GM Pulls Ahead in Web Supply-Chain Race

Aims to save processing costs

Three months ahead of schedule and before its automotive competitors, General Motors Corp. opened a Web-auction and catalog-procurement system to its vast network of suppliers Dec. 17.

The world's largest automaker wants to trim materials and processing costs by using its new TradeXchange online system. Detroit-based GM, which announced the online market in November, hopes to reduce the cost of processing a purchase order -- from an average of $100 to $10 -- by channeling most of its $87 billion in annual supply purchases through the Web site, officials said (News, Nov. 8).

GM's move puts it ahead of rival Ford Motor Co. Dear-born, Mich.-based Ford announced plans in November with Oracle Corp. to create AutoXchange, an online procurement system for Ford's suppliers. The site is set to launch early this month.

DaimlerChrysler AG in Stutt- gart, Germany, is considering an online trading forum, but Jeff Trimmer, director of operations and strategy for procurement and supplies, said it's unlikely to be an auction. "We're not strong believers in online auctions," Trimmer said. "There is a place for online-auction and catalog buying, but we're more interested in developing long-term relationships with our suppliers."

GM said the industry players that have signed up for its TradeXchange include Tokyo-based Isuzu Motors Ltd., which averages $750 million in annual supply purchases.

Forrester Research Inc. in Cambridge, Mass., predicts business-to-business Web auction sales will expand to $52 billion in 2002 from $8.7 billion in 1998.

Analyst Steve Cole at Forrester said the auto industry could represent a big chunk of that activity. He said procurement networks should cut costs for automakers due to the efficiencies created by Web-based order management systems. The procurement networks will also boost the buying power of the automakers and their suppliers, pushing supply prices lower, Cole said.

Gary Ball, president of Ball Machinery Sales Ltd. in Guelph, Ontario, buys and sells used metal-stamping equipment from automakers. He said he purchased $400,000 in stamping equipment from GM through TradeXchange Dec. 17.

"Now the end user can buy direct from GM without going through a middleman, like myself. I would sell a press for $125,000, but the end user can buy direct from GM for $100,000," Ball said. "It's good for GM, and it's good for me, because I don't have to stand at an outdoor auction in bad or hot weather all day."

GM used auction software from Commerce One Inc. in Walnut Creek, Calif., to develop TradeXchange. Dealers need only a Web browser to purchase from GM, but suppliers that want to sell to GM need to license or purchase MarketSite trading portal software from Commerce One.

TradeXchange lets participants conduct purchases via an auction, catalog or through a bid-quote process.

The online supply-chain auction goes beyond the auto industry. Oracle Corp. and Seattle-based The Boeing Co. are reportedly discussing a deal to set up an online marketplace to automate purchases of air-plane parts and other products, though both companies declined to comment.

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