PracticePeople In PracticeVW gears up its private exchange

VW gears up its private exchange

Automotive exchange Covisint has attacked Volkswagen for damaging relations with the supplier community by creating its own private exchange.

Volkswagen started running purchasing auctions for components and supplies through its IT department last year. It intends to increase activity in the next six months, with more than 800 online auctions planned for this year.

The company will license auction software, developed by a subsidiary of EDS, for six years and claims to have already made savings of about 13 per cent.

But public exchange Covisint, which counts Ford, General Motors, DaimlerChrysler, Peugeot and Renault as members, claims suppliers want a single public exchange to which all manufacturers conform.

‘Private exchanges put a burden on the supply community,’ said Dan Jankowski, Covisint vice president of corporate communications.

‘Covisint is trying to drive waste and cost out of the system. What Volkswagen is doing adds waste and cost. Now the suppliers have to support yet another protocol.’

When Ford and General Motors were setting up individual online purchasing systems in pre-Covisint days, the supplier community asked for a single industry standard exchange that everyone conformed to, claims Jankowski.

‘It’s too early to say which model will win,” said Gartner analyst Daren Siddall. “There aren’t enough successful examples of either yet.’

Companies should keep their options open and avoid committing to either model.

Setting up a private exchange does not preclude a company joining a consortium-led model such as Covisint, says Siddall.

‘A lot of companies are not waiting for online exchanges to deliver,’ he said.

‘Even if they are members of a consortium marketplace, a lot of manufacturers are conducting their own trials in the background. We are definitely seeing a two-pronged approach.’ Volkswagen started running purchasing auctions for components and supplies through its IT department last year. It intends to increase activity in the next six months, with more than 800 online auctions planned for this year.

The company will license auction software, developed by a subsidiary of EDS, for six years and claims to have already made savings of about 13 per cent.

But public exchange Covisint, which counts Ford, General Motors, DaimlerChrysler, Peugeot and Renault as members, claims suppliers want a single public exchange to which all manufacturers conform.

‘Private exchanges put a burden on the supply community,’ said Dan Jankowski, Covisint vice president of corporate communications.

‘Covisint is trying to drive waste and cost out of the system. What Volkswagen is doing adds waste and cost. Now the suppliers have to support yet another protocol.’

When Ford and General Motors were setting up individual online purchasing systems in pre-Covisint days, the supplier community asked for a single industry standard exchange that everyone conformed to, claims Jankowski.

‘It’s too early to say which model will win,’ said Gartner analyst Daren Siddall. ‘There aren’t enough successful examples of either yet.’

Companies should keep their options open and avoid committing to either model.

Setting up a private exchange does not preclude a company joining a consortium-led model such as Covisint, says Siddall.

‘A lot of companies are not waiting for online exchanges to deliver,’ he said.

‘Even if they are members of a consortium marketplace, a lot of manufacturers are conducting their own trials in the background. We are definitely seeing a two-pronged approach.’

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