E-marketplace Covisint LLC is looking to help lower the cost of office supplies for car dealers. Unlike its efforts to automate the purchasing of car parts, this new initiative goes back to the roots of business-to-business e-commerce by facilitating the purchase of office supplies and similar commodities.
Covisint and The Reynolds Co., a major forms provider, this week will begin operating General Motors Corp.s Dealer Supply Advantage, a procurement Web site that enables independently owned GM car dealerships to take advantage of the automakers huge buying power to order MRO (maintenance, repair and operations) goods at a discount online.
Dealers will be able to go to the GM portal, click on a new icon for Dealer Supply Advantage, click through to Covisint and purchase goods as diverse as note pads to gas cards to computer equipment.
Next month, Covisint, of Southfield, Mich., and Reynolds will launch a second site aimed at non-GM dealers looking to shop online.
Buying pencils online is a long way from the original mission that GM, DaimlerChrysler Corp. and Ford Motor Co. had when, two years ago, they formed Covisint. The goal then was to integrate systems, foster collaboration among some of the worlds largest manufacturers and their suppliers, and transact big business deals online.
But moving into the retail side of the automotive world may not be far from Covisints core business model.
"This is a tentative first step beyond just being a supply chain company [and becoming] an overall sourcing company," said Kevin Prouty, an analyst at AMR Research Inc., in Boston. "If they do well with GM, others will pick it up."
Covisint is making strides into a number of potential areas that could tie together engineering, operations, supply chains and procurement, according to Prouty. To do that, it will need money, and the move into dealerships brings extra cash to the e-market.
Reynolds, which makes the majority of forms used by dealerships (think mountainous lease applications) worked with Covisint and GM, of Flint, Mich., to modify its ReySource procurement software for Dealer Supply Advantage.
GM has about 22,000 dealerships nationwide, each spending an average of $1 million a year on MRO supplies, forms and other related items, making the potential volume attractive for Covisint.
And Reynolds already also has inroads to GM dealerships, according to Scott Collins, vice president of integrated document solutions at Reynolds.
"We sell something to probably 92 to 95 percent of all GM dealerships," said Collins, in Dayton, Ohio. "This is an I told you so. We had read about Covisint and their stance of [providing] an online auction between manufacturers. We felt it was only a matter of time [before something like this came about]. It makes sense with the manufacturers, who are looking to add as much value to the dealerships as possible. Its a real logical fit for Covisint with its core competency in building online marketplaces."
Covisint will have to persuade dealers to change the way they do business and start purchasing materials online. If the experience of Debbie Davis holds true elsewhere, that shouldnt be an insurmountable obstacle. Davis is human resources and payroll director at City Chevrolet, which uses Boise Cascade Corp.s online procurement system to purchase office supplies and forms. The forms piece of the site clicks through to ReySource.
"I was leery at first because that was something new," said Davis, in Charlotte, N.C. "But the wonderful thing about it is that once [Boise Cascade] provided the [online] catalog, it has the [item] number there—you just put it in, and it pulls it right up." Davis doesnt know if shell switch from the Boise Cascade portal to Dealer Supply Advantage.
DaimlerChrysler, of Auburn Hills, Mich., has a jump on GM with MRO procurement already available through its Market Center dealer portal, which did $30 million in business last year.
DaimlerChrysler estimates that about 52 percent of its dealers use Market Center to buy everything from pens to computer hardware to UPS services.
"We are happy with our growth," said Mark Nagel, senior manager of Market Center. "The dealer potential in this space is about $4 billion in the United States, and weve only started penetrating that."
DaimlerChrysler plans to offer higher-priced items through its portal, including things such as health care coverage and 401(k) plans. Itll also offer IT products and services to dealers.
To that end, the company, in partnership with IBM and Dell Computer Corp., is planning to announce this week a program in which a dealer can go through Market Center to install a network at the dealer so it can do business on the Web.
Covisint might also have its eye on a burgeoning industry where dealerships could play an integral role: direct to industry, where a consumer who wants to buy an auto might go to a dealership and special-order that vehicle directly from the manufacturer, which makes the car to order and delivers it through the dealership.
"We have two focuses for the company: strategic sourcing and all the activities one would find in sourcing and portal connectivity and standards, or the connectivity element," said Dan Jankowski, senior vice president of global communications at Covisint. "Thats the connecting of the entire industry enterprise. Were working with OEMs and dealers. Weve been trying to be part of their direct selling to consumers.
"Some companies have talked about the five-day car or the 10-day car," said Jankowski. "If we do our job, the automaker can cut the amount of time it takes to get the car to the consumer."