Rationale and future of business-to-business in the

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Int. J. Automotive Technology and Management, Vol. 2, No. 2, 2002

Rationale and future of business-to-business in the automotive industry Jean-Jacques Chanaron CNRS – GATE – Lyon and Graduate School of Business, BP 127, 38003 Grenoble Cedex 01, France E-mail: [email protected] Abstract: This paper deals with current practices, strategies and rationale for e-Business-to-Business (e-B2B) in the automotive supply chain. It aims at identifying the main characteristics and the current major trends regarding the emergence and development of e-B2B in the automotive system. It also investigates prospects and success factors for such massive deployment between OEMs and first tier suppliers. It looks at strategies by major OEMs and at the potential impacts and barriers to e-business-to-business. Keywords: Automotive; supply chain; e-B2B. Reference to this paper should be made as follows: Chanaron, J.J. (2002) ‘Rationale and future of business-to-business in the automotive industry’, Int. J. Automotive Technology and Management, Vol. 2, No. 2, pp.130-158. Biographical notes: Professor J.J. Chanaron is currently Research Director within the French National Center for Scientific Research and professor in technology management and economics at the Grenoble Graduate School of Business where he is also Scientific Director. He has published extensively via books, articles in refereed journals and conference papers on industrial economics, economics of innovation and technology management since 1973 when he received his PhD at the University of Grenoble. He also holds a HDR in Economics. He is an associated professor and researcher with Henley Management College, Manchester University and Newcastle University in the UK. He is a consultant to international organisations (EU, OECD, ILO, UNIDO), professional organisations (CCFA, FIEV, JAMA, CLEPA), OEMs (PSA, Renault, Toyota, Nissan, DaimlerChrysler) and component manufacturers. He is a member of the French Society of Automotive Engineers (SIA) and the GERPISA International Network of Researchers on the Auto Industry.

1

Introduction

Most academic research on innovation is focused on product and process technology [1–3]. Far less attention has been paid to organisational innovation despite the widely shared view that within the Schumpeterian perspective [4], a new working method is one of the five main categories of innovation, i.e. a change in productive combination. E-business is obviously such a dramatic change for organisations. Chung-Shing Lee [5] refers to e-commerce as a disruptive innovation that initially damages organisations and established companies but promises great long term growth potential.

Copyright © 2002 Inderscience Enterprises Ltd.

Rationale and future of business-to-business in the automotive industry

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As pointed out in the surveys carried out by KPMG Consulting on Global Supply Chain Benchmarking and Best Practices in 1999 and 2000 [6,7], information technology (IT), and in particular web-based technology, is identified as one of the most significant challenges over the next ten years. Ernst & Young pointed out that 25 to 30% of the cost of a car has to do with inefficiencies in the way the supply chain manufactures and supplies a car [8]. E-business is currently considered to be one of the most promising drivers for change in the automotive industry and, in particular in its value added chain from R&D and design to the final customer. According to the most enthusiastic observers, it will completely revolutionise the system. Schlott [9] compares the internet revolution to the fashion for just-in-time and lean philosophies in the early nineties. For the most cautious, it will simply be one more supply and sales channel in addition to the already existing and more traditional ones [10]. According to Lamm [11], the internet is not creating a frontal competition with the ‘old’ system, but is adding a new tool which is challenging it and requiring its complete reshaping. From an academic point of view, in-depth research is still to be conducted in order to establish some more stabilised models before any robust managerial recommendations can be formulated. E-business is concerned with five different channels: •

business-to-business (B2B) between OEMs, i.e. vehicle manufacturers and their suppliers and between tier-one and tier-two suppliers

•

business-to-business between OEMs and their dealers and other distributors, i.e. the B2B of built-up vehicles and replacement parts

•

business to customers (B2C) between the OEMs distribution networks and their final customers

•

business to employees (B2E) between corporations and their employees worldwide

•

business to government (B2G) between corporations and the various governmental organisations they have to deal with.

This paper deals only with the first category, i.e. e-supply and e-procurement within the automotive industry [12]. Its objectives are as follows: •

to scan the existing literature and elaborate an exploratory framework of benefits and cost of e-supply and other online business-to-business (e-B2B) as well as key success factors

•

to survey the automotive supply chain in order to assess the current and future role of e-B2B.

So far, e-commerce is still emerging and at an unexpected speed [13,14]. But market research shows that e-B2B is growing much faster than e-B2C. Forrester Research reports that 75% of spending through the internet results from the business-to-business segment and predicts that it will represent total purchases of US$183bn by 2001 [15]. The total B2B e-commerce in the US is estimated at US$2,700bn by 2004 of which 53% will flow through e-marketplaces (Forrester website, see Appendix 1) [16]. In 2002, US$52bn will be processed through reverse auction [17]. Wolffe, Tait and Bowe [18] estimate that 900 online exchange systems will be established in the very near future. Deloitte Consulting [19] pinpointed that by the end of 2000, 91% of North American

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corporations will buy through the internet against 31% in May 2000. Kleinbard [20] quotes a survey by Keenan, an internet analyst, which shows that out of 620 B2B internet sites, only 10% were active, i.e. processing real transactions, in May 2000. Figure 1

The B2B boom

3000 2500 2000 1500 1000 500 0 1999

2000

2001

2002

Rest of the world

2003

USA

Source: Forrester Research, Merryll Lynch [21].

The near collapse of the new economy in 2000 is analysed to have little impact on e-B2B, in particular on Supply Chain Management (e-SCM). In March 2001, Gartner Group estimated the world market for B2B at higher figures than the Forrester Research estimates released in 2000 (Table 1). According to Michel [22], the major impact of the depression is on e-B2C or Customer Relations Management (e-CRM). Table 1

Market forecast for e-B2B EMarketer 2000

FORRESTER RESEARCH 2000

GARTNER GROUP 2001

2000

185

150

433

2001

336

400

919

2002

684

850

1,900

2003

1,260

1,500

3,600

2004

2,775

2,500

6,000

2005

n.a.

n.a.

8,500

Sources: Forrester Research, Merryll Lynch [21]; Villemin [23]; La Tribune, [24]; Choon and Dajalos [25]


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Huge online B2B marketplaces are on their way. Within the automotive industry, there are Covisint, under the leadership of the major OEMs (Ford, GM, DaimlerChrysler, Renault, Nissan, Toyota, PSA, Honda [26]), and Rubbernetwork in the tyre industry. Electricity power suppliers and steel companies (MetalSite) are also struggling to organise themselves into integrated online exchange systems [18].

2

Literature background

Due to the current weakness in academic analytical literature, possibly due to the too recent emergence of electronic commerce [27], this paper is an exploratory investigation [28–30]. It aims at identifying the main characteristics and the current major trends regarding the emergence and development of e-B2B in the automotive system [31] and at building up major assumptions concerning such trends and their implications. Opposing the widely spread spirit of optimism regarding the growth of B2B, emphasised by the ‘revolutionary change’ perceived by major actors such as K. English, chief executive of Covisint [32], it has also developed a quite cautious approach, since the internet economy has been dramatically affected by a major recession since mid-2000, expressing the extremely unstable character of the so-called new economy. Regarding theoretical background, most available academic publications dealing with e-business (as a whole) refer to several schools of thought, which appear to be very complementary when explaining or justifying part of the question: •

Transaction cost theory: in this perspective, the key rationale for introducing e-B2B is cost reduction and it therefore uses the neoclassical microeconomic theory of cost as well as non conventional approach to the firm when introducing notions such as opportunistic behaviour, asymmetric information, etc. Transaction cost theory is used to explain the impact of IT, and then e-commerce, on the creation of inter-organisational coupling, i.e. the ‘contractualised’ electronically-assisted sourcing between two independent firms [33].

