Marketplace may be on the cards for cigarette firms

16 November 2000
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16 November 2000 | David Arminas

British American Tobacco is considering launching a cigarette industry online marketplace with its competitors.

'We're looking at whether we could form a marketplace for raw materials with our competitors," Ian Brown, head of logistics, UK operations, told SM. "If we are not talking to them now, we soon will be."

Indirect spend, including packaging, film, board and also some raw material such as cigarette paper, will be targeted.

"We don't believe it will be really worth doing unless we did it on an industry basis," Brown said. "Through e-procurement initiatives and collaborative planning, we are probably leveraging as much as we can out of our suppliers. The benefit of a marketplace will be economies of scale."

BAT is looking at models such as the automotive marketplace Covisint, initiated by Ford, DaimlerChrysler and GM which now includes other major manufacturers and will begin a pilot project in the UK this month.

But the marketplace would have to earn credibility, as legal question marks remain over the massive buying power of large companies joining forces, a major stumbling block in delaying the start-up of Covisint.

Brown did not believe that the marketplace would damage existing relationships. "We have a relatively few suppliers who are industry specific," he said. "Many supply a lot of fast-moving consumer goods companies, so they are already in other initiatives."

If the marketplace had not proved itself in the first couple of years, then big companies such as BAT and Philip Morris would pull out, he said.

Joining with competitors can be risky and there may be many pitfalls that are not initially apparent, according to Jenni Ashwood, business systems manager of retailer Bentalls. A project to buy direct goods in co-operation with Selfridges and Allders was started two years ago and wrapped up this year.

Disagreements over standards and changes in purchasing personnel at the companies meant commitment was missing. "The new people who came in didn't have this personal relationship," Ashwood said. Procurement was a competitive advantage that they were not going to share.

SMnov2000

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