This case studies a successful marketplace to prompt learning about what makes such a marketplace effective. It also illustrates the importance of online bidding in some industries. 

The Covisint marketplace was originally created by Ford, GM and DaimlerChrysler (www.covisint.com). Today, Covisint is not a marketplace, but is described by its owners Compuware as a ‘connectivity solution’ with the strapline of ‘trusted information. Anywhere’ (Covisint, 2015) (Figure 12.7). Its service is still used by motor manufacturers although they now don’t use a single marketplace, rather each manufacturer uses technology to access its suppliers direct. This case study charts the evolution of the service. 

Covisint (2002) described a high level of activity on the exchange. Taking the example of DaimlerChrysler AG, 512 online bidding events processed through Covisint over a 12-month period from 2001 to 2002. In total, this amounted to $10 billion. In May 2001, DaimlerChrysler staged the largest online bidding event ever, with an order volume of $3.5 billion in just four days. 

In total, 43 per cent of the total value of the parts for a future Chrysler model series was negotiated online with over 50 online bidding events in the third quarter of 2001 alone. As well as savings in material purchasing prices, DaimlerChrysler succeeded in reducing throughput times in purchasing by approximately 80 per cent, thus saving on process costs. According to Dr Rüdiger Grube, deputy member of the board of management responsible for corporate development: 

The economic effects achieved with e-procurement in the first year of implementation have already covered the costs of previous investment in e-business and hold great potential for the future, too. Therefore, we will continue to pursue our e-business activities to the fullest extent in 2002 as well. 

With the online catalogue system ‘eShop’, which was part of the Covisint service at that time, DaimlerChrysler would be able to reduce process costs by 50 per cent after the completion of the blanket rollout, which would give approximately 15,000 users the possibility of ordering several million articles. By the end of 2002 about 1500 business partners would be connected to the electronic document exchange system ‘eDocs’, which would enable them to process approximately 500,000 document transmissions per year. Initial results using the ‘FastCar’ program for networking change management in automotive development at Chrysler show cuts in communication processes by 60–90 per cent. In 2001, over 600 managers connected to the system developed over 300 product improvement suggestions online with the ‘New Product Change Management’ used in the development department of Mercedes-Benz. 

Question 

By reviewing the case study and examples of the different supplier portals available on Covisint ( www.covisint.com ), explain why Covisint has prospered as a supplier of e-procurement portals and business document data exchange rather than as a neutral marketplace.