Now That's a Shopping Spree

DaimlerChrysler runs world's largest online auction

Stuttgart  May 18, 2001  Move over, eBay. The once much-ballyhooed and then much-pooh-poohed automotive e-marketplace Covisint last week hosted what apparently was the largest online auction to date.

DaimlerChrysler announced this week that it had conducted a four-day event for 1,200 parts, with the total volume of orders hitting $3.0 billion. For comparison, online auction pioneer FreeMarkets reports that it has conducted events totaling $16.6 billion in volume since its founding in 1995.

The Internet-based bidding process determined the prices of parts for two future products. Five suppliers participated in the bidding. DaimlerChrysler provided no estimate of how much the auction might save the company in procurement costs.

Covisint provided the Internet application for the bidding and managed the event, which, DaimlerChrysler reported, went off without any technical problems.

That must have been good news for the e-marketplace. Early in 2000, Covisint was announced to much fanfare for its potential to save billions in procurement costs for its members, which include the Big Three (GM, Ford and DaimlerChrysler), as well as Renault and Nissan. However, the e-market's lengthy ramp-up-time and initial wariness among suppliers prompted a great deal of skepticism about Covisint's chances for success.

DaimlerChrysler this week hailed the e-marketplace, proclaiming in a statement about the auctions, "Covisint online exchange proves its worth."

The car manufacturer reported that the online bidding process shortened procedures for the company's purchasing department and for the bidders. "In addition," DaimlerChrysler said in its statement, "it makes participating bidders aware of their price position compared with their unnamed competitors, allowing them to draw corresponding conclusions." One assumes that the "corresponding conclusions" might entail lowering one's prices.

DaimlerChrysler pointed to the auction as evidence that online bidding events can be used to fulfill complex orders, but with the proviso that the preparations for the events must be thorough. "Online bidding has proven to be an outstanding purchasing tool, even when the placement of the orders is this complex," said Johannes Rudnitzki, head of purchasing at Mercedes-Benz' passenger cars division, "but the precondition for this was a detailed description of the object of the bidding."

Rudnitzki said that DaimlerChrysler would continue to use the auctions. "Without a doubt this promising tool will now be widely used by our purchasers," he said.

The suppliers who participated in the online bidding process were selected by the manufacturer's purchasing department after an analysis process. On the basis of the results of the online bidding event, the purchasing department will now make the final decision regarding the placement of orders. Factors such as the technology, logistics and quality performance of the bidders will also taken into account during this process.

In addition to online auctions, DaimlerChrysler also uses Internet-based catalogs under its e-procurement initiative, called DCXNET.

For insight into how DaimlerChrysler is using supply chain visibility to reclaim lost cycle time, read the cover story in the June 2001 issue of iSource Business ("Supply Chain 20/20").