Automakers are chipping away at supply chain automation through smaller, in-house projects.

When Henry Ford introduced the automated assembly line, he revolutionised the entire manufacturing process and popularised a method for building cars more efficiently.

Now, more than 85 years after the assembly lines were automated, Ford's ideological descendants hope to repeat his success with an unprecedented and ambitious supplier exchange that they believe will again change the way cars are designed, built and delivered.

But a funny thing has happened on the way to the exchange.

The automakers -ÃÆ'Ã,¢Ã¢,Ã,¬" including Ford Motor, DaimlerChrysler AG and General Motors, which earlier this year announced the massive Covisint Internet trading exchange -ÃÆ'Ã,¢Ã¢,Ã,¬" are finding that revamping their purchasing operations is no small feat. Perhaps more important, they are finding that their own business-to-business projects are where the winners and losers will be determined.

What these in-house initiatives add up to is a realisation among carmakers that while Henry Ford may have automated the auto assembly process, he didn't do it all at once; in other words, a huge project such as supply chain integration is best tackled in small pieces.

This realisation is beginning to show in some of the automakers' public announcements. In one week late last month, DaimlerChrysler, Toyota Motor Sales USA and Volkswagen AG announced separate partnerships with i2 Technologies, a of e-business software. Each deal will build a private electronic marketplace that brings only a slice of the respective automaker's entire supply chain online.

Typifying this "go small" attitude is Toyota, whose US arm plans to use i2's technology to streamline and help manage its accessories and replacement-parts business. The goal is to improve forecasting and replenishment, which will, in turn, lower inventory-carrying costs and enable dealers to give customers accurate delivery dates for parts, officials said.

"The large automakers are tending to focus more and more on the areas that are most important to their competitive advantage and automating them first," said Jeff Bodenstab, vice president of marketing for i2's automotive and industrial business unit. "Just because they're a part of Covisint doesn't reduce the need for them to have faster, more efficient in-house systems."

DaimlerChrysler will work with i2 on the carmaker's FastCar project, a plan for saving the company billions of dollars by reducing the amount of time it takes to design, build and deliver a vehicle. The automaker, which has headquarters in Stuttgart, Germany, intends to interconnect its design, engineering, manufacturing and procurement operations to slash its time to market.

If this objective sounds familiar, that's because it's also the stated goal of the huge public exchange, Covisint.

However, officials at the Big Three maintain that their public and private efforts are complementary, not redundant. But some industry executives suggest that the smaller, in-house initiatives have a better chance of paying dividends in the near term.

"Covisint is the landing ground for our suppliers to do business on," said Gary Dilts, senior vice president of DaimlerChrysler's eConnect Platform Team. "The things going on within the company [such as the FastCar project] are the competitive battleground where things will be decided."

Other car manufacturers seem to agree. Instead of joining its rivals in Covisint, VW will build its own supplier marketplace, with help from i2, IBM and Ariba. Among the other major automakers, only Nissan Motor and Renault SA have accepted Covisint's invitation to join.

Some of the companies' reluctance to work hand in hand with competitors stems from an unwillingness to share vital internal data. By being able to see, for instance, how many windshields Ford is ordering, Chrysler could surmise how many Tauruses Ford expects to sell, one observer said.

Issues such as leadership, sharing profits and the rules for exchanging information have also proved to be contentious.

In addition, the mega-exchanges are having a harder time attracting executives because qualified candidates are often opting to work for dot-com start ups, where there is less-ingrained internal politics, more flexibility and a clearer payoff, said Robert Bass, a partner in the eCommerce practice at Ernst & Young LLP.

But a central challenge to getting huge projects like Covisint off the ground is the daunting complexity of integrating back-end ERP (enterprise resource planning) systems of the thousands of suppliers involved.

That complexity is magnified by the fact that ERP systems from such dominant developers as SAP AG and Oracle are not fully Web-enabled. For that reason, some observers believe that the mega-exchanges announced in many industries will not be fully operational for another 18 to 20 months.

"The many-to-many exchange doesn't exist," said Bass, in New York. "Most companies have ERPs, and those databases aren't able to do quick Web queries, so linking into the exchange" is difficult, he said.

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