Ad hoc expenditure is a big headache for any organisation and procurement division: these low-value, high-volume purchases can erode budgets if processed through traditional P2P. While the solution is to introduce a purchasing card (P-card) programme, how does one determine which expenditure to put on a P-card?
A simple and effective way of segmenting your expenditure lies in the Kraljic Model, Tshipi Alexander, Head of Issuing Sales and Service at Nedbank Corporate Card, tells SmartProcurement.
When it comes to strategic sourcing activities, the Kraljic Model is one of the most widely used to prioritise the items a company needs to procure.
The model consists of four quadrants and the items for which a P-card will bring processing benefits would typically be those in the non-critical quadrant – low-value, high-volume, ad hoc purchases, possibly limited to one supplier.
The purchasing strategy for items in the non-critical quadrant is to simplify and automate the procurement process as much as possible and to use a decentralised procurement policy with no formal requisition and approval process.
AP-card will help achieve these goals as the cost of processing purchases is reduced significantly when P-cards are adopted, and P2P processes can be reduced by up to 65%.Furthermore, a P-card has excellent controls such as spend limits and allowing spend only at specific suppliers.
• P-cards offer greater visibility of spend by providing data up to the third level.
• Organisations can seamlessly integrate data feeds and online portals into their enterprise resource planning (ERP) systems, providing exact details of who bought what, where they bought it and how much they paid for it.
• P-cards enable immediate payment of suppliers, which improves supplier relations and eliminates the damaging effect that late payments have on small businesses.
For more information on how a procurement card will benefit your company contact Anita Carolus-Opperman at Nedbank Corporate Card at AnitaCarolusO@Nedbank.co.za.