•

Organisational learning theory: with such foundations, the implementation process of digital procurement is analysed [34]. It also explains changes in behaviours of individuals, of groups within the firm and of organisations within the automotive system, in particular inside the supply chain. New organisation theories are apparently very useful for the understanding of e-business-to-business. It might be analysed as one of the key elements of ‘inter-organisational coupling’ [35], seen as an alternative to vertical integration or pure market transactions (i.e. on-the-shelf trading). New information technology serves as an important driving force for inter-organisational coupling [33].

•

Core competence model: from this managerial approach, firms should focus on their core competence and therefore buy in products and services where they have very little experience and which are not within their core competence. In this case, e-commerce might be analysed as one of the core or strategic competencies that firms should control in order to monitor their competitive advantages [36].

134 •

J.J. Chanaron Knowledge management theory: some authors consider that e-commerce or e-business requires a radical change if not a comprehensive paradigm shift in the organisation and its management models [37]. Therefore, organisations are facing a situation of permanent change and discontinuities, which they can only resolve with innovation and knowledge creation.

The understanding of e-business-to-business is clearly within the convergence of new heterodox economic theories and management sciences. Figure 2

A disciplinary convergence

Industrial Economics

Quasi-integration, Organizational learning, Transaction costs, Firm boundaries, Agency theory, Innovation

KEY COMPETENCES/STRATEGIC COMPETENCES

Strategy, Value chain, Supply chain, Knowledge management

Management Sciences

3

Methodology

The objective of the research was to develop ideas mainly from induction of data. Since this is an exploratory study, emphasis has been put on the identification of critical factors rather than best practice generation. The unit of analysis was the e-B2B development process within the automotive industry, i.e. in the environment of OEMs, leading first tier suppliers, internet service providers, e-business start-ups, second tier suppliers, etc. A qualitative research methodology was developed, based on three different sources: •

scanning existing literature on e-commerce and e-business-to-business from academia as well as consultancy firms or industry white books

•

investigating corporate press releases since e-business is still an emerging phenomenon, largely driven by private businesses

•

in-depth focused interviews conducted with key executives in charge of e-B2B in order to check the validity of the assumptions built up from the literature.


4

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The context

4.1 A consolidating industry During the last five years, the automotive industry has consolidated very quickly. An intense mergers and acquisitions movement took place within the OEMs as well as in the component industry (parts and tyres).

4.1.1 The OEMs The concentration rate has increased substantially in the last three years with the merger between Daimler and Chrysler, then dealing with Mitsubishi; the deal between Fiat and GM; the acquisition of Nissan, Dacia and Samsung by Renault; and the acquisition of Volvo and Land Rover by Ford. In 2000, the grouping around GM has nearly 24% of the worldwide production (56 million units), followed by Ford and DaimlerChrysler with approximately 14%, Toyota, VW and Renault-Nissan with around 9%. After these six main groupings, the two following independent corporations, i.e. PSA and Honda, have less than 5%.

4.1.2 The component suppliers According to Burt [38], the global value of the parts sector has risen to more than US$950bn from US$450bn in the past ten years with a supplier base shrinking from 13,000 to 8,000 suppliers. The most recent FT survey on the tyre industry [39] estimated the total turnover at US$70bn in 1999. The average size of the top 25 first tier suppliers has grown significantly between 1992 and 1999, from US$ 4.7bn in 1992 to 6.5 in 1995 [40] and 10.3 in 1999 (Table 2). Table 2

Potential purchasing-related tasks to be performed online

Auction/Bidding

Real-time Purchasing Accounting

Online price quoting

Online early warning of quality and logistics problems

Production specification/information

Budgeting, planning and scheduling

Order management and tracking follow-up

Marketing and business intelligence

Invoicing and accounting

Human resources management and payroll

Inventory and surplus management

Training

Project management and meeting planning

Data interchange

According to 1999 figures, the share of the top 20 global suppliers in the total world part industry has grown from 20.6% to 24.9% over the last five years. Very large and well known companies such as ITT Automotive and BTR have disappeared or sold out their automotive divisions. Some have emerged as global players: Magna jumped in rank from 31 to 15 and Federal Mogul from a very low ranking to 18 through mergers and acquisitions. Therefore, the internet revolution is emerging as a fast changing structure for the world automotive component industry in which global players are increasing their

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bargaining power with the OEMs and in which the role of most SMEs is within the second and third tiers.

4.1.3 The commodities suppliers There is no available survey of the commodities suppliers to the automotive industry i.e. energy, raw materials, office supplies, logistics and transportation, industrial equipments, etc. Most of these sectors are obviously highly horizontally concentrated and globalised. They are also already largely committed to e-business through horizontal e-marketplaces.

4.2 An extremely competitive industry It is obvious that the worldwide automotive industry qualifies as an extremely competitive industry. At the OEMs’ level, the trends are towards price and product variety competition with increasingly strong customer expectations on quality, safety and environmental cleanliness. The pressure on price is so high that this is spreading to the whole supply chain mainly through: •

direct cost reduction

•

commonalisation of platforms, mechanical systems (engines and gearboxes) and components

•

modularisation (pre-assembled sub-systems).

Therefore, it is not very surprising that supply chain management has become one of the key weapons in achieving competitive advantage.

5

Which actions and operations for which goods and services?

Many different tasks could be performed through the internet but only a few systems, such as IBM Websphere and Oracle E-Business Suite offer a wide choice of operations. One of the key advantages of e-commerce is indeed to manage all services related to purchasing such as quality, warranty, inventory, deliveries, invoicing, etc. Therefore, the development of e-B2B is likely to lead to a decrease in the use of Electronic Data Interchange (EDI), if not to a complete replacement of EDI by the internet. The potential market for e-B2B in the automotive value chain is obviously associated with the nature of the purchased goods: commodities and services, on the one hand; components, sub-systems and modules ready to be assembled on the vehicle, on the other hand. It is very likely that the more generic the good, the more it could be traded on the internet and the more specific it is, the less it would be e-traded. So far, some companies are already using the internet to auction raw materials, temporary jobs, maintenance and security jobs, computers, software, electrical equipment for building, energy, etc. However, the search for customer differentiation and loyalty could prevent any auctioning of proprietary technologies and brand related components. In other words, components specifically designed for a particular client or vehicle would not be e-traded. Some recent anecdotes are illuminating:


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•

On 11 February, 2000, Commerce One, a leading actor in global e-commerce solutions for business, successfully conducted with GM and Isuzu an internet based bid-quote purchasing decision (or reverse auction) for direct material supplies on the GM TradeXchange website. The transaction was the auto industry’s largest ever to be conducted entirely over the internet . The purchasing decision enabled GM and its partner Isuzu, to buy a large volume of rubber sealing packages for vehicle production in both Europe and North America at a cost of US$147 million. The final price represented significant savings over traditional procurement processes. Eighteen qualified suppliers participated in the bid-quote process, and four suppliers were selected in the final analysis, each receiving a portion of the order. Suppliers were qualified and selected based on four criteria: quality, service, technology and price.

•

In March 2000, Lear Corporation also globally organised a reverse auction for fasteners with twelve pre-selected potential suppliers. All suppliers gradually decreased their price. The maximum discount was about 30% of the initial pricing. Some suppliers stopped quoting when they reached their limit. According to one of them, the cheapest offer was far below its own cost of the materials. However, Lear did not grant the order online to the best bid. Its buyers came back to their traditional French supplier who offered online a discount of 10%, re-introducing quality, service and technology into the selection criteria. Was the reverse auction organised for business intelligence purposes or in order to force the traditional suppliers to decrease their price more than was contractually decided (3% minimum per year)?

