| "The purchasing card
process makes usage so visible that it's actually easier
to detect misuse than with traditional ordering methods"
BASF companies in the United Kingdom and
Ireland supply a wide range of raw materials to most industries.
BASF has 10 group companies operating more than 20 sites
in the UK and Ireland. The main operating company in the
UK, BASF plc, markets chemicals, plastics and agricultural
products, and manufactures fibre intermediates and pharmaceutical
active ingredients. Other UK group companies are involved
in industrial coatings; automotive OEM and refinish coatings;
biocide development; printing inks and plates; distribution
of colours, chemicals and plastics; polyurethane raw materials;
and vitamins and mineral premixes for animal feed.
The
Background
As with many companies looking for synergies
between sister companies and across geographical locations,
BASF has been keen to reduce the costs involved in their
business processes. One way in which they have been successful
in doing this is by the introduction of purchasing cards.
Having negotiated a deal with their bank, purchasing cards
were trialed with 6 suppliers and 15 internal users. The
suppliers chosen covered a broad cross section of commodity
types and included Fisher Scientific. Fisher Scientific
has been a purchasing card capable supplier since 1997,
and operates to line level detail, that is the information
transmitted to the bank contains line level detail and a
complete VAT breakdown.
Prior to the trial, all end users would
have to place orders via the purchasing department. The
implementation of purchasing cards allowed end users the
autonomy to order their requirements directly. Initially,
this was seen as purely transferring transactional paperwork
from purchasing to finance, which was compounded by the
'paper heavy' information received from their bank. BASF
however, created a new deal with a different bank that was
able to supply all their statements electronically, eliminating
this transactional paperwork. Comments Julie Hill, Purchasing
Card Administrator for BASF; "It is vitally important
at the onset of a purchasing card programme that you select
the right issuing bank to work with. The bank that you do
your corporate banking with is not necessarily the right
choice for your purchasing card programme. After changing
our initial issuing bank and moving to electronic transmission
of documents, our efficiency improved immensely. In the
same vein it is important to carefully select your software
package to manage the purchasing card data, taking a long
term view of how you want to operate in the future, making
sure that the software has the capabilities to grow as your
programme grows."
After a successful trial, the programme
was rolled out and now covers 220 cardholders across 6 sites,
and continues to grow. As a company, BASF is trying to implement
best practice processes across all its group companies.
One of the first initiatives to attempt to do this is to
roll out the purchasing card programme to each company.
Julie comments; "When we are implementing the programme
at a new site, we always recommend a pilot with couple of
suppliers that have proven track records with us. Fisher
Scientific is one such company that we always recommend,
because of all the suppliers we deal with, they are one
of the companies that cause least problems and queries relating
to purchasing card transactions."
BASF have found, however, that not all
suppliers are as keen to use purchasing cards as Fisher
Scientific. Pam Alderson, Commercial Associate at the Seal
Sands site comments; "Supplier uptake has been one
of the biggest stumbling blocks in implementing the purchasing
card programme. Some companies such as Fisher Scientific
can see the benefits it brings to them as a supplier, such
as quicker payment, and in turn benefit from furthering
their business relationship with us. Others, however, have
taken a bit more convincing. We ran supplier days when we
first instigated roll out to 'sell' the benefits to them,
which did help. The financial benefits to suppliers accepting
payment by purchasing cards is clear - whereas before using
purchasing cards we would do a BACS run every week, now
we only run one once or maybe twice a month. This is a much
slower payment method than the three to four days' receipt
of payment when a purchasing card is used. In the future
we envisage only doing business with companies that are
purchasing card capable."
The benefits of using purchasing cards
have not only been seen by their suppliers, but at BASF
too. As Julie explains; "We used to have an administrator
spending all day every day creating orders - now they are
only doing so for an hour and a half a week Whereas previously
we used to have highly skilled engineers and scientists
on a computer terminal creating requisitions on our ERP
system, they can now place an order via the telephone in
a matter of minutes, allowing them to spend their time doing
jobs they are trained for. We have also halved the time
spent in Finance processing invoices. With suppliers such
as Fisher Scientific that are line item capable, invoices
are not required, greatly reducing our paper handling."
And what of the security issues of devolving
buying power to end users? "This really isn't an issue,"
comments Julie. "The purchasing card process makes
usage so visible that it's actually easier to detect misuse
than with traditional ordering methods. In four years of
using purchasing cards we have only ever had one case of
attempted fraud, which was from outside of the company,
and the checks in place made sure that the attempt was not
successful. Our end users are given 'dummy cards' that contain
the number and expiry date, but cannot be used as a swipe
card. We are able to block certain merchant categories such
as hotels and restaurants so they cannot be used with these
suppliers. We have monthly and transaction limits set up
against each card, and are able to suspend cards if users
are, for instance, off sick for a long period. All in all
the system is extremely secure."
And so what of the future for BASF? Pam
explains; "BASF is currently collating information
about purchasing practices across Europe to identify synergies
and opportunities to set up European deals and practices.
Ultimately, we envisage that there will be purchasing 'hubs'
set up across Europe. There will be a definite move towards
electronic procurement, and we see the use of purchasing
cards as a positive example of that directive."
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A
highly efficient and secure payment method