Automakers, Suppliers Urged to Collaborate Over Internet

A supplier that doesn’t find a way to join the information technology age will be left out of some customers’ value chains and end up losing revenue and market share, says Michael Segal, senior vice president-Customer Success for software systems provider MatrixOne Inc.

“Do it now, before your competitors,” warns Mr. Segal.

Mr. Segal and others at Tuesday’s session here on “Collaborative Product Commerce” reiterate an aging mantra that still hasn’t taken full hold throughout the industry: Suppliers need to be involved up front in the product design phase, where most costs are fixed, and they need to be able to react to engineering specifications quickly.

“More than 70% of cost is set in the vehicle development phase, so you need to have rapid communication” says Bob Matulka, in charge of C-Product development for B2B exchange Covisint. He says surveys indicate that although only 34% of automotive executives believe design collaboration with suppliers is critical today, 72% believe it will be key by 2003. “No one can afford to be left behind,” he says.

“If suppliers are involved earlier, you can reduce fixed costs and time to market and increase revenue and market share,” says Mr. Segal. “It is a simple concept, but a hard thing to do.”

The task is made even tougher for Tier 1s by the current industry pressures to move from being parts suppliers to systems partners, demands to integrate processes with OEM systems over the Internet and provide more innovation, while coping with price pressures and learning to work hand-in-hand with competitors, he says.

In setting up an IT system, Mr. Segal suggests an open architecture that is both Internet compatible and works with any existing systems a supplier already may employ. “You want to use something that allows you to work over the Internet, but takes advantage of any investments you have already made.”

Use of the Internet through B2B exchanges such as Covisint will help reduce complexity for suppliers, Mr. Matulka says. “A Tier 1 can have 500 suppliers, imagine the number of connections involved throughout the industry (if the Internet isn’t used),” he says.