Business-to-business
trading platforms were among the many casualties of the dotcom
collapse. But the B2B vision refuses to die and in the automotive
sector, the conditions are looking more favourable as more of the
industry's sourcing shifts to China.
We were thus intrigued last week's announcement from GlobalAutoIndustry.com, a US-based B2B site for the car industry, and Shanghai Kowin Automotive Components, the global sourcing division of China's Chery Automotive.
At the Hi-Tech Fair in Shenzhen , the two firms signed a letter of intent to create what they claim is the "world's largest" online B2B automotive sourcing portal.
The portal aims to bring buyers and sellers in the automotive industry together and, more importantly, allow them to post the necessary information for completing transactions, including RFQs, specifications, drawings and parts catalogues.
This is hardly a new idea. Six years ago, the internet was awash with similar initiatives focussed on transforming trading in a bewildering range of "old economy" industries, including leather, paper, automotive and chemicals.
The car industry announced one of the most ambitious B2B e-commerce projects in which car giants Daimler Chrysler, Ford and General Motors agreed to create a massive trading exchange, called Covisint.
The aim was to create a "neutral" exchange that would operate independently of its three big backers and embrace 50,000 suppliers. There were even plans to floated as a separate public company.
The business plans of many of the B2B initiatives were hopelessly naive and the business processes too simplistic. Unlike a consumer buying a digital camera on the internet, procurement offices are interested in a lot more than just price. So, when the VC-backed marketplaces, with names such as PaperX, MetalSite and MetalSpectrum, could not raise new funds, the B2B bubble popped.
Covisint survived although it has hardly thrived and in 2004 it was sold to US software company Compuware.
What about today? Many lessons have been learnt and the greater availability of broadband makes it more feasible to reach small suppliers and exchange bandwidth-hungry data such as technical drawings.
In the automotive sector, the conditions look more promising than before as the centre of gravity for the industry's supplier base shifts inexorably east. Kevin Chen, CEO of Kowin, says:
Sourcing from emerging markets, especially China, has become imperative for most players in mature automotive markets. With thousands of suppliers in China, and varying terms of quality and service capability, it creates significant challenges for global buyers to find appropriate suppliers in China."
Kowin was founded in 2004 as a purchasing platform. It is now the sole sales agent for Chery's tier 1 and tier 2 suppliers as well as the distribution agent of spare parts for Chery's global operations.
The two organisations expect to sign the formal agreement creating the portal, as yet unnamed, during the Beijing Auto Show next month.
