Honda moving cautiously in e-commerce

Although talk swirls constantly about the magic bullet of OE-supplier e-commerce and its potential for saving automakers vast sums, Honda Motor Co. Ltd. isn't buying it.

Larry Jutte, vice president and general manager - Motorcycle and Powertrain, Parts and Procurement, Honda of America Manufacturing Inc., says Honda simply doesn't do business with suppliers in the fashion implied by suggested models of OE-supplier e-commerce, such as online parts-bidding auctions.

Instead, Mr. Jutte says Honda is cautiously scrutinizing the implications of e-commerce with its suppliers in order to improve relationships - not force cost reductions.

He says that Honda is analyzing the use of information technology in purchasing and supply chain management to develop an appropriate strategy based on Honda's "culture," but the "direction and benefits are unclear.

"Right now, we are not convinced that open bidding (for parts in online auctions) is the way to go," Mr. Jutte asserts. "This approach basically treats components as commodities. You can't put parts and materials up for bid every year."

Instead, Mr. Jutte says Honda thinks the best possibilities come from linking suppliers' production with assembly plant lines. "We believe the best application of information technology will be to closely synchronize our suppliers' production lines with our own production lines. We're studying exactly what implications this will have for Honda and for our suppliers in North America. But looking at changes that we have implemented internally, you can bet our strategy will involve a greater number of body-on-sequence suppliers."

Mr. Jutte elaborates by saying that for the past several years, Honda has undertaken a concerted effort to make vehicle and powertrain assembly more "synchronous."

He cites a recent cooperation between Honda's Acura division and Borg-Warner Automotive for the development of the new Acura MDX's all-wheel drive transfer case:

"What attracted us (to Borg-Warner) was a unique technology - not a low price," he claims. "This is but one example of why putting our suppliers' business up for auction is not only incompatible with our emphasis on unique technologies, it also would prevent us from getting the type of commitment from suppliers that we need."