To B2B or not to be? E-markets in motor manufacturing

To B2B or not to be? John Adamson surveys the growth of e-marketplaces in the auto manufacturing industry and asks why big...

To B2B or not to be? John Adamson surveys the growth of e-marketplaces in the auto manufacturing industry and asks why big players like BMW have decided to go it alone rather than join an e-hub.

One of the side effects of B2B e-commerce is that all sorts of unlikely bedfellows are climbing under the same duvet.

Perhaps the most useful illustration of the forces promising to unite industries - and those threatening to pull them apart - is provided by the car manufacturers.

In February this year, General Motors and Ford buried their differences and announced plans to collaborate on the development of an industry-wide exchange.

Both had been planning exchanges of their own, and the decision to pool their interests looked like a victory for common sense. After all, you can't expect to enjoy the benefits of collaboration if you're not prepared to collaborate.

The GM-Ford axis quickly expanded to include DaimlerChrysler, then Renault and Nissan. The resulting organisation Covisint was beginning to look like a model of cross-industry co-operation.

Suppliers would benefit from having a single target to aim at, rather than having to bear the expense of participating in numerous private exchanges each with its own technical requirements. As for the car-makers, they would reap the classical benefits of e-procurement: lower purchasing costs, a bigger supplier base and better integration of purchasing with other business processes.

Big as it is, Covisint by no means represents the whole of the motor industry. Some notable names are missing.

BMW was invited to join Covisint but declined. Under the inevitable media interrogation that followed BMW confessed to having doubts about getting too close to its rivals.

The information sharing aspect of B2B e-commerce is one of its main attractions is also one of its main problems - unless you trust your partners. By sharing information about traffic, business processes, prices and suppliers, buying communities can become more effective. Clearly BMW was concerned that some parts of the community stood to become more effective than others.

The company raised other objections: its supplier network had been built up over many years. It wasn't prepared to risk leaving some of these suppliers out in the cold nor, apparently, was it prepared to share these carefully nurtured relationships with its rivals.

Fair enough. Then BMW executed a swift u-turn and announced that it was to set up an exchange of its own with fellow German manufacturer Volkswagen.

There are a few lessons to be learned from this saga. The most important is to recognise that the interests of more efficient procurement will often be weighed against other vested interests. While BMW could see the advantages of clubbing together, it could also see the disadvantages of joining a club in which it would have been one of the smaller members.

It is widely predicted that the huge number of exchanges will be whittled down to only a few per industry.

It seems unlikely, though, that the magic number will turn out to be one.

Despite some of the more pious protestations made about collaboration it is clear that many companies still want to manage collaboration to their own ends. Everyone wants a level playing field - just so long as they make the rules, get to play on it first and have a controlling interest in the club.

John Adamson is joint managing director of e-procurement specialist Tranmit

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