•

On 17 May, 2000, Ford and e-steel, the leading negotiation based e-Commerce exchange for the global steel industry, signed an agreement to ‘e-enable’ complex procurement programs with the OEM’s global Tier 1 suppliers. Approximately 4-5 million tons of steel and steel-related products will be purchased via e-steel for metal stamping suppliers over the course of this contract. The scope of the alliance covers the OEM’s steel order fulfilment processing, claims, financial controls, and audit reporting throughout its global manufacturing and assembly operations.

6

The diffusion of e-B2B is still confidential

The diffusion of digital procurement is different when looking at OEMs and suppliers. New actors are entering the supply chain as intermediaries and finally the system looks like an unstable jigsaw.

6.1 The OEMs There are four alternative strategies already taken by the OEMs:

6.1.1 An aggressive position by forming a joint venture with several OEMs and suppliers GM, Ford and DaimlerChrysler have set up Covisint a single giant trade exchange platform in 2000 and Renault decided that they would follow suit. Such internet portal

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allows suppliers to bid for contracts and OEMs to select suppliers online. The system will streamline the whole supply chain process, including procurement, planning and scheduling, manufacturing and logistics for both sides of the transaction. Initially, the three founders expected that the system would handle US$50bn by the end of 2000. But the development has taken longer than expected causing serious delay. The first categories to be transferred would be components bought by auctions and catalogue purchases. Delphi Automotive, Magna International, Bethlehem Steel and Compaq Computer were the very first to agree to sell and buy over the exchange system. The total potential turnover is evaluated at more than US$500bn. Through mergers and acquisitions, the system has been joined by Mazda, Volvo, Jaguar, Land Rover (through Ford), Fiat, Suzuki, Isuzu and Subaru (through GM), Nissan (through Renault), Mitsubishi and perhaps Hyundai and Kia (through DaimlerChrysler). Early in 2001, Toyota and Honda decided to join Covisint as well as PSA. Such a move is seen as a major shift in mergers and acquisitions strategies by Silverman [41]. Instead of full-blown M&A, corporations are integrating operations through ‘coopetition’, i.e. starting shared internet marketplaces for e-B2B while stopping short of other corporate links. Some partners are also simultaneously playing different strategies: for instance, DaimlerChrysler has opened a web based purchasing site for all of its 4,500 dealers (Chrysler, Jeep, Dodge) and expects to save US$ 500 per vehicle sold. It has set up a holding for all internet related activities: DCX NET with Euro550m. It has a significant share in PowerWay Inc. for B2B and Cobalt Group for B2C.

6.1.2 A defensive strategy by implementing a specific platform open to additional partners (OEMs and suppliers) This is the choice made by BMW. W. Becker, Senior Vice President of purchasing at BMW, said BMW has not joined Covisint because it is perceived as a US controlled network that could jeopardise the industrial secrets of its members. Bosch and Siemens are currently said to be reviewing the offer.

6.1.3 A mixed orientation by setting up a stand alone solution Volkswagen Group decided to set up its own online component sourcing network on the basis of its unwillingness to share its secrets with its competitors [42] and using its already existing electronic network integrating one third of its suppliers [43]. This stand alone strategy might well be inspired by M. Piech’s very strong ego. The Volkswagen’s online purchasing platform has been created with the alliance formed by IBM, i2 Technologies and Ariba. In July 2001, Volkswagen released the agreement signed with EDS to use its online software eBreviate to buy manufacturing equipment and raw materials for six years. By mid 2001, according to M. Piech, the online procurement amount of VW Group was DM1bn and will soon rise up to DM4bn.


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The Case of Renault The initiative to join Covisint has been taken by J.B. Duzan, Executive VP, Director for Purchasing, who is strongly pushing online B2B, while L. Schweitzer, the CEO, looks much more cautious, if not dubious. L. Bourelier is the project director. The initial target is a saving of US$1,000 (8,000 FFR) per car of which two thirds would be on the suppliers and one third on the OEMs. The delay is due to the need for a stabilised structure within Covisint, i.e. amongst the partners, and with the external stakeholders, in particular the US and European antitrust bodies and indeed the suppliers. According to Renault, online auctions are feasible for very simple and standardised components and for commodities. For complex systems and sub-systems, the key criteria are quality, confidentiality and innovation. This is not compatible with open auctioning. Online B2B is also not compatible with the partnership set up by Renault under the OPTIMA system, which has been well accepted by its suppliers so far. The top management is still divided by two philosophies:

•

those entirely pro-e-B2B who are pressing to go forward rapidly

•

those cautiously pro-e-B2B (limiting it to some very precise applications, i.e. experimentation) who are pushing for more investigations on features, characteristics, long term consequences and strategic options.

In October 2000, M. Schweitzer estimated the potential saving at US$ 300, stating that any other figure would be highly exaggerated (Automotive News Europe, 09/10/2000).

6.1.4 A wait and see position Some OEMs are still hesitating and reviewing their position: this is the case for Toyota, PSA and Honda, even if they have publicly declared their interest to join in Covisint. One of their main arguments is that e-B2B is quite contradictory with long term partnership and the need for personal and face-to-face negotiation within the purchasing relationship [44]. In line with their overall strategy for purchasing, they will certainly limit the contribution of B2B to non strategic components and commodities. On the other hand, some more marginal OEMs are not in a position to invest significantly in e-business – Tata, Avtovaz and Daewoo for instance – due to their current financial situation. They are likely to join one of the existing platforms or to be taken over by a bigger competitor and then forced to follow its example.

6.1.5 Towards the integrated enterprise? Some OEMs, such as GM, DaimlerChrysler and Volvo, are already engaged in designing and implementing, with the support of large application providers such as IBM, EDS, I2 and SAP, the so-called virtual extensive enterprise in which the digital supply chain management (SCM) will be part of an e-business application framework also integrating e-commerce (e-B2C) and business intelligence as well as Product Lifecycle Management (PLM), Customer Relationship Management (CRM) and Enterprise Resources Planning

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(ERP) [45]. Digital procurement is then considered as a single tool within a comprehensive package that will totally reshape the organisation. PSA: A More Cautious Approach The B2B strategy of PSA was released in June 2001. It is based on its membership in Covisint, in particular its commitment to develop Covisint Europe, and on its own suppliers’ portal named numerical ‘maquette’, in which a reserved site has been opened with three different levels: • a common space which presents general information about quality and supply methods • a one-to-one space in which the relationship between PSA and each individual supplier will be described: quality performances, invoices, purchasing marketing • a cooperative space on which co-makership, and in particular co-design, will be developed. By 2002, PSA is willing to enrol 150 out of its 450 automotive component suppliers in this way. Source: http://www.px2001.com/frameset/home.html

6.2 The suppliers According to the 1999 survey by Arthur Andersen [46], 59% of automotive suppliers surveyed during the Automotive Best Practices Forum are currently engaged in a process of implementing e-business strategies. Only 6% conduct more than half of their transactions via the internet . According to the most optimistic statement, this number is expected to increase to 66% by 2002. So far, only the biggest first tier suppliers have been able to either join existing vertical market places (steel, tyres, chemicals) or OEMs’ sites (Covisint, VW, BMW) (see Table 3) to set up a specific site (Valeo). The largest French first tier supplier is taking an aggressive strategy: its newly appointed CEO, M. Navarri announced that Valeo could buy more than Euro5bn online by the end of 2001 [47]. Some horizontal or specialised web based market places have already been set up by the major suppliers such as Rubbernetwork for tyres, e-steel and metalsite for steel, Pantellos for power, electricity and gas, Cemconnect for chemicals and plastics, etc. Several other websites are offering commodities or office supplies, etc. such as buying-partner.com for general equipment (photocopy machines, fax machines, etc.). An Anecdotal Story In March 2000, the Lear’s CEO invited all fastener manufacturers’ CEOs, including a French company who are one of the world leaders in this industry, to join a reverse auction on internet with online quotations made available to all bidders. After one hour, the cheapest bid appeared to be below the cost of materials of the French company who eventually decided to stop participating in the auction. The winner was an unknown Chinese company. Finally, Lear granted the order to the French supplier who provided a very significant discount on the best price offered during the auction. The Chinese bidder was eliminated due to the uncertainty about quality, sustainability, reliability and technological competence but their price was used as a benchmark to force the French supplier to reduce its own price.

