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Balfour Beatty to cut supply chain by 5,000

Exclusive: Balfour Beatty’s plans to merge its preferred supply chain will see it reduced from 15,000 to 10,000 suppliers, the contractor revealed to CN today.

It comes after CN revealed the new approach to supply chain management earlier this week in an exclusive interview with the contractor’s three new business stream leaders.

The UK’s biggest contractor will shrink its supply chain largely by cutting out “one-off suppliers” relating to transactions of less than £1,000 as part of its restructure of UK construction services.

A new centre of excellence for procurement and supply chain function will work from four hubs in London, Bristol, Manchester and Edinburgh.

Balfour Beatty said the reduction of its supply chain is aimed at “supporting our clear goal of becoming the preferred partner to the best suppliers and delivering best value for our customers”.

The firm hopes to improve value for money and eliminate duplication of costs by “getting closer to our best-performing suppliers, creating an efficient and dynamic supply chain and retaining a strong regional presence in support of SMEs.”  

It will also aim to improve safety and sustainability by “driving behavioural change right through to grassroots level of our supply chain”.

The firm added: “We have created a supply chain solutions team to encourage more collaboration through early project involvement to share ideas, expertise and innovation and develop winning solutions together, with a stronger focus on assurance to drive perfect delivery on time, every time.”

The restructure of UK construction services is aimed at saving £30 million a year across UK construction, but will result in the loss of 650 back office staff and office and depot numbers being reduced from 75 to 37.

A layer of senior management has already been taken out.

From January 2013 the business will cut its core brands from 15 to seven, with the majority of activity to be delivered by the Balfour Beatty brand.

Balfour Beatty’s business stream bosses told CN earlier this week that the company’s 10-year acquisitive strategy had resulted in an over-complex structure and confusion from suppliers.

Major projects director Bob Clark told CN the restructure was informed by the experiences of the firm’s supply chain.

He said: “They were saying ‘we were working with six different bits of Balfour Beatty, we’ve got to fill in six different prequals – surely that’s daft’ – and it is daft.”

Click here to see a “who’s who” in the new Balfour Beatty.

Balfour Beatty – how we will make a more efficient supply chain:

  • Moving to one supply chain database to replace more than a dozen systems across all UK businesses, remove duplication and rationalise suppliers from around 15,000 to 10,000 – largely achieved by rationalising services provided by “one-off” suppliers of transactions less than £1,000;
  • Getting closer to the supply chain, concentrating on business with best-performing suppliers, the vast majority of whom are SMEs, and opening up larger pipeline;
  • Introducing a consistent method of classifying and managing safe, sustainable performance against time, quality and cost;
  • Encouraging and rewarding best practice;
  • Introducing a transactional procurement desk to handle lower-value, higher-volume procurement processes, allowing management more time to focus on strategic supply chain management;
  • Driving common processes to make it easier to do business with Balfour Beatty, removing the need to submit numerous prequalification responses to the various parts of Balfour Beatty and reducing cost to the supplier;
  • Introducing e-commerce tools such as electronic bidding will speed up the tendering cycle while removing cost and inefficiency.

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