I'll have an E please Bob

fter the first rush of enthusiasm for the Internet and all the wonders it can bring, we now seem to have settled into a more reflective mode, looking closely at the reality and how it can work for us. It certainly isn't a universal panacea for all of the problems that face contractors, but it does have a lot to offer if used sensibly and realistically.

That realism is the key – looking at how contractors and their suppliers could really benefit from the technology on a day-to-day basis. To that end, software supplier Estimation has been working as the technology partner with a group of leading contractors and wholesalers to put the theory to the test.

Titled The Building Services E-Commerce Trading Group, contractor members are ABB Building Technologies, AMEC Building Services, N G Bailey, Crown House Engineering, Drake & Scull and Lorne Stewart; the wholesaler members are Newey & Eyre and BSS. The group is now confident that it has arrived at an e-commerce model that will work well for all concerned.

"We began by identifying the areas where contractors could make use of e-commerce," explains Estimation's David Bell. Routine procedures such as getting quotations, establishing price and availability of materials, placing purchase orders, and issuing and receiving sales invoices can all fall within the remit of e-commerce, along with making and receiving payments.

"There are essentially two ways of approaching this – and only one of them brings the time and cost savings that make the whole process worthwhile," says Bell.

One way is to treat business e-commerce in the same way as consumer Internet shopping. You dial into a supplier's web site, find the goods that you want, and fill in the order form. "But this approach isn't very helpful if you consider the need to compare prices and check stock availability before ordering," reckons Bell. "To do that you have to visit a number of web sites and navigate around each one's structure to get the necessary information, which would probably take longer than sending faxes to each supplier or calling them, as most people do at the moment." The alternative method, already being used in America by Estimation's sister company, is to develop a true end-to-end solution. A solution that connects the contractors' office systems for estimating, procurement, accounts and contract management via a 'digital marketplace' or 'portal' on the Internet, through to the computer systems used by merchants and manufacturers. At each stage the software used has to reflect the specific needs of the industry and the way it does business – and the software supplier has to understand the ins and outs of the business in depth.

This approach means that the estimator or buyer can continue to work with the software they prefer – requesting quotations, placing purchase orders, and carrying out all of their other activities from their desk. These, in turn, are automatically routed through the digital marketplace to the relevant suppliers, who return the appropriate response to the contractor – again via the digital marketplace. This all happens within minutes and with no human intervention – bringing enormous benefits in terms of cost savings, greater flexibility and higher accuracy of information.

"A characteristic of building services contracting is that there are a lot of relatively small orders placed with wholesalers – the average order value is only around £135," points out Bell. "Yet the administration costs for each order are about the same, so the relative cost of administration in relation to the value of most orders is enormous. This is where a major saving can be made by an end-to-end e-commerce solution". Experience in America suggests savings in the order of 80% are easily achievable simply by automating routine tasks.

And this has nothing to do with reducing prices, it is about removing cost from the supply chain at every level. "The wholesalers we have been working with see as many benefits for themselves as they do for their customers, otherwise they wouldn't get involved," says Bell.

There are additional benefits to be taken into account: automatic checking of stock availability and delivery times means that operatives are not wasting time waiting for orders, the whole operation can be more precisely planned. Further, the information flows through the system without being re-typed, so there is less scope for errors to creep in.

Such a solution is more complex than the Internet shopping approach but it will yield so many more benefits that it is worth taking the time and trouble to get it right. The Building Services E-Commerce Trading Group was brought together by Bell and Estimation to ensure that this happens. "Between us we are now putting the theory to the test in a live contracting environment and the results are very positive," says Bell. Watch this space.