SupplyOn takes on North American market
David Hannon -- Purchasing, 8/17/2004 2:00:00 AM
The SupplyOn online marketplace for tier one automotive suppliers is making the leap across the pond. Founded in 2000 through investments from major German automotive suppliers Robert Bosch, Continental, INA Werk Schaeffler, SAP and ZF Friedrichshafen, the marketplace has gained strong acceptance in Europe and is now moving into the North American automotive market in a big way, with its major user/investors like Siemens VDO spreading the word.
Unlike the more infamous automotive industry marketplace Covisint, which was founded by OEMs and thrust upon suppliers, SupplyOn was founded by suppliers, albeit very large ones. It offers tools for both the buy side and sell side, including e-sourcing/e-auction tools, EDI, collaborative engineering documents management and supplier performance modules for buyers.
"A year ago, the perception was that SupplyOn was a European tool that would not work in North America," says Frank Homann, vice president of North American purchasing for Siemens VDO, which has part ownership in SupplyOn. "Today we have introduced in the U.S. and have U.S. and Mexican suppliers on SupplyOn. But we learned from Covisint not to take on too much and take it step by step and stay profitable."
Since making an investment in SupplyOn in late 2001, Siemens VDO has strongly pushed most of its sourcing through the platform and taken a keen interest in the platform's growth. Siemens VDO decided to invest in SupplyOn for the cost benefits, as an external technology provider would charge per-use in most cases for a tool that only certain suppliers would use. The SupplyOn investment was a one-time charge and allowed all of its suppliers to connect to one point.
"In North America we see a lot of our competitors investing heavily in individual software, which we did not want to do," says Homann. Siemens VDO started by rolling out the e-sourcing tool and later moved onto e-auctions. The e-auction tool on SupplyOn was actually developed by Siemens internally and adopted by SupplyOn when Siemens VDO signed on. According to Homann, 75% of all automotive production material in Europe is running through SupplyOn and increasing in Europe and in North America.
Siemens VDO has a $6 billion annual spend, with $4.7 billion of that production and $1.3 billion indirect. Almost all of its production volume goes through SupplyOn today, in the neighborhood of $4 billion a year. Siemens VDO still uses a Siemens corporate marketplace for its indirect materials but has moved onto the Web EDI tool from SupplyOn and is currently piloting the supplier performance monitoring tool.
"We are trying to run $1 billion through the e-auction tool on SupplyOn this year," Homann says. "Last year, we did about $500 million through auction. We are currently running 6,000 RFQs worldwide through this annually with no exceptions. We are tracking our return on investment in SupplyOn by the level of business we put through it, not tracking pennies saved on it."
Homann says SupplyOn differs from Covisint because it was not forced upon suppliers by OEMs. At the same time, Siemens VDO is now requiring that all of its RFQs go through the platform—no exceptions.
"The goal was to create a marketplace where we have access to information from suppliers in one place instead of all of us having to deal with suppliers individually through emails and phone calls," he says. "At the end of the day we all have the same requirements and processes at tier one suppliers, so it makes sense in terms of process cost reduction to do it this way. This tool is all about speed and data transfer."
Next year Siemens VDO plans to allow suppliers to use SupplyOn to connect directly to its SAP system, and view data almost instantly from internal systems. Homann says this level of connectivity is already in place at General Motors, for instance, which Siemens VDO supplies.
"We as a supplier like that because you can get updated data and be prepared for meetings. We as a tier one supplier cannot afford a system like theirs so we are doing it collaboratively through SupplyOn's connectivity."
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