Management companies are lining up to offer purchasers of services products and suppliers a route to buy online. Servus Facilities Management is racing to get there first.

Transferring businesses’ supply chains on-line is expected, claims a study by IQ Research, to cut competition on prices by 34 per cent – and that’s just for starters. Procurement staff savings in the UK are expected to reach 30 per cent; warehouse and stock-carrying requirements 17 per cent, and transportation 12 per cent.

So it’s no surprise that senior executives at Britain’s biggest buyers are getting so excited by the potential of e-procurement. But what about the mass of medium-sized firms that may lack the purchasing clout to reap the greatest benefit from, or simply the cash to put in place, sophisticated electronic supply chains?

This is where Phillip Russell, managing director of Servus Facilities Management, expects to generate the most interest in the ‘buy site’ his team is currently trialling, called Clubsite, where customers can buy business supplies ranging from photocopiers to furniture. The intention is to launch the portal between customers and suppliers in the summer. While purchasers supporting the facilities management function are likely to use it for general business products such as office equipment, Clubsite will also offer access to direct supplies.

What’s certain is that even if Servus is the first to get its site off the ground, others won’t be far behind. Bidders for BT’s £160 million facilities management contract were asked to provide a model for the establishment of electronic supply chains.

Citex, which made it to the original shortlist, says that as a result it has the strategy in place and a full specification for a site, but has yet to decide if and when to make its move. ‘We think it would cost £2 million-£3 million to successfully launch the dominant ‘vortal’ [a portal for a vertical market] for construction and business services. If we think we can do it, we will, but you have to be sure you will have the pay back,’ says chief executive Oliver Jones. Elsewhere, landlords are creating a similar service for tenants. Arlington Securities will this month launch a package of on-line ‘membership’ services.

Although he won’t reveal exactly what his company’s investment has been in Clubsite, Servus’ Russell says that spending will have run into ‘millions of pounds’ by the summer. Russell believes that three key factors are needed to attract customers to the site: the purchasing clout he says the site will offer customers that will become part of a buying pool; the ‘intelligent procurement’ the site will bring to their purchasing decisions, and a decision process based on ‘functionality’ rather than technical data.

‘We have always helped our customers to buy things through buying clubs where we would buy, for example, hundreds of photocopiers, allowing customers to take advantage of our buying power,’ he says.

‘Buying through functionality’ means making sure that a product’s attributes and capabilities are obvious to a non-specialist.

Intelligent procurement means asking the right questions: ‘We were organising a contract for the purchase of equipment for a company providing catering services to a client and found that all the kitchen equipment had a short-notice call-out arrangement. But in reality the only item that can’t be taken out of service at any time is the cash register. The kitchen equipment didn’t need such a high level of service.’

‘Buying through functionality’ means ensuring that a product’s attributes and capabilities are obvious to a non-specialist. ‘When you buy a washer/dryer, it’s no good knowing that one has 800 rpm and another 600 rpm,’ says Russell. ‘It’s only when you know that rpm means revolutions per minute and that more revolutions means the clothes will dry faster that you can make an informed decision. By making the browser functionality-driven, you pass purchasing power to the person at their desk.’

Once the site is launched, customers will be charged for access but, like internet service providers, operators of such sites may find that the norm becomes free access. Meanwhile, Servus will recoup its investment through taking a cut from any purchases, which Russell says could be anything from 5 per cent to, for example, a maximum of 25 per cent where a buyer is very selective. However, the deal he offers will always have to better any the customer could get themselves.

The trial, which began with customers four weeks ago, will include an assessment of the return in savings a customer can expect if they choose to use the site.

Russell notes that one of the biggest savings could actually derive from re-engineering the customer’s procurement department. ‘One client we dealt with had nine different approval levels for mobile phones,’ he says.

Finally, to avoid the embarrassing problems that several internet-based retailers suffered before Christmas when products ordered on-line failed to be delivered on time, the team will be keeping a close eye on distribution and monitoring customer satisfaction.

E-procurement gets personal This month business park developer Arlington Securities is due to go live with a package of on-line ‘membership’ services for its tenants – part of wider plans to develop business support services for tenants. The membership services are aimed at two audiences – first, the corporate finance director who may be responsible for buying anything from car fleets to travel services. ‘We are aiming to build up a full portfolio of these kinds of products and services offering on-line procurement. We see this service growing significantly,’ says Howard Bibby, managing director of Arlington Business Services. The second targets are the individuals employed by Arlington’s tenants – with the emphasis on the personal. ‘We have 30,000 occupiers who will have access to lifestyle services such as information about the local gym, the local cinema and so on – we will filter out the most used and most useful web sites,’ he says. Arlington is talking of only offering these services to existing customers, but defines customers widely enough to include suppliers and advisers, as well as tenants. However, it is thought that, like Servus, it may eventually extend the offering to newcomers. The company will take a small turnover-based income from procurement services, which will be inclusive in the price quoted to the buyer. Access will be free. ‘We’re trying to make it a one stop service,’ says Bibby. ‘Goods will arrive on time. The whole point of these services is to make the business an administrative hub for the corporate occupier.’

How it works Servus’ Clubsite will have access to a product called MarketSite, created by US IT company Commerce One, which has been licensed in the UK to BT. MarketSite consists of a front-end browser developed by Commerce One that allows the user access to a global ‘market site’ of suppliers. When a buyer wants, for example, a mobile phone, they begin by entering ‘phone’ on the Clubsite browser, which will then give them a series of progressively more specific options. It will ask whether they want a fixed or mobile phone; help them decide what tariff they want by asking how many local or international calls the phone is likely to be used for, and so on. Continuing through the multiple-choice questions will eventually take the buyer to the best option for their requirement. Customers are told when their phones will be delivered; automatically receive a customer feedback form asking whether they are happy with their purchase, and will also receive tips on how to use what they have bought. Catalogues of products will be regularly updated and – in theory – as time goes on, prices should come down on the basis that the more users there are of Clubsite, the better prices Servus can get from suppliers.

Source

The Facilities Business