Balfour sets up private e-trading hub

Construction group Balfour Beatty aims to process half of its 965,000 annual purchase invoices electronically within three years...

Construction group Balfour Beatty aims to process half of its 965,000 annual purchase invoices electronically within three years by implementing a private e-trading exchange for its regular UK suppliers.

In the next few years, analysts expect private e-marketplaces such as this - usually between a company and its key suppliers - to become more prominent than public e-marketplaces, many of which have failed or been scaled back.

Michael Evason, an e-commerce analyst at research firm Datamonitor, said public e-marketplaces - which are businesses in their own right - are a sound proposition, but any return on investment will only come in the long term.

"Returns on public exchanges have been disappointing," said Evason. "In the short term, more private exchanges will be formed, although as these build up they will become unwieldy. Within five or six years the trend will be for companies to outsource these marketplaces to independent exchanges again."

Balfour Beatty, which currently spends more than £2bn a year with some 10,000 suppliers, is implementing its e-trading exchange to replace its primarily paper-based purchasing procedures. The system is based on technology from Burns e-Commerce Solutions.

The first phase of the implementation, which started last August, involved an internal trading community of six divisions within Balfour Beatty: construction, power networks, specialist holdings, rail maintenance, rail projects and plant.

The second phase will involve a limited number of preferred external suppliers, which are currently producing a large number of invoices for the group. The next three phases will see the top 250 suppliers gradually joining up, before the remainder of the supplier community joins in the sixth phase.

Balfour Beatty's suppliers will be able to access Burns' Business Exchange service over the Internet via a browser that is tailored to match the group's individual trading needs.

E-marketplaces: public or private?
A number of public e-marketplaces, including the Jupiter Exchange which served the hospitality sector and Chemdex which catered for laboratory supplies, have closed.

However, despite scepticism about public e-marketplaces, new exchanges continue to appear. Both First 4 Farming, an e-trading hub for the agricultural sector, and Steel 24/7, an exchange for the steel industry, went live this month.

Other high-profile public e-marketplaces include Covisint in the motor industry and GNX and WWRE in the retail sector.

Many companies, including Tesco and tyre manufacturer Pirelli, are involved in both public and private e-marketplaces.

Analysts now expect the trend to be towards private e-marketplaces such as Balfour Beatty's new trading exchange.

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