Rationale and future of business-to-business in the automotive industry Table 3

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Existing e-B2B organisations in the automotive system

e-B2B SUPPLIERS

CUSTOMERS IN THE AUTOMOTIVE INDUSTRY

POTENTIAL TURNOVER

Covisint Oracle & Commerce One

GM, FORD, DAIMLERCHRYSLER RENAULT, NISSAN, TOYOTA, PSA, HONDA, MAZDA, MITSUBISHI MERITOR, JOHNSON CONTROLS, FEDERAL MOGUL, DELPHI, MAGNA, BOSCH, YASAKI, LEAR CORPORATION, BETHLEHEM STEEL, AUTOLIV 40 Tier 1,2 or 3 Selected Suppliers for Profit Sharing

US$250bn Renault: FFR110bn

Fast Buyer-AT KearneyErnst&Young-Oracle-ITS (Fiat) AutoXchange-Oracle FORD TradeXchange-Commerce One GENERAL MOTORS FreeMarkets Trade-Match e@SI Commerce One, Pricewaterhouse Coopers Yet to be named SupplyOn by SAP

Ariba, IBM, i2

Yet to be named i2 Technologies – iStarXchange RubberNetwork.com Commerce One EuroAutoSupplier AT Kearney Steel24-7 (sales) BuyFor Metals (purchasing) Siebel Systems FreeMarkets Vignette Manugistics Group Colinx EDS eBreviate

PSA:€25,6bn

Total Expected Turnover: US$750bn

FIAT FORD, HANKOOK TIRE, HALLA CLIMATE CONTROL, PYUNG HWA GENERAL MOTORS DELPHI, VISTEON, EATON, NAVISTAR VALEO VALEO VALEO

VALEO, DELPHI, EATON, TRW, MOTOROLA, DANA • Initiators: BOSCH (36%), CONTINENTAL (18%), ZF (18%), INA WÄLZLAGER SCHAEFFLER (18%), SAP (10%) • Partners: EBERSPACHER, HELLA, MAHLE, KOLBENSCHMIDT PIERBURG, THYSSEN KRUPP, WEBASTO, Other German Suppliers VOLKSWAGEN, DANA, BMW, HONDA OF AMERICA, VOLVO TRUCKS, CUMMINS, VISTEON, DUPONT BMW TOYOTA MICHELIN, GOODYEAR, CONTINENTAL, PIRELLI, COOPER, SUMITOMO RUBBER (1) JOHNSON CONTROLS, SIEMENS, MITSUBISHI CORPORATION SUPPLIERS

US$300bn US$87bn Valeo: US$300m in 2001

US$30bn

VW: US$49bn

Spare parts in the US > US$60bn

USINOR, ARBED, CORUS, THYSSENKRUPP DAIMLERCHRYSLER, FORD, ROCKWELL, MOTOROLA EATON, DELPHI, VISTEON, NAVISTAR DAIMLERCHRYSLER DANA, GOODYEAR, MITSUBISHI MOTORS, PACCAR, TENNECO SKF VOLKSWAGEN

Equipment and materials

Note: (1) Bridgestone left the consortium on 28/08/2000 Sources: Websites (see Appendix 1) and press cuttings from Financial Times and Les Echos

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6.3 Specialised start-ups and providers There are dozens of start-ups trying to catch their share of the e-B2B market or to attract major customers willing to outsource their procurement through an Application Service Provider (ASP) [48]. They belong to the intermediaries, i.e. the third layer in the University of Texas’ typology [49]. They compete with large infrastructure and software providers such as Microsoft and Oracle which belong to the second layer and with small or large e-commerce units (e-sellers or e-buyers) belonging to the fourth layer. FreeMarkets’ B2B eMarketplace is one of the leading B2B auction sites with 500 employees and US$2.7bn of purchase orders in 1999 saving buyers an estimated 2% to 25% [50]. The auction orders for the automotive industry were estimated at US$210m in 1999 and included springs, fuel system valves, master cylinders, steel blanked gauges, rubber moulded components, printed circuit boards, decorative plastics, cold headed components, actuators and sensors, die castings, plastic components, filtration mesh, ferrous metal stamped components, cooper and brass coils, electricity power and temporary labour. By mid 2000, FreeMarkets was already claiming 4,000 registered suppliers and within the automotive industry its current customers are Visteon, Delphi, Eaton and Navistar. FreeMarkets includes online auctions, asset recovery services, online surplus asset trade, global database of suppliers, supplier research and call centre support in 30 languages. Imark, a subsidiary of FreeMarkets, is proposing 15 families of products including interior and exterior accessories and body parts, brake systems, chassis and frame, drive-train, electrical devices, emission components, engine parts, exhaust, fuel system, glass, tyres and wheels and transmission but only three such as battery cables have available inventories and only for the replacement market. By nature, this segment of the new value chain is very unstable. Dozens of new B2B start-ups are created every month all over the world. Gartner Group estimates that 10,000 electronic trading exchanges using the internet will deal with US$438bn annual transactions by 2002. These small start-ups of the so-called new economy are still very small and most of the time in deficit despite some remarkable performances on the NASDAQ (Table 4). Big players such as IBM, with its websphere technology, Oracle, involved in AutoXchange and Microsoft, with Biztalk, are also looking carefully into e-commerce [51,52]. Consolidation is also already on its way in the e-supply business: FreeMarkets acquired iMark; i2 Technologies merged with Aspect Development for US$9.3bn in March 2000 (Table 5). As far as industrial organisation is concerned, this will give a considerably modified shape to the automotive industry. Table 4

The main B2B suppliers, figures available in May-June 2001

COMPANY i2 Technologies Ariba FreeMarkets Commerce One Manugistics Siebel

TURNOVER 2000US$m 571.1 280 20.9 34.0 177.6 n.a.

PROFIT (LOSS)US$m 23.5 (800) (21.8) (63.0) n.a. n.a.

EMPLOYEES 3,000 n.a. n.a. 1,100 n.a. 4,500

AUCTION VOLUMEUS$m n.a. n.a. 2,700 n.a. n.a. n.a.

