Employee Procurement Cards p. 11

By: Mark Fitzgerald Newspaper purchasing managers hand them out very cautiously,
but some realize their use can free up the purchasing
department to concentrate on a broader assortment of duties sp.

SOMETHING IN THE very soul of a newspaper purchasing manager militates against handing a credit card to an employee.
Where are the authorizations? Where is the requisition documentation? Where are the controls?
"I always refer to the purchasing card as an accountant's nightmare," said Michael Kelly, controller of the Chicago Tribune and himself a certified public account.
"But," Kelly added, "I think we have to get beyond that."
Indeed, the Tribune recently selected American Express for its corporate procurement card.
Slowly and cautiously ? very, very cautiously ? newspaper purchasing managers are overcoming their deep-seated aversion to handing anyone the equivalent of a blank check, and are issuing procurement cards to trusted employees.
Procurement, or purchasing, cards are similar to personal or corporate credit cards except that they are not used for travel or entertainment ? and they permit businesses to place extensive controls on how and where they can be used. American Express and Visa are aggressively marketing the cards.
A procurement card's biggest advantage is in making small purchases without adding the expense of creating and tracking a purchasing order.
For newspaper purchasing managers, procurement cards are another unsettling element many of them believe they must nevertheless embrace in the brave new world of the reengineered multimedia corporation.
But as the discussion at the 37th Newspaper Purchasing Management Association annual conference held recently in Minneapolis demonstrated, procurement cards are about as close to an emotional issue as there is among newspaper purchasing managers.
As skeptical NPMA members questioned the benefits of the cards, Mark Thomas, purchasing manager of Journal/Sentinel Newspapers in Milwaukee, urged them to keep an open mind.
"This could be a way of even saving [our jobs]," Thomas said.
To proponents, procurement cards free up purchasing managers to become more valuable to newspapers.
"I want to get on with truck leasing, with helping maintenance [departments], with finding second-party suppliers for Ferag [equipment]," said Donald Woodworth, purchasing manager for Newsday. "But if your people are busy with [small] purchasing orders, they are not out there finding alternate sources for TKS press parts."
Woodworth told the NPMA that he became convinced of the need for procurement cards when he conducted an audit of purchasing patterns in his own department.
The findings were eye-opening:
? Purchases under $250 represented 36% of all purchasing orders written ? but just 1% of total dollars spent on purchasing. Annually, Newsday's procurement amounts to about $33 million, Woodworth said.
? Purchases under $500 were 58% of POs issued ? and just 3% of total dollars.
? Purchases under $1,000 were 75% of all POs ? and represented only 8% of total dollars.
"I quickly realized," Woodworth said, "that we were in the trivial purchasing business and not where we had to be if we were going to serve our internal customers."
Nor was Newsday unique.
Michael Kelly, controller of the Chicago Tribune, found a similar result from a purchasing audit.
"To my dismay, I discovered that at the Chicago Tribune, 51% of our purchase orders that were cut in the previous year amounted to only $1 million ? which is a miniscule amount of [total] purchasing," Kelly said.
Newsday's solution was to give 57 employees Visa procurement cards with individual limits set at $500 per transaction and $2,500 for the month.
"The limit kept it, frankly, out of the range of fax machines or personal computers, things that we would not want people to purchase without requisitions," Woodworth said.
Like other procurement cards, the Visa card allows Newsday to altogether block purchases from some companies and purchases of some product types.
Monthly statements and packing tickets are required to be signed by department managers. A single summary invoice is sent to accounts payable for all card holders.
"The intention," Woodworth said, "is to have less paper. It's going to be a verbal order with a monthly statement. And people are going to have to get used to that."
Virtually all purchases on the cards are conducted by phone, Woodworth said. Visa provides, at a one-time cost of $300, a keypad with modem and card swipe to conduct transactions.
Newsday has asked 125 vendors to equip themselves for procurement-card purchasing.
About 40 were set up for the cards when the program began in January, Woodworth said.
"The only criticism from employees is the concern that they are being asked to do more with [fewer] people, but that has died down with the overall reduction in their paperwork and the ease with which a small purchase can be accomplished," he said.
Despite the apparent temptations of a procurement card, fraud has not been a major concern, Woodworth said.
"We decided that if the manager is doing his job, he's asking the right questions. And [an employee] may [make a questionable purchase] once ? but he won't do it twice," Woodworth said.
"The people who get cards," he added, "they are your best people. They will try for the best price."
Besides, the Newsday purchasing manager added, "We're talking about 3% of what you purchase. So you truly are not putting your company at risk."
Indeed, as NPMA skeptics questioned the paper trail and tracking qualities of the cards, William Spina, director of purchasing for the New York Times, urged critics not to lose sight of the big picture.
"The point is, if you use a ledger process to account for every single purchase, you're going to be spending more time tracking things that represent 3% of budget than you are saving [by using the card]," said Spina, NPMA president-elect.
Putting the card squarely in the reengineering issue ? and tacitly acknowledging purchasing managers' traditional reluctance to fewer controls ? Spina added, "It's a paradigm shift."
That's how Kelly framed the issue, as well.
"With empowerment [of employees], you've got to get to the stage where you cut the cord and allow managers to make decisions," he said.