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  Supply Chain Trends and Issues: Our Weekly Feature Article on Important Trends and Developments in Supply Chain Strategy, Research, Best Practices, Technology and Other Supply Chain and Logistics Issues  
 
 
  - April 2, 2014 -  

Supply Chain News: IBM, Indian Auto Groups Launch Ambitious Connectivity Hub to Integrate OEMs, Parts Suppliers

May be First to Connect an Entire Sector; Success Could Show Path for Other Industries

 
     
     
  by SCDigest Editorial Staff  
     
 

It is well recognized that a lack of connectivity and integration is a key limitation in the progress of the supply chain in any industry sector, from consumer goods to health care.

While there are always individual company leaders which drive connectivity for their own benefits, rarely if ever has an entire sector really tried to address the issue, other than perhaps developing electronic communication standards, such as the VICS EDI standards in consumer goods to retail, RosettaNet in high tech, and others.

SCDigest Says:

If this Indian project is a success, it may just spur other sectors to initiate similar strategies. Auto DX is certainly not a new concept - but maybe now the time is right to finally see it through.


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TThat's what makes the announcement earlier this month by IBM and a pair of automotive industry associations in India (Society of Indian Automobile Manufacturers (SIAM) and the Automotive Components Manufacturers Association (ACMA)) so interesting - and perhaps impactful. Together, they have launched a new communications hub that will connect all the country's manufacturers and suppliers electronically.

The Indian automotive supply chain is still characterized by a lot of manual communications in areas like purchases orders, invoices, forecasts and more - slowing down its speed and sometimes leading to errors. This is in part because a given supplier may be required to send EDI data in dozens of different formats and types to meet the specific requirements of different manufacturers - simply more than they can handle.

In this new program, suppliers will only need to create data in just one standard format, and send that to the Cloud-based network, called Auto DX. Manufacturers can either work directly with that, or IBM will transform the message into a manufacturer's own format. Some 14 different EDI transactions or document types are being supported. There are also web-based tools for those suppliers that are not EDI enabled.

There are many examples of private exchanges that do this sort of work for a given company and its suppliers. This new program is noteworthy because almost no one has been able to pull this kind of exchange off across an entire industry.
Surprisingly, there are more than 40 actual auto OEMs operating in India, as well as some 700 hundred suppliers. This obviously results in tens of thousands of potential connection paths, and even more when you consider that tier 1 suppliers will want to integrate with tier 2 suppliers, etc.

So the opportunity from automating these transactions is huge.

"There has been a lot of inconsistency with how transactional data is shared in India between manufacturers, suppliers and customers, resulting in processing delays, inaccurate transactions and other inefficiencies," said Sri Karumbati, CIO of SSS Springs and Deputy Chairman of the ACMA Technology Committee. "ACMA and SIAM are excited to come together with IBM and take advantage of their decades of experience in supply chain technology to help build a platform that enables all of our members to exchange data quickly, accurately and in a safe and secure manner."

Not Another Covisant?

Of course, to those who have been around for awhile, talk of a "hub" in any automotive sector may bring back bad memories of Covisant, the so called "exchange" launched by the Detroit OEMs in 2000. Launched with great fanfare near the top of the ecommerce bubble, Covisant was supposed to automate the procurement process for the OEMs, and had some saying the exchange would before long be worth more than the OEMs themselves combined.

 

(Supply Chain Trends and Issues Article - Continued Below)


 

 
 
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It didn't quite work out that way. The exchange was plagued by technology issues, huge resistance to changing processes and much more, and was gone not many years later in one of the worst supply chain disasters of all time.

 

So is this another Covisant in the making?

Absolutely not, says Terrence Curley, an IBM executive, in an interview with SCDigest. First, he noted that unlike Covisant, the Auto DX exchange has been built with proven technology - its Sterling B2B Collaboration platform that has been used to create many private exchanges.

And Curley said that for now, the hub is really just going to focus on connectivity, not procurement, although he did not rule out the possibility of adding exchange capabilities down the road after the communications hub has proven its value.

 

 

Source: IBM

Interestingly, Curley also said that all participants in Auto DX will share in its cost of operations, including the OEMs. He said India's manufacturers designed that in from the beginning, not wanting to appear as forcing something on the suppliers that they would have to pay for alone.

"This is a path breaking, industry-wide initiative that seeks to create an overarching platform for the entire Indian automobile industry," said Jagdish Belwal, CIO, Tata Motors. "This system created by IBM will go a long way in improving overall efficiencies across the entire automotive ecosystem by standardizing the data definitions, data interchange formats and therefore expanding the possibilities of automation."

If this Indian project is a success, it may just spur other sectors to initiate similar strategies. Auto DX is certainly not a new concept - but maybe now the time is right to finally see it through.

Is now finally the time for this kind of industry-wide communication hub? Why or why not? Let us know your thoughts at the Feedback section (email) or button below.


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