Note: Ariba is forecasting an income of US$m 800 and a profit of US$15m in 2001, Les Echos, 30/01/2001


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A typology for marketplace

Type

Companies

Platforms

Ariba, CommerceOne, i2, Oracle

Integrators

CommerceQuest, Extricity, Vignette, WebMethods

Portals

Plumtree, Vignette

ERP

I2, JD Edwards, Oracle, SAP

Supply Chain

Asera, i2, Manugistics, Sapiens, SeeCommerce, webPlan

Catalog Management

Broadvision, Cardonet, Cohera, Hologix, Infinite Content (i2), Requisite, Saqqara, TPN Registar, Vignette

Consultants

Accenture, CGE&Y, DiSanto and Associates, PWC, Surgency

Source: http://www.supply chaintoday.com/e-busines_commercial_sites.htm

6.4 A complicated jigsaw In practice, it is quite difficult to identify a ‘dominant design’ in the emerging organisation of automotive related e-B2B. Some OEMs and leading global suppliers are simultaneously involved in different groupings (Table 6). In addition to these marketplaces, the automotive industry is also setting up networks which will interconnect OEMs and suppliers through the web and gradually replace EDI systems. This is the case of JNX (Japanese Automotive Network exchange) which is driven by the Japanese Automotive Research Institute (JARI). There are similar initiatives in Europe with ENX, in North America (ANX), in Australia (AANX) and in Korea (KNX). They all cooperate in designing the standards for such connectivity. As an example, JNX will connect service parts distributors, car dealers, car rental companies, driving schools, transportation companies, scrappers and wreckers, materials suppliers, engineering companies, etc. through the whole industry [53]. ENX is grouping more than 120 European component suppliers. Toyota has been the first to announce that it will use ENX to source on internet some of its components for its French plant in Onnaing (North) [54]. E-business-to-business marketplaces are so numerous that it is difficult to know which products and services they are dealing in and who their clients are [55]. Supply Chain Today classifies these sites according to the following typology. The complicated jigsaw is still very unstable since the collapse of the new economy is not yet completed and major mergers and acquisitions will still happen.

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Table 6

Consolidation in the B2B industry

PARTNER #1/PREDATOR

PARTNER #2/TARGET

NATURE

DATE

IBM

Ariba

Minority Stake

1st Quarter 2000

i2 Technologies

Minority Stake

QAD

Alliance

May 2000

iMark.com.

Acquisition

March 2000

Arthur Andersen

Alliance

19/04/2000

Surplus Record Auction

Acquisition

End 2000

i2 Technologies

Aspect Development

Merger

13/03/2000

Commerce One

QAD

Alliance

16/05/2000

Sterling Commerce

Strategic partnership

End 2000

Tradex Technologies

Acquisition

1st Quarter 2000

TradingDynamics

Acquisition

1st Quarter 2000

Agile Software

Acquisition

30/01/2001

eXcelon

Alliance

19/06/2000

Manugistics

Siebel, Vignette

Technological cooperation

End 2000

SBC Communication

Sterling Commerce

Acquisition

End 2000

FreeMarkets

Ariba

TRANSACTION

US$1.4bn in first quarter 2000

US$9.3bn

US$2.5bn

US$3.5bn

Source: Press cuttings

7

Alternative strategies

From the available information, it appears that there are four different strategies for the OEMs and the suppliers within the automotive supply chain in dealing with e-B2B: 1

in-house e-B2B solutions with the support of software companies, for instance Oracle

2

partial outsourcing through ASPs such as SAP or Oracle

3

e-commerce solution integrators, such as the alliance IBM-I2-Ariba

4

out-of-the-box vertical market solutions, or vertical portals [56].


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Covisint: a growing force Set up by DaimlerChrysler, Ford and General Motors, Covisint is the unchallenged leading platform in the automotive industry since Renault-Nissan, Toyota, Honda and PSA joined it. Covisint decided to specialise in automotive components and not to compete with specialised horizontal platforms, in particular for raw materials such as steel. For instance, Covisint will eventually promote e-steel with its clients (FT, 19/07/2001). After quite a long emerging period during which the company organised itself into an independent business unit, based in Southfield (Michigan, USA), it has been fully operational since the end of 2000. Early in 2001, Covisint established an office in Amsterdam (The Netherlands) and in July 2001 in Tokyo. Covisint is also cooperating with other platforms in which suppliers are already dealing, such as econia.com A.G. in Germany (Welt, 16/07/2001). ArvinMeritor has been the first global tier one supplier to organise a transaction through Covisint (FT, 05/10/2000). The first reverse auction was also held in October 2000 for plastic parts. In May 2001, Covisint organised a record auction on behalf of DaimlerChrysler buying 1,200 components for a total amount of €3.5bn (Hansdelsblatt, 16/05/2001). Between December 2000 and June 2001, Covisint is said to have managed transactions worth US$36bn. (Welt, 16/07/2001). There are 1,000 registered users who conducted 420 auctions covering 2.5 million items in 20,000 individual transactions. (InformationWeek http://dailynews.yahoo.com/h/cmp/20010719/tc/IWK20010718s0005_1.html).

Another approach would separate the options according to the driving actor [57]: •

the sell-side solution when suppliers are taking the leading position, e.g. e-steel or rubbernetwork, etc.

•

the buy-side solution when it is the OEMs or buyers, e.g. Covisint, who take the lead

•

the intermediary solution where the leading role is devoted to a specific marketplace or network governance structure in order to organise vertical or horizontal transactions, e.g. Oracle or SAP.

It should be highlighted that the large global consultancy corporations such as KPMG, PricewaterhouseCoopers, McKinsey and Cap Gemini/Ernst & Young, are developing their offers in e-B2B, in particular to the automotive industry. PricewaterhouseCoopers in search of a network of strategic alliances To augment its services, PricewaterhouseCoopers is making investments in and forming relationships with companies in four key areas: internet design and development, e-business technology and tools, e-transaction businesses and e-business/web strategy. Some of the strategic partners who help PricewaterhouseCoopers provide complete E-Business solutions include: Art Technology Group, BroadVision, Commerce One, CrossWorlds, Documentum, Extricity Software, Intershop, i2, Microsoft, mySAP.com, Opus360, Oracle, PeopleSoft, Siebel Systems, SpaceWorks, Studio Interactive, Vignette, XUMA (Source: http://www.pwcglobal.com).

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A complex rationale

Most academic literature about e-B2B is based on transaction costs economic theory. Saving such costs related to the organisation and fulfilment of value chain transactions would be considered as the main rationale. In organisational behaviour theory, the main concept is ‘disintermediation’, meaning that one of the key objectives is to reduce the number of intermediary bodies, in other words, to simplify the supply chain. In more detailed examinations, it appears that the top motivations for engaging in e-B2B are reduction of operating costs, i.e. direct costs linked to the different steps in the procurement process and transaction costs; satisfaction of OEMs requirements; and improvement in competitive advantages. However, according to the Arthur Andersen survey [46], only 16% of suppliers identified revenue growth. Nearly 50% indicated that they did not know the expected payback of their e-business investments. 25% were hoping to get a one-year payback period and 25% proposed a one-to-four year time frame. The costs and benefits of e-purchasing are summarised in Table 7. Table 7

Risks and benefits of e-B2B

BENEFITS

RISKS

Savings in procurement costs such as administration of transactions and operations

Downward pressure on prices

Direct revenues from the exchange system through commissions, transaction fees and service fees

Increasing cost of IT

Savings in design costs through standardisation

Standardisation as opposed to customisation and variety

Savings through a reduced number of tiers in the supply chain

Breaking the anti-trust regulations

Promoting and leveraging supplier efficiency

Expanding the supply base

Optimising Purchasing Processes

Missing the world-class supplier

Transparency over Supplier Base

Increasing risk of lost corporate secrets

Satisfying the OEMs request

The available data on the benefits of e-procurement varies from one source to another. Commerce One believes that it could save 5 to 10% in material cost. AT Kearney set a target of realising US$10bn in savings by applying e-commerce initiatives to the European supplier sector.


