The Big 3 automakers' Feb. 25 announcement that they plan to combine their online purchasing efforts touched off reverberations that will be felt around the globe, across many industries, for years to come. While it will take some time to fully comprehend all the implications, automotive suppliers will begin to feel the impact almost immediately.
The decision by General Motors Corp., Ford Motor Co. and DaimlerChrysler AG to work together to create a single, Internet-based procurement network is a positive development. Whether you like online procurement and auctions or not, get used to them, because they are here to stay. Suppliers will be better off adapting to a single system with common protocols than to multiple buying networks within the same industry.
A key to this ambitious venture's success — assuming it gains the necessary federal antitrust clearance — will be the involvement by other leading automakers in the program. Already, there is talk of Toyota Motor Corp. and other key original equipment manufacturers becoming investors and participants in the venture.
There is no doubt that some plastics processors have much to fear in such a system. The Internet will accelerate the death of commodity parts producers that add little value and are not the lowest-cost manufacturer — and rightly so. That is nature's way of keeping the supply chain healthy and efficient.
But high-quality molders are scared, too. That's because there are many unanswered questions about how the system will work and how the automakers will qualify the suppliers that they allow to bid for their business online. The OEMs will need to make the most of the communication tools afforded by the Internet to explain their mission clearly, openly and in detail to their vendor bases.
The Internet potentially may open a huge door of opportunity to some supplier firms that never have had the chance to get a foot inside the office of a Big 3 purchasing executive. This, to some degree, may reverse the automakers' previous strategies of winnowing their vendor bases to a precious chosen few companies. But they happily will allow that supplier base to grow again, if it affords them an efficient means to greater purchasing leverage.
The flip side of that opportunity equation, of course, is that established suppliers can expect global competition from unexpected quarters for business that they thought they had locked up.
But processors need to remember that the automakers are going online in part because they want to enable customers to order "custom-made" vehicles that can be delivered in a matter of weeks. That helps to ensure that cost alone won't dictate buying decisions. The OEMs will pick financially secure suppliers that offer the speed and agility to take on bigger roles in assemblies, modules, design, tooling, color-matching, etc. That simply reinforces the direction in which the market is already heading.
In this sense, the Internet does not render lean, well-run, successful companies helpless. Rather, it offers them a powerful new channel through which they can interact with their customers and their own suppliers more efficiently. The Big 3 just ensured that the only winners will be those that embrace change and jump aboard the e-train with them.