Ford's boasts not all they appear

Ford's multi million dollar B2B savings bonanza has been slammed as 'insignificant' by industry pundits who claim Covisint customers are cashing in by squeezing suppliers' profit margins.

The car giant claims it saved $70m last year by sourcing all its indirect procurement requirements through online automotive exchange Covisint. Indirect supplies are general office supplies rather than car parts.

But analysts say the savings are 'miniscule' and miles off the $923bn value Covisint stake holder Commerce One has forecast for the automotive B2B market.

Ford says it made the saving through a combination of lower tender costs and cheaper suppliers. But Ovum analyst Laurent Lachal says the saving fails to impress when considered in the context of Ford's annual expenditure.

"It's easy for the Fords of the world to make those savings because they spend so much. We're probably only looking at a saving of one or two per cent. It's all relative," he said.

The real savings will come from collaborative relationships which would only happen with a move to direct procurement he said.

Gartner Group analyst Darren Siddle, agreed that Ford's focus on cash savings missed the point of an industry exchange, and that a change of attitude was needed if Covisint is to tackle the logistics of direct procurement.

"Proving the concept works is important and that's what this is about, but the savings are an e-procurement issue, and that is something that others apart from Covisint can offer. For long term survival it needs to prove tangible benefits," he said.

Those tangible benefits include the development of common XML cataloguing standards, and it could be a decade before Covisint overcomes the inter-company clashes that are stilting development warns AMR analyst Nigel Montgomery.

"Covisint will be a major player in the development of standards, but it just hasn't got its act together yet to collaborate," he said.

Covisint members also include Daimler Chrysler, General Motors, Nissan, Peugeot and Renault. German car giant BMW has refused to join in its counterparts in favour of developing a private market place.