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Released savings thanks to e-business

Company

Savings on materials

Dana Deutsche Bank Commerce One

Savings on administration costs

Total savings

US$bn 1 US$ 1,188 per car 5-10% up to 20%

80%

Covisint

15% on a US$ 20,000 car

Oracle Ernst & Young

2-16%

5-20%

20% or more 15-30%

GlobalNetXchange Goldman Sachs

20-40% US$ 3,500 per car in the USA

Arthur D. Little

US$ 1,000 per car

Taylor Nelson Sofres Intersearch Aberdeen Group

45% 5-10%

Fast Buyer (Fiat) Volkswagen/EDS

From US$107 to 30 per order requisition Up to 70%

Up to 30%

Up to 50% 13%

Source

FT, 20/06/2000 Website, May 2000 Geneva Motor Show, March 2000 Oracle (1999) Gopal & alii, (1999) Nairn (2000) Quoted by Bernahart, Feige (2001) Bernahart, Feige (2001) Baum (1999) Aberdeen Group (1999a), (2000)

FT, 12/07/2001

Sources: Websites (see Appendix 1), company’s documentation

According to Tait [58], most analysts emphasise that the benefits lie more in process than in direct procurement costs: •

faster cycle: according to Aberdeen Group, there are huge benefits in reducing the purchase and fulfillment cycles from 7.3 to 2 days

•

reduced inventory: Aberdeen Group estimates from 25 up to 50%

•

standardised communication between participants within the supply chain

•

reduced working capital

•

faster overall production cycle.

But as quoted by Tait [58], Doughty from Cap Gemini admitted that those benefits will take several years to be fully realised. Above all, it seems that sharing information with existing and potential partners and improving customer service are likely to be the most immediate advantages. According to a survey by Ernst & Young reported by Industry Week [59], such benefits have been considered as ‘major’ by more than 40% of questioned enterprises [60].

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As an example, Ford is said to have received a full return on its investment in Covisint during the first year of its activity. The savings are estimated at US$m70 in 2000 and are expected to reach 350 in 2001 [61]. Figure 3

Covisint: expected savings in US$ per car

60

Warranty

98

Transportation

Total saving US$ 1,188

98

Sales Procurement Costs

107

Manufacturing

118 121

Inventory

189

Raw Materials Product Development

196

Maintenance/Repair

201 0

Figure 4

50

100

150

Expected savings per cost category in percentage of total costs

Source: Roland Berger [62]

200

250


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According to McKinsey & Company and CAPS Research [63], there are four business models for e-business platforms. The two most efficient models for long term value creation potential are project/specification management, which is dedicated to industrial marketing or transportation networks for instance, and supply consolidation which identifies the supply base and conducts the transactions. The liquidity creation model which creates purchasing markets for commodity products has a medium long term value creation potential. Aggregation which combines demand within and across buying enterprises and transaction facilitation which executes the purchase have only a low potential in long term value creation. Most experts and analysts foresee huge changes and cost savings along the whole value chain which will be completely inter-connected through internet as illustrated by Figure 5. Figure 5

An inter-connected system

OEM

Thus, the approach of digital procurement as one of the key elements of ‘inter-organisational coupling’ as suggested by Fulk and DeSanctis [35] and reinforced by Clark and Lee [33] seems quite relevant. But the measurement of the cost benefits of e-B2B is still a controversial issue. McKinsey & Company and Stanford University Business School’s Center for Electronic Business and Commerce Research are carrying out research in order to build up a performance index for B2B marketplaces [64]. Within the context of the dramatic downturn of the internet economy, the financial viability of electronic B2B is obviously a prerequisite to its own deployment. According to the McKinsey 2001 survey of 60 independent B2B platforms the return on operating expenses is around 14% for the top quartile and 4% for the others. But in practice, like most e-commerce companies, the B2B leaders are also facing huge losses.

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Hypotheses about major trends

Five major trends can be hypothesised regarding the involvement/commitment to develop and control e-B2B as strongly positively correlated with :

1

Its level of globalisation for direct operations, in particular design, manufacturing and purchasing

The more globalised are design, manufacturing and purchasing, the more likely there will be a strong interest in e-business. When thousands of employees and thousands of suppliers are concerned in a global organisation, there is a need for a highly centralised coordination which clearly reinforces the attractiveness of web-based technologies. This is obviously the case for GM, Ford, DaimlerChrysler and Renault-Nissan, the most active Covisint members.

2

Its level of consolidation, i.e. the number of business units and brands

The more consolidated and centrally coordinated an organisation is, the more it has the opportunity to develop electronic transactions internally and externally. This is obviously the case for GM, Ford, DaimlerChrysler and Renault-Nissan when PSA and Honda are in the opposite situation.

3

Its emphasis on co-makership and modularisation, which include a full transfer of responsibilities onto the suppliers’ shoulders

The more an OEM is committed to developing modular design and assembly, the more it is interested in diversifying its module suppliers and in dealing with them electronically.

4

The level of standardisation or ‘commonalisation’ of the purchased good or service [65]

The more a component, sub-system, system or module is generic, the more easily it could be purchased through reverse auction on the internet. The more it is specific to a particular vehicle or brand, the less likely it is that it would be purchased through the internet .

5

The level of vertical integration or specific relationships with key first tier suppliers positively or negatively related to e-B2B declared interest

This fifth trend is still not obvious. Some OEMs with specific relationships with affiliated or ‘historical’ partners, such as GM with Delphi, Ford with Visteon, Fiat with Teksid and Magneti Marelli, are very much involved in e-B2B. Some others, such as Peugeot with Faurecia and Toyota as well as Nissan with their kereitsu partners, are still reluctant to impose an all-internet purchasing strategy.


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10 Emerging problems The following problems should be pinpointed: •

Contradiction with the so-called co-makership (or full partnership) deal along the whole supply chain

The extra cost generated by internet supply is one of the key issues which will indeed have serious impacts on the relationship between the OEMs and their suppliers and along the whole value chain. According to Bursa [42], Covisint was considering charging 0.25% to 0.5% on each transaction conducted over its website. Quoting Alan Turfe, then head of GM e-activities, Bursa evaluated an income generation of US$bn 3 to 5 over the next five years. When linking the potential for e-B2B to the various categories of suppliers [66–68], it is likely with contractual (or catalogue) and newer suppliers that e-B2B will develop first since all specifications have been validated and the component could be delivered according to the OEM’s choice. But with older and partner suppliers, who have the ability to design and the responsibility over it, this would be more difficult and potentially contradictory with previous trends and practices. •

Threat to competition and potential collusion practices breaking the existing antitrust laws

This is the argument pinpointed by Wolffe, Tait and Bowe [18]. Antitrust analysts and officials in the US believe that the century-old antitrust laws should be applied to the new economy to prevent anti-competitive practices such as collusion and monopoly power. Officials are suggesting that it is unlikely to be a problem if the combined purchasing power is less than 20% of a particular market. In the automotive industry, this could well be a problem since each major player might already have more than one fifth of the total world supply. Estrem [69] emphasises the potential risk of ‘virtual keiretsu’ as a threat to free trade and competition. The European commission published its guidelines for vertical portals in May 2000. In August, a green light was given to horizontal portals through the case of myaircraft.com (aerospace components). For the Commission, the antitrust regulation does not apply to B2B market places since other trade channels still exist [70]. In the USA, Covisint has been recently approved by the anti-trust commission. •

Change in the relationships along the value chain

E-B2B could be a part of the search by the OEMs for new ways of regaining the bargaining power lost through out-sourcing to global suppliers and the transfer of responsibilities, by threatening them with potential cheaper competitors. This might lead to a major shift in customer-supplier relationships towards so-called ‘dual invoicing’, i.e. R&D and design tasks on the one hand, manufacturing and delivery on the other. Expert suppliers would then be asked to develop new components and systems through a true partner relationship, including long term contracts, while the manufacturing itself could be auctioned through the internet. Such a separation of development and series

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supply contracts is a major change for the supply chain. This might lead to exit strategy as soon as standards are set by the OEMs [43]. •

Major threat to confidentiality and innovation

As pointed out by Olin, Greis and Kasarda [71], B2B can be a double-edged sword. It enables design and R&D teams from both OEMs and global suppliers to operate in a virtual design environment, but also poses security concerns regarding how to protect proprietary information, in particular innovative ideas and suggestions.

