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DaimlerChrysler Reduces Costs Through On-Line Purchasing

21 December 2000

DaimlerChrysler Reduces Costs Through On-Line Purchasing

    AUBURN HILLS, Mich., Dec. 21 In just the last seven
months, DaimlerChrysler's Procurement & Supply operations in Stuttgart and
Auburn Hills have conducted more than 30 on-line bidding events to procure
over 500 parts using Internet technology to help the company significantly
reduce the cost of production and non-production goods and services.
    DaimlerChrysler has saved more than 17 percent of the total cost of those
purchases since it began stepping up its on-line bidding processes with events
held in Stuttgart and Auburn Hills.
    "These on-line bidding events have demonstrated that quantifiable benefits
can be gained through on-line material procurement processes," said Gary C.
Valade, Executive Vice President, Global Procurement & Supply.  "We have made
extraordinary progress with the implementation of our e-business strategy in
Procurement & Supply this year and fully expect to continue this positive
trend in 2001."
    Valade pointed out that Covisint, the on-line trade exchange that
DaimlerChrysler owns in partnership with other auto companies, plays a central
role in the company's overall e-business strategy.
    Since October, DaimlerChrysler has conducted 27 events for on-line
purchasing of nearly 500 parts using the Covisint exchange.  The estimated
material cost savings on parts purchased in those auctions exceeded
17 percent.
    "Our first-year expectations of Covisint have been exceeded by these pilot
activities in 2000," Valade said.
    Prior to October, the company held six on-line bidding events for 32 parts
using Commerce One services.  The estimated material cost savings on those
auctions topped 9 percent.
    Utilizing the Internet on a recent supply chain pilot, DaimlerChrysler cut
the lead time it formerly used to send production program information to
suppliers from 14 days to one day, a 92 percent reduction in lead time with no
truncation of information.
    "The Internet will raise the response capability of the entire supply
chain enormously," Valade said.  "Clearly, e-business signals the end of
sequential communications.  These pilot applications have shown that changes
in production program information can be made available to all companies in
the supply chain simultaneously.  This gives us a tremendous cost advantage."
    Vehicle production materials purchased through on-line auctions since May
have been batteries, fasteners, stampings and water shields.  Non-production
materials such as racks and assembly plant maintenance tools and equipment
also have been purchased through the on-line bids.
    Process costs and warehouse stocks can be reduced significantly by the use
of Internet-based catalogues when purchasing non-standard production material.
The Covisint platform has been linked to this area of application at Auburn
Hills since the middle of November and in Europe since the middle of December.
    "Processes are now being put in place for a rapid start-up phase in 2001
that should enable us to achieve approximately 100,000 transactions during the
calendar year," Valade said.  "Covisint has been, and will continue to be, a
good enabler to help us reach our e-business goals next year."