TOLEDO, USA Dana Corp. is not waiting for Ford Motor Co., General Motors and DaimlerChrysler to develop their joint online purchasing exchange.
The Toledo, Ohio, USA-based maker of axles and chassis components is launching its own web-based purchasing system.
Dana spends $8 billion annually on worldwide purchasing. By developing its own web-based purchasing system, the company expects to cut about $1 billion from its procurement costs and reduce the number of its suppliers by 50 percent during the next four years.
The company developed the purchasing system with technology partners Ariba Inc. and Aspect Development Inc., both of Mountain View, California, USA. For now, Dana will use the online system to buy parts only from its 86,000 suppliers worldwide.
Dana is spending about $30 million on its new purchasing system, said Jim Woodward, Dana's director of e-commerce.
'Considering the cost savings, we think that's a very quick payback,' Woodward said.
'We're consolidating all of our purchases with fewer and fewer selected vendors on a global basis as they become part of the system,' he said.
Of Dana's 86,000 suppliers, 11,500 of them represent 99 percent of what the company buys, Woodward said.
Although Dana set up the system to handle its own purchasing, the company is looking into partnering with other automotive suppliers, as well as heavy-truck, off-highway and aftermarket suppliers, to create an independent online exchange for business-to-business transactions.
Five of Dana's 300 plants began using its new system to make purchases on March 31. Dana expects to have all plants online in 2001.
Meanwhile, Ford, GM and DaimlerChrysler continue to develop their joint purchasing and supply-chain management exchange. It will be operational by the end of June. The three automakers are creating the world's largest online purchasing company to run the joint exchange.
Dana's system and plans have not gone unnoticed. Ford, GM and DaimlerChrysler will use their exchange mainly to buy parts and other goods, such as office supplies, from suppliers. But Ford, GM and DaimlerChrysler also want other automakers and suppliers to use their exchange. The Ford-GM-DaimlerChrysler exchange could charge a transaction fee when others use it. The automakers hope to slash the cost of business transactions from $100 per order to as low as $10.
At least one of the automakers, GM, said it would welcome other trade exchanges that may surface. To entice others, the Ford-GM-DaimlerChrysler exchange must make sure that it offers the best value proposition, said A. Alan Turfe, executive director of GM's TradeXchange.
Dana wants to know whether it and other suppliers would have to pay a fee to use that exchange, Woodward said.
'We told them, we don't pay a fee to purchase from (our suppliers online),' he said. Dana, like other suppliers, is pleased that Ford, GM and DaimlerChrysler have teamed up to create one trade exchange.
It probably makes sense for Lear Corp. of Southfield, Michigan, USA, and any other of the large Tier 1 suppliers, to join the automakers' exchange and start their own exchange to better manage their own supply base, said Gary Baker, an automotive consultant at Arthur Andersen LLP in Detroit.