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Balfour Beatty to merge supply chains

Balfour Beatty will merge around a dozen preferred supplier lists as part of a radical restructure aimed at tackling the duplication that has built up after 10 years of acquisitions, the firm’s new divisional heads have told H&V News.

The restructure is aimed at saving £30m per 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.

Centralising supplier lists into one will remove the need for subcontractors to submit numerous prequalification responses and opens up a larger pipeline of work, the construction giant said, and will also include electronic bidding.

The heads of Balfour Beatty’s three business streams explained the implications of its restructure into four regional hubs.

Executive director of engineering services Dave Donaldson said the supply chain was “as noisy as our customers” about the company being too complicated, with “a lot of criticism” levelled at the group.

Managing director of major projects Bob Clark added: “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.”

The firm is in the process of appointing supply chain managers to the centralised procurement and supply chain function in each of its four regional hubs – in London, Bristol, Manchester and Edinburgh – who will then liaise with the business streams.

Mr Donaldson said the group had “taken its time” to get the restructure right, as there was “lots of collateral damage when you do it at the pace that our competitors have done”.

Mr Clark explained that a 10-year acquisitive strategy to ‘blue the country’ with Balfour Beatty had meant the company’s structure had become over-complex.

He said it led to “confusion in the marketplace” and a need to ensure that “whoever goes to see [clients] knows the whole breadth of what the firm has to offer.”

Managing director of the regional business stream Steve Waite said the main risk in delivery is failure of the supply chain, adding “the closer you are to them as a business, then the more advance knowledge you have of any risk there”.

While 80 per cent of the supply chain are “probably quite happy to deal with the local people they’ve always dealt with”, the other 20 per cent sees a “huge opportunity to start expanding across the country and across the different parts of Balfour Beatty”, said Mr Clark.

Mr Waite added that the biggest way to support the supply chain continues to be “valuing their work regularly and properly, and a fair payment policy, which a lot of our competitors are extending”.

A Supply Chain Solutions team has been created to encourage more collaboration through early project involvement to share ideas, expertise and innovation.

Mr Donaldson said he was “sceptical or cynical” about speculation over how many suppliers could be dropped as a result of restructuring, saying it is more about “having the right people in the right places that can service the business where you want to be”.

Balfour Beatty will integrate Mansell, its regional and major civil engineering divisions, its construction Scottish & Southern and Northern arms and its engineering services division into one business from January 2013.

Brands will be retained, including ground engineering and M&E engineering services through Balfour Beatty Ground Engineering and Balfour Beatty Engineering Services respectively.

 

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