The massive food and drinks group Diageo is set to start trading with its suppliers over the internet, with the aim of making significant savings in transaction costs.

The company plans to create an "electronic market", aggregating procurement budgets across its various divisions to achieve better performance. It also plans to consolidate the range of companies it deals with, focussing on a smaller number of preferred partners with whom it can negotiate volume discounts.

This is the latest in a series of shifts towards the increased efficiencies and lower costs promised by e-business principles. The rate at which companies are taking this up seems to be increasing rapidly.

Almost two years ago, a survey of senior European business executives conducted by Andersen Consulting found that most expected the internet to change their procurement practices within five years - a judgement which may prove to be much too conservative.

Elliott Chase