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Phelps Dodge Integrates Procurement Cards with On-Site Stores and Purchasing System

Author(s):

Brenda L. Bunch, C.P.M.
Brenda L. Bunch, C.P.M., Strategic Programs Coordinator, Phelps Dodge Mining Company, Phoenix, AZ 85004, (602)234-8361, bbunch@phelpsd.com
Kevin Scott
Kevin Scott, Database Administrator, Phelps Dodge Refining Corp., El Paso, TX, (915)778-9881, kscott@phelpsd.com
Elizabeth Klune
Elizabeth Klune, Vice President, Wells Fargo Bank, San Francisco, CA (415)396-1075, eklune@wellsfargo.com
Sean Bradley
Sean Bradley, MIS Director, Harnischfeger Corp., Milwaukee, WI, 53214, (414)671-7522

84th Annual International Conference Proceedings - 1999 

Abstract. Phelps Dodge, Wells Fargo Bank, and its suppliers have taken the procurement card to a new level. They have implemented the procurement card at Phelps Dodge corporate-wide including the Mining Company and Phelps Dodge Industries. At Phelps Dodge Mining Company they have also set up their on-site supplier stores to utilize the procurement card as the means of invoicing and payment. The supplier stores are set up with a Phelps Dodge procurement card under the store's name, Level III line-item detail, appropriate limits to maximize the use of the card, and an integration into Phelps Dodge's purchasing system to tie costs back to its assets.

In 1995, Phelps Dodge began their program with two pilot sites and a goal of using the procurement card to improve costs through streamlining the purchasing and payment process while adding value by empowering employees and holding them accountable. They have since expanded to include 14 sites with approximately 7,000 transactions, $3.0 million in monthly spend, and an average transaction dollar of $415. Included in these 14 sites, Phelps Dodge has integrated its on-site supplier stores into their program. They currently have 7 stores at one site set up and running.

The procurement card program has proven to be very beneficial to the organization in reducing costs and empowering the employees to procure necessary low cost items in a timely matter. However, costs were not easy to collect, especially as employees began buying items that needed to be accounted for. Therefore, Phelps Dodge developed an in-house program to collect costs based on active work order numbers and/or cost centers. By doing so, costs would be collected and transferred appropriately. It has allowed managers to track costs that are being applied to his/her respective department.

Phelps Dodge then looked at the opportunity they had with their on-site supplier stores, including being able to collect costs on a regular basis, which would far exceed what they had in the past. Previously, all of the supplier stores were not part of the purchasing system; issues and payments were done outside of the system and costs were difficult to collect. In setting up the system to accommodate the supplier stores, Phelps Dodge needed to make sure it was an automated process with no manual intervention. In accomplishing this, the system was programmed to identify which cardholders were on-site stores. It then takes the work order data entered at the point of sale and transfers the line item information from the time of transaction through the procurement card process and eventually into the Phelps Dodge purchasing system.

To flow correctly, criteria needed to be in place at each of the stores. First, they had to make sure the stores would be able to collect Level III, line-item detail, specifically quantity, description, and line item amount. This was the first battle and unfortunately continues to be. The stores were educated on what the requirements were. Phelps Dodge worked extensively with the software providers, merchant banks, and Wells Fargo to make sure the stores were properly being set up to accommodate these requirements. Once the stores had the appropriate software and the ability to begin passing the level III information, problems in collecting the data was apparent. To resolve the issues, Phelps Dodge has been working with the backend people, including MasterCard, the merchant banks, and data transfer providers to resolve the issues. They are finally identifying the problems and are getting them resolved rather quickly. Being able to identify and work with the various points in the process has been the key to success in finally reaching some conclusion with the level III issues. (To understand the backend processing, I have attached a schematic to this report.)

Phelps Dodge is now beginning to work on setting up additional supplier stores at other locations and maximizing the potential the card has given them.


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