From Curiosity To Wide Acceptance p. 13

By: Mark Fitzgerald In one year, newspaper purchasing managers have changed
their tune about the use of procurement cards sp.

JUST A YEAR ago, newspaper purchasing managers were furiously debating the very idea of procurement cards.
Now, these credit cards are all the rage.
Many once-skeptical newspapers are experimenting with the cards ? and some big chains are jumping in with both feet.
For instance, in the past few months Scripps Howard and Knight-Ridder have introduced the cards at all their newspapers. The New York Times uses procurement cards. So does Newsday ? and its parent, Times-Mirror, is experimenting with the cards at the Los Angeles Times.
"This thing is exploding," said David Smith, purchasing manager of the Toledo (Ohio) Blade.
Smith exemplifies the enthusiasm many newspaper purchasing executives have about procurement cards. The Blade does not have its procurement card system up and running yet ? but Smith helped lead a panel discussion on the subject at the recent Newspaper Purchasing Management Association's (NPMA) 38th annual conference in Cincinnati.
And Smith is practically an evangelist as he tries to get suppliers to the Blade to join the Mellon Bank Mastercard procurement card system.
"What I've been telling them is that this is a new program. You may not have heard of it ? but in the next two years this thing is really going to explode," Smith told NPMA members.
Smith was not exactly preaching to the choir at NPMA ? but the purchasing executives clearly were more favorably disposed to the cards than they were only a year ago. Procurement cards are like the travel and entertainment (T&E) cards issued by American Express, but can be limited to particular categories of purchases.
Depending on the issuer's requirements, vendors may need to sign up in order to be paid for purchases made on the cards, even if the vendor already accepts a consumer bank card or T&E card.
At the 1994 NPMA conference, the debate between procurement card enthusiasts and skeptics was as close to stormy as a purchasing manager's convention is ever likely to get. Enthusiasts saw the card as a way of ridding themselves of time-consuming and expensive paperwork, especially for small orders.
When the Knoxville (Tenn.) News Sentinel studied its purchasing order situation, it discovered that fully 92% of all the checks it wrote were for amounts under $1,000. Yet those checks amounted to just 23% of total dollars spent, said News Sentinel purchasing manager Sandra Zachary.
"Maybe we really were spending too much time on the small stuff," she said.
Skeptics, though, fretted about handing a blank check to employees. Some worried, too, that the purchasing department would lose control of purchasing.
This year, however, enthusiasts were in the ascendancy ? and now had some hard data on their side.
At Newsday, for example, introducing procurement cards has dropped the number of purchase orders by 20%, said purchasing manager Donald Woodworth. The number of requisitions that once had to be processed by the purchasing department dropped by 22%, he added.
Procurement cards also free up purchasing executives to concentrate on more important work, users say.
At the News Sentinel, for example, purchasing manager Zachary's time spent on purchasing fell from 20% of her workday to just 7%.
Even in their infancy, procurement cards have reduced head counts.
Michael Kelly of Philadelphia Newspapers Inc. credits the cards for the elimination of one of the purchasing department's three full-time employees.
At the Denver Rocky Mountain News, the number of buyers dropped from four to two. One reason for the decline was the adoption of procurement cards, said purchasing manager Theresa Sinner. Procurement cards also have the potential for saving money on purchases, managers say.
At the Sacramento Bee, for example, purchasing services manager David J. Fox has negotiated a 2% discount on purchases from the newspaper's major paper products supplier by using the American Express corporate T&E card.
As is true of any other credit card, the procurement card's advantage for vendors is the fact that they can get paid faster. As is also true of any other card, vendors pay a fee based on how fast they want to be paid.
By and large, newspaper department managers have accepted the procurement cards.
Probably the most enthusiastic employees are accountants, who receive on easily reconcilable bill per month rather than hundreds of separate purchasing orders.
"Accounting by far is the department that is going to save the most time with [procurement cards]," said the Toledo Blade's David Smith.
Newspapers using procurement cards increasingly want to use them more. Several papers have already extended the maximum allowable purchase, or are about to do so. Philadelphia Newspapers, for instance, allows certain managers to charge individual purchases as high as $2,500 to their cards.
More typical are the limits imposed by the Miami Herald. Here department managers can make individual charges up to $1,000, while photographers, on the other hand, are limited to individual charges of $300, with a monthly total limit of $1,000, said purchasing manager Kimberly P. Foster.
There have been surprisingly few abuses, purchasing managers report.
One reason for this restraint may be the strict warnings ? with threats of termination and legal action ? that newspapers give their employees about abuse.
The warnings are more severe ? and frequent ? largely because of the greater exposure, said Evelyn Smith, corporate travel manager for Scripps Howard.
In contrast to T&E cards ? which, depending on the card, ascribe liability to the individual employee, or the employee and the corporation, or the corporation alone ? procurement cards primarily set liability at the corporate level. Also, bills for the procurement card go right to the newspaper, contrary to the way T&E card charges are handled ? many papers insist that these first be paid by the employees, then that they submit an expense report for compensation.
"If [employees] misuse the card, if there's an indication of fraud ? they're out of there," Scripps Howard's Smith said.
But abuse has not been a problem, said Smith, who is responsible for overseeing chainwide procurement card use, which encompasses an average 700 transactions a week.
"These card holders ? if you train them properly so they understand their responsibilities ? they are not going to screw you up," Smith said.
"The real safeguard is a supervisor reviewing individual accounts," said Newsday's Donald Woodworth. A blocking option on Newsday's card ? which allows the newspaper to prohibit purchases in five product categories of its choosing ? has proved "inadequate," Woodworth said.
If there is little abuse, there is some resistance among department managers, who complain that these cards force them to do the job of the purchasing department.
"Within the first two weeks, we had a mutiny in operations," the Rocky Mountain News' Theresa Sinner said. Opposition was so intense, the tabloid decided to let the operations managers make their purchases, as before, through a designated operations buyer.
That buyer, however, uses a procurement card.
Some newspapers, too, have looked at procurement cards and decided to give them a skip.
The St. Louis Post-Dispatch, for instance, studied the cards but concluded they would not be worth the trouble. The newspaper for several years has moved to a stockless system, in which it has contracts with suppliers for eight areas of frequent purchasing, including electrical parts, press bearings, lighting and plumbing.
There were not enough other small-amount purchases to justify procurement cards, said purchasing head Nylin D. Bathke.
And, like several other smaller papers, Lancaster Newspapers Inc. in Pennsylvania has looked into procurement cards, but is not signing on to the concept yet.
"We're a small newspaper," said purchasing manager Rory Mackinson. "We can give out [T&E] credit cards and control them very easily. If I have a question, I can just walk over to the person's desk. We can have petty cash advances ? and use them effectively.
"We can have petty cash checking accounts ? and use them effectively. Plus, we are a small-town paper, and we like to do our purchasing locally," Mackinson said. The newspaper has both Visa and American Express cards that are used by department heads and other top managers, he said.
Those who have procurement cards say they are not going back, however.
"Overall," Newsday's Donald Woodworth said, "the card does what it is intended to do ? namely, eliminate paperwork on small purchases."


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