11 Conclusion There is an urgent need for further research on e-commerce and its impacts on the automotive industry structure and business models by economists as well as industry analysts and consultants before any viable business recommendation is formulated. The new internet-based economy is still very much in an infant stage. No trends have stabilised yet. This is still a very controversial issue: •

On the one hand, this could well be considered purely as a management guru’s whim as the lean model was ten years ago. Some observers notice that the consequences of adopting such a managerial whim without being fully prepared, or without adapting it to local and cultural context, negatively impacts businesses, leading to bankruptcy and unnecessary consolidation.

•

On the other hand, e-B2B could well be the new best practice in purchasing, transforming radically traditional business models into a more virtual and transparent system.

The only consensus, if any, is that clearly e-business is unavoidable in that some particularly ‘entrepreneurial’ organisations have decided on early entry. This is obviously good for the corporate image to the public. The shared vision seems to be that it is better to be in than to be out. For Chung-Shing Lee [5], e-commerce is no longer an alternative but an imperative. As far as Europe in concerned, the following key remarks might be formulated: •

There are still opposing strategies regarding B2B with two groups of OEMs: DaimlerChrysler, PSA, Renault and Fiat teaming with GM and Ford within Covisint, facing Volkswagen and BMW who are looking for an independent approach.

•

The same opposition also exists within the first tier global component supply industry.

•

Large and medium size independent suppliers as well as SMEs are struggling to avoid being ‘the nuts in the cracker’: they consider centralised B2B to be a new way for their customers to squeeze their autonomy and therefore what remains of their bargaining power for pricing.

One key issue for economic policy makers is the so-called ‘winner-takes-all’ logic [72] by which the big marketplaces such as Covisint might get bigger and bigger through a


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disproportionate share of the market and the network effect which holds that services become more valuable as more people use them. The risk is indeed monopoly positioning and unfair competition and therefore over-pricing. The users would then have to pay a premium to use such mega internet sites. There is still an obvious risk that Covisint will become dominant and that unfair competition practices will appear, to the benefit of OEMs. This would inevitably have an impact on the final customers! Antitrust bodies in the USA and Europe might pay strict attention to such practices. For an emerging country such as China, one of the main advantages of e-business-to-business is that it is a very cheap system for information and data management of the supply base. It could allow emerging industries to align on best practices used by US, European and Japanese OEMs and first tier suppliers. As far as second tier suppliers, mostly SMEs, are concerned, they might use e-B2B to enter the global market. But for practitioners, the central question is the need to design and implement new business models. This is one of the key topics for further research since there is no ‘one best way’ available.

References and Notes 1 2

3

4 5

6 7 8 9 10 11 12 13 14

For a bibliography on innovation, (see [2,3)]. Birchall, D., Chanaron, J.J. and Soderquist, K. (1996) ‘Managing innovation in SMEs, a comparison of companies in the UK, France and Portugal’, International Journal of Technology Management, Vol. 12, No. 3, pp.291–305. Chanaron, J.J. (1998) ‘Managing innovation in European small and medium-sized enterprises’, Nijmegen Lectures on Innovation Management, Nijmegen Business School, Maklu-Uitgevers, Antwerpen. Schumpeter, J.A. (1911) The Theory of Economic Development, Harvard University Press, Cambridge (1934 edition). Chung-Shing Lee (2001) ‘An analytical framework for evaluating e-commerce business models and strategies’, Internet Research: Electronic Networking Applications and Policy, Vol. 11, No. 4, pp.349–359. KPMG Consulting (1999) Global Supply Chain Benchmarking and Best Practices Study, Phase I, KPMG. KPMG Consulting (2000) Global Supply Chain Benchmarking and Best Practices Study, Phase II, KPMG. Sage, L. (1999) ‘Facing the e-commerce challenge’, Automotive Insight, Ernst & Young, September. Schlott, S. (2000) ‘An announcement that changed the world’, International Automobile Management, June, No. 2, p.3. Licoppe, C. (2000) ‘Commerce électronique: mythes et réalités’, La Recherche, Feb., No. 328, pp.88–89. Lamm, P. (2000) ‘Le New Deal de l’économie (1) L’industrie traditionnelle se dope au Net’, Les Echos, 5 June. Defined as the worldwide system made up of all OEMs (vehicle manufacturers) and all their industrial suppliers from any tier within the supply chain. Therefore, market surveys are rapidly out-dated, such as Gebauer, Beam, Segev [14]. Gebauer, J., Beam, C. and Segev, A. (1998) ‘Impact of the internet on procurement’, Acquisition Review Quarterly, Vol. 14, Spring, pp.167–181.

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15 Mann, P. (1999) ‘Delivering value across the internet supply chain’, Manufacturing Systems, July, pp.i–viii. 16 According to IBM, in 2000, B2B will account for 78% of the total revenue generated by e-commerce. 17 Smeltzer, L. and Ruzicka, M. (2000) ‘Electronic reverse auction: integrating the tool with the strategic-sourcing porcess’, Practix, Vol. 3., June, pp.1–6. (www.capsresearch.org/practrix.htm). 18 Wolffe, R., Tait, N. and Bowe, C. (2000) ‘Fair exchange in cyberspace’, Financial Times, Comments & Analysis, 5 June, p.16. 19 Sengès, G. (2000) ‘Le New Deal de l’économie (2) Un mouvement lancé aux Etats-Unis’, Les Echos, 6 June. 20 Kleinbard, D. (2000) ‘Navigating the B2B maze, finding an e-commerce site or exchange that works for your small business’, 23 May, Vertical Net Web Site. 21 Forrester Research, Merryll Lynch (2000) websites information. 22 Michel, T. (2001) ‘L’e-business surnage dans le marasme ambient’, La Tribune, 22 March, p.35. 23 Villemin, F.Y. (2000) ‘Le commerce électronique’, ITCE 00/01, CNAM-CEDRIC. 24 La Tribune (23/3/01) 25 Choon Tan, K. and Dajalos, R. (2001) ‘Pg strategy in the 21st century: e-procurement’, Practix, Vol. 4, June, pp.7–12. 26 To name only independent OEMS. 27 Gebauer, J. and Segev, A. (1999) ‘Emerging technologies to support indirect procurement: two case studies from the petroleum industry’, Information Technology & Management, Vol. 1, Nos. 1–2, pp.107–128. 28 For a good global academic approach, see [29]. For an outstanding article on the economics of B2B, see [30]. 29 Kaplan, S. and Sawhney, M. (2000) ‘E-hubs: the new B2B marketplaces, Harvard Business Review, May-June, pp.97–103. 30 Garicano, L. and Kaplan, S.N. (2000) ‘The effects of business-to-business e-commerce on transaction costs’, National Bureau of Economic Research, Working Paper Series, No. 8017, http://www.nber.org/papers/w8017. 31 Chanaron, de Banville (1991) Uers un systeme automobile European, Economica, Paris. 32 Tait, N. (2001) ‘A long drive to be all things to all car manufacturers’, Interview of Kevin English, Chief Executive, Covisint, Financial Times, June. 33 Clark, T.H. and Lee, H.G. (1999) ‘Performance, interdependence and coordination in business-to-business electronic commerce and supply chain management’, Information Technology and Management, Vol. 1, Nos. 1–2, pp.85–105. 34 Malhotra, Y. (1996) ‘Organizational earning and learning organizations: an overview’, Brint Institue, www.brint.com/papers/orglrng.htm. 35 Fulk, J. and DeSanctis, G. (1995) ‘Electronic communication and changing organizational forms’, Organization Science, Vol. 6, No. 4, pp.337–349. 36 Hamel, G. and Pralahad, C.K. (1994) Competing for the Future, Harvard Business Press, Boston. 37 Malhotra, Y. (2000) ‘Knowledge management for e-business performance: advancing information strategy to ‘internet time’ ’, Information Strategy, The Executive’s Journal, Vol. 16, No. 4, Summer, pp.5–16. 38 Burt, T. (2000) ‘Components: transformation underway’, Financial Times Survey, FT Auto 2000, February, FT.com. 39 Financial Times (2000) ‘Tyre industry, consolidation is likely to continue’, Financial Times Survey, FT Auto 2000, February, FT.com.


