a set of specs and receive simultaneous bids from a host of sellers (conceivably seen anonymously by all parties) all within a matter of minutes. Sourcing a component on a global scale — locking in suppliers who'll feed five assembly plants on three continents from equally geographically diverse supplier sites, for example — can be accomplished in an afternoon.

Software to manage the procurement process has been around for some time. Enterprise resource planning (ERP) packages from software companies like Oracle Corp. and SAP AG have offered customized solutions for a variety of business models. And many automotive suppliers such as American Axle & Mfg. Inc. already work online with most of their suppliers over the Internet, including collaborative product development, without the aid of a service such as FreeMarkets or Covisint.

What these newer B2B exchanges are attempting is to tie all of the pieces together, getting everyone playing with similar tools that can “communicate” with each other. Covisint and others can move files back and forth between clients who use differing versions of XML or EDI — file format protocols that differ in much the same way as simple graphics files such as gifs, jpgs or tifs.

Covisint claims to have more than 900 companies recruited to use its services. The bulk of that business is now focused on procurement, but, says Kevin Vasconi, Covisint's chief technology officer, “We're looking at the whole procurement process — logistics, management and collaborative product development.” He adds that some customers already have had some success in using collaborative engineering via Covisint.

But he admits that initial efforts might include only one supplier on a project. The next time it might be two or three. “As more vehicle programs use it, more suppliers will want to get involved.”

And Covisint is trying to offer a wide array of services that are tailored to meet the needs of the auto industry. “Most other exchange services are very focused,” he notes. They may only perform a limited function, more often than not, online procurement. The Covisint goal is to be much broader. “We're taking a very holistic view,” Mr. Vasconi says. And, he adds, the cost for entry doesn't require an extensive list of on-site hardware and software.

By housing the needed software on an ASP (Active Server Page, which allows real-time interactive communication) managed system, Covisint users can “rent” access to the software. It's what Mr. Vasconi calls “a very compelling value component.”

Those clients who already own their own software can take advantage of an “on-ramp” designed by Covisint, which allows their software to “communicate” with other standard software of similar function in use by other trading partners.

Mr. Vasconi says Covisint is even working with manufacturers that use a highly customized “legacy” software system to build integration on-ramps that would allow a similarly seamless access to other customers.

“One of the cornerstones,” says Mr. Vasconi, is that “we didn't go out and say there's only one way to connect. That doesn't reflect the realities. We want to make this as inclusive as possible.”

To that end, Mr. Vasconi notes that some participants could — and do — connect to the system with only a telephone dial-up over a 56k modem. But he admits that he wouldn't recommend doing collaborative product development (which would require very fast transmission of extensive amounts of data) on such a limited connection.

Will there be only one? Or, for the most part, a dominant player that survives as others take on a lesser role? These things take time — maybe even a century. After all, in the nearly century-long competition between S.S. Kresge and F.W. Woolworth, only one still survives.