PARIS - Valeo plans to replace costly and complicated Intranet links to its vendors with faster and cheaper Internet connections over the next year.
The change is part of the strategy of the company's new e-savvy CEO, André Navarri.
Valeo already has one of the most sophisticated e-business approaches among Europe's major suppliers. In January, it began online bidding of some contracts with its vendors. And it is the lone European member of an alliance of six Tier 1 suppliers now looking at ways to combine their purchasing power in an Internet-based venture.
Navarri wants Valeo to continue to be an online innovator.
'I expect to leverage synergies by the migration of purchasing online,' he said. 'More than just bidding and putting our catalogue online, it gives us a chance to shape our purchasing processes and to give to our purchasing people worldwide the necessary tools.'
Valeo estimates that eventually half of its A5 billion purchasing budget can be conducted online. Only a small part of the procurement bill is handled that way today.
But the e-revolution at Valeo goes beyond purchasing.
'We are analyzing all our processes, not only to reduce the cost of transactions, but to have a much better integration of our suppliers. We want to share resources, to monitor their progress on a real-time basis and see how they are performing. We want to understand what it means to become digital.'
A key part of that is replacing Valeo's dedicated Intranet connections with Internet links.
'Today we are EDI (electronic data interchange) connected to the automakers,' said Navarri. 'But only 5 percent of our Tier 2 and 3 base is EDI-connected to us. Why? Because it is complicated and costly. The Internet is a much simpler and much easier tool than the classic information technology tools.
'I expect that in one year we will see a dramatic change in the interactions between us and our suppliers and between the Tier 1s and the automakers,' he said. 'These tools will allow us to go much faster.'
Valeo is working with five suppliers in North American - Dana, Eaton, TRW, Delphi and Motorola - on a joint study of business-to-business Internet-enabled technologies. The result could be a massive vertical exchange for Tier 1s to deal with lower tier suppliers.
Navarri said automakers and suppliers at all levels must cooperate online. But he said the real work must be done internally.
'You can't rely on your customers in the digital move,' he said. 'Valeo started sooner than most and we intend to stay best-in-class.'
Questions remain about how supplier initiatives will fit with big automaker portals like Covisint, the online exchange formed by General Motors, Ford and DaimlerChrysler. Some industry observers think a single auto exchange will evolve that links everything from the lowest-tier suppliers to sub-dealers.
Navarri believes that a variety of exchanges will emerge, not a single online marketplace that dominates the industry.
'If you call an exchange an association intended to find synergies and benefits from Internet tools, then there will be a lot of them,' he said, 'There will be associations of Tier 1s, associations of OEMs, vertical associations of different commodities. They will live together.
'But if your view is a kind of a Big Brother exchange I don't think it will benefit anybody,' he said. 'The endgame will be a lot of tools and a lot of marketplaces.'