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40 Ernst & Young (1999) Tomorrow’s Automotive Supplier. 41 Silverman, G. (2000) ‘The urge to merge takes on a different form’, Financial Times, IM&A Survey, 30 June, p.II. 42 Bursa, M. (2000) ‘The internet revolution’, ISATA Magazine, No. 9, April, p.10. 43 Roland Berger & Partners (2000) ‘Nine mega-trends re-shape the automotive supplier industry’, A trend study to 2010, Munich, March. 44 “We find it hard to imagine a system in which all human contact is replaced by a computer”, according to R. Johnson, head of purchasing at Toyota Europe, quoted in International Automobile Management, 2/2000, p.19. 45 Gosselin, J.P. (2001) ‘Extensive enterprise: produce and optimize, relying on numerical integration’, Ingénieurs de l’Automobile, No. 742, Jan-Feb., pp.108–112. 46 Miller, R. J. (1999) Impact of Internet Buying on Vehicle Manufacturers and Suppliers, Arthur Andersen, Detroit. 47 Automotive News, 05/06/2000. 48 Financial Times (2000) ‘E-business, focus on ASPs’, Financial Times Survey, FT-IT Review, 7 June. 49 Barus, A. and Whinston, A.B. (1999) Measuring the Internet Economy, University of Texas, Cisco Systems, October, 7, Austin. 50 Since 1995, it has executed online auctions for over US$5.4bn creating potential estimated savings of more than US$1bn. 51 Some portals are set up by banks and/or consulting companies to specifically support SMEs [52]. 52 Maudet, P. (2000) ‘Internet sur le terrain. Fonction achat : branle-bas dans le B to B’, Sociétal, No. 29, 3ème trimestre, pp.14–15. 53 Kawase, Y. (2000) JNX Status Update, JNX Center, JARI, 20 September. 54 Nihon Keizai Shimbun, 10/01/2001. 55 For a list of e-market places, see @brint.com at the following address: http://portal.brint.com/cgi-bin/getit/links/business/e-commerce/Marketplaces/industrial. 56 This is the strategy adopted by the French glass manufacturer Saint-Gobain which is setting up a European market place or vertical portal with an objective of Euro2bn turnover by 2005. 57 Archer, N. and Gebauer, J. (2000) ‘Managing in the context of the new electronic marketplace’, 1st World Congress on the Management of Electronic Commerce, Hamilton, Ontario, 19–21 January. 58 Tait, N. (2000) ‘Technical hitch stalls ‘Big Three’ trading site’, Financial Times Survey, Automobile, 14 June, p.II. 59 IndustryWeek.com 60 General Electric Appliances is currently pushing online supply auctions towards its 2,000 global suppliers which is supposed to lead to ‘double-digit’ percentage savings (March, 2000). It had a bn $5.7 turnover in 1999. 61 Financial Times (2001) 2 July 62 Roland Berger in Automobile Management (2001) from their website. 63 McKinsey & Company, CAPS Research (2000) Using the Lens of Economic Value to Clarify the Impact of B2B E-Marketplaces, www.capsresearch.org. 64 Chapuis, B., Lemmens, R., Mendelson, H. and Villars, D. (2001) ‘A performance index for B2B marketplaces’, The McKinsey Quarterly, Online (http://wwwmckinseyquarterly.com). 65 The correlation is indeed negative with the level of specification: the more specific the component is, the less it could be traded through internet bidding. 66 Nellore, R. and Soderquist, K. (2000) ‘Portfolio approaches to procurement. Analyzing the missing link to specifications’, Long Range Planning, Vol. 00, pp.1–23.

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67 Using Kamath and Liker research on Toyota [68]. 68 Kamath, R.R. and Liker, J.K. (1994) ‘A second look at Japanese product development’, Harvard Business Review, Vol. 72, No. 6 pp.154–170. 69 Estrem, W.A. (2000) ‘Being virtual: the role of information technology in the globalization of the automotive industry’, The JAMA Forum, Vol. 18, No. 2, pp.4–13. 70 Fabre, R. and Manteau, P. (2000) ‘E-marketplaces: le ‘oui’ de Bruxelles’, Les Echos, 27 September. 71 Olin, J., Greis, N. and Kasarda, J. (1999) ‘Knowledge management across multi-tier enterprises: The promise of intelligent software in the auto industry’, European Management Journal, Vol. 17, No. 4, August, pp.335–346. 72 Tomkins, R. (2000) ‘Dotcoms devoured’, Financial Times, 23 October.

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Appendix 1: Websites B2B Research Organisations Gartner Group: http://www.gartnercom Taylor Nelson Sofres Intersearch Corporation: http://www.intersearchcorp.com Forrester Research: http://www.forrester.com Keenan Vision: http://www.keenanvision.com Roland Berger & Partners: http://www.rolandberger.com/ Roland Berger Research: http://www.rb-research.de Forit Internet Business Research: http://www.forit.de McKinsey Quarterly: http://www.mckinseyquarterly.com

B2B Companies Alliance e-marketplace: http:// www.ibm-i2-ariba.com Ariba: http://www.ariba.com i2 Technologies: http://www.i2.com Trade-match: http://www.trade-match.com Oracle: http://www.oracle.com and oracleexchange.com FreeMarkets: http://www.freemarkets.com & www.imark.com & www.b2bexplorer.com IBM: http://www.ibm.com Commerce One: http://www.commerceone.com Covisint: http://www.covisint.com Vertical Net: http://www.veticalnet.com Thru-put: http://www.thru-put.com SAP: http://www.sap.com Business Objects://www.businessobjects.com Siebel: http://www.siebel.com Informix: http://www.informix.com Vignette: http://www.vigentte.com EXcelon: http://exceloncorp.com Econia :http://www.econia.com

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Product Specific Sites Steel: http://www.esteel.com and http://metalsite.com Power, Electricity and Gaz: http://pantellos.com Chemicals, plastics: http://Chemconnect.com

Support Services Big Step: http://bigstep.com Smart Age: http://smartage.com

Information Sites http://www.supplychaintoday.com http://logistics.about.com http://www.supplychainonline.com/modules.html# http://portal.brint.com/cgi-bin/getit/links/Business/E-Commerce/Marketplaces/Industrial