Multi-system covers multi-tasks for tier-one auto supplier

By By William Atkinson -- Purchasing, 3/22/2001

With $32 million in sales and 325 employees, Mehra Tube Inc., Grand Blanc, Mich., is a moderate-sized tier-one supplier of tube and hose assemblies to the auto industry. "As auto suppliers, we are being pushed by our customers to make more use of the Internet," explains Santosh Mehra, president. "For example, activities once handled by EDI are now being done on the Internet."

When General Motors began using reverse auctions with a number of its suppliers, including Mehra Tube, the company saw the value of using the same technology with its suppliers as a way to reduce costs and remain competitive. However, once it became experienced with the concept, the company realized reverse auctions offer numerous benefits beyond just getting the best bid prices.

One thing that attracted Mehra to I-Dynamo, the company's reverse-auction provider, was the ability to place the company's existing suppliers on the site. "What I like about I-Dynamo is that we can have plastics suppliers, hose suppliers, stampings suppliers, and screw machine suppliers all on the same site," he says. "One other provider we considered did not have this capability, and the suppliers it had available didn't provide the commodities we needed."

Mehra also considered another provider, but found that a match did not exist. "First, the provider did not give us a list of the suppliers it was going to use," he says. "In addition, the system was cumbersome to use, but since their salesperson was willing to help me through it, I decided I could live with it," he explains. "However, they then told me that it would be at least three or four weeks before we could conduct an auction. Since we don't get that kind of time from our customers, this posed a problem." The final nail in the coffin was that, two weeks later, Mehra was told that every auction he might want to schedule would be required to involve a minimum of $25,000. Not all of the auctions he wanted to schedule would meet that minimum.

Under the I-Dynamo system, when Mehra Tubing has a need to source a specific component, it forwards drawings to suppliers who express interest in participating in the auction. "A few days later, we hold the auction," Mehra says.

The auctions themselves (and resulting price savings) are only one feature of the system that Mehra finds of value. "We create blanket contracts with suppliers, and we used to fax releases to them every week or every month," he says. "We occasionally ran into problems where suppliers reported not receiving our faxes." One feature of I-Dynamo is an online release system that sends out releases to suppliers via the Internet. "The system requires suppliers to acknowledge and accept the releases," says Mehra.

The system also has an advanced shipping notice (ASN) feature that suppliers send to Mehra Tube online. "This feature was important in helping us achieve QS-9000 requirements," he adds.

In all, the system provides a single site that handles purchase orders, releases and ASNs. "It also provides exception reports," says Mehra.

I-Dynamo is currently working with Mehra Tube on additional features, including the ability to tie releases to the company's MRP system (reducing the number of manual entries required), and the ability to allow the company to attach drawings to online RFQs (eliminating the need to fax such drawings to suppliers).

"Besides cost savings and other time-saving features, another benefit of the system has been the ability to locate new suppliers," continues Mehra. "In order to remain competitive, we need to continue to find new suppliers. For example, we had dealt with just two stampers for over 12 years. The auction system helped us locate three more, two of whom have turned out to be extremely competitive. We have also been able to add a hose supplier."

Mehra admits this can pose a challenge, though. "Good, long-term suppliers aren't eager to see their business challenged," he notes. "We don't want to upset these suppliers as we add new ones, and we want them to continue to participate in our auctions." One way Mehra has been successful in doing this is to explain to these suppliers that his customers are also demanding the same thing. "To date, we are fortunate that none of our existing suppliers have backed out," he reports.

In the near future, Mehra Tube is planning to investigate another I-Dynamo system that will allow ordering of MRO supplies (such as office supplies and janitorial supplies) via e-catalogs. Mehra says, "We would be able to put the items that we order into the system, then enter the quantities that we need to order each month."