AMERICAN EXPRESS UNVEILS NEW CORPORATE PURCHASING CARD; EXPECTED TO RADICALLY CHANGE PURCHASING OF OFFICE AND MAINTENANCE SUPPLIES
NEW YORK, Jan. 12 /PRNewswire/ -- American Express today announced that it will begin marketing a new charge card that provides an efficient, low-cost system for managing the purchase of supplies, equipment and services by large U.S. corporations. The American Express Corporate Purchasing Card expands the company's card franchise, which now includes charge and credit cards for consumers and the Corporate Card for managing business travel expenses. Today's announcement reflects the results of a year-long pilot program that involved 10 U.S. corporations, including IBM, Scott Paper Company and Northrop Corp. All 10 intend to expand their Corporate Purchasing Card programs. Based on initial sales efforts, which began last month, an additional 30 corporations are planning to implement the American Express Corporate Purchasing Card program. "We intend to earn a major position in this large industry by meeting our customers' needs," said Harvey Golub, Chairman and Chief Executive Officer, American Express Company. "Building a preemptive position in the purchasing card business as quickly as possible is, in fact, one of the top five priorities at our flagship subsidiary, Travel Related Services. "In the future, American Express may well be known as much for business expense management as it is today for consumer cards and travel services," Golub said. The new card is designed to replace the labor- and paper-intensive purchase order process that most companies use. Specifically, it streamlines the buying of low-dollar, indirect goods and services, such as office supplies, maintenance and temporary personnel services. Indirect purchases cover a broad range of administrative expenses -- items that do not directly impact the company's customer. This area of corporate purchasing is estimated at more than $250 billion annually. A mul-?million dollar advertising campaign announcing the Corporate Purchasing Card will debut tomorrow, with ads running in national media and business publications. This marketing effort supplements a sales effort to corporations and suppliers, which began Dec. 1. Reengineering solution Large corporations can spend more than $100 to process a single purchasing transaction, according to industry studies. "The cost of purchasing is very high," said Roger H. Ballou, President, American Express Travel Services Group. "There is virtually no difference in processing costs between buying a $10 stapler or a $10,000 computer. Often, the cost of processing the paperwork can exceed the cost of the item purchased. "The issue is even more pressing when companies look at how their purchasing and accounts payable resources are being deployed," Ballou said. "Most of their time and money is allocated to processing items that cost less than $1,000, which represents a small percentage of the actual dollar volume." In fact, smaller-ticket purchases represent about 75 percent of transaction volume, although they represent less than 20 percent of a company's total purchases in dollar volume. Client Experience Before testing the card program, Scott Paper estimated that it was costing an average of $152 to process a single transaction. In a pilot program at its Chester, Pa. facility, the company reengineered the procurement process, consolidated suppliers and began using the Corporate Purchasing Card. The result was that 76 percent of its invoices were eliminated, and the average transaction cost was reduced to less than $3.00. IBM, which had been spending $50-100 per transaction, finds that it now spends about $1.00 per transaction. What's more, it is reassigning personnel within the accounts payable department because of this process reengineering. During the pilot phase, American Express began calling on suppliers -- many of which have never accepted plastic payment. And, to date, over 1,000 new supplier locations, including GE Supply, Egghead Software, Bearings Inc., and National Office Supply, have been enrolled to accept the Corporate Purchasing Card, which can also be used at any establishment that already accepts American Express. "Because of the corporations' interest, suppliers are eager to demonstrate their customer service focus to clients and forge tighter vendor partnerships," said Ballou. How the Corporate Purchasing Card Works The Card streamlines the process to four steps: -Employees authorized to use the Card order directly from suppliers either by presenting the Card in person, over the telephone or electronically -Suppliers deliver products to the company and receive payment from American Express in as little as three days -The company receives one monthly consolidated bill from American Express containing all Card charges, while the employee receives a monthly report to verify transactions -The company receives management information system (MIS) reports to analyze its spending, monitor policy compliance and negotiate with suppliers. It can also receive information electronically to automatically update the general ledger Benefits to Corporations The benefits of the new Card to corporations include: -Savings through consolidated payments in a single check to American Express -Reduced administrative costs in processing purchase orders -Faster approval (and delivery) of goods -Tighter control of purchases through specific spending limits (including restrictions per transaction, per employee, per department on each Card) -Better management information to enhance companies' power to negotiate with suppliers -Ability to obtain sales tax information (e.g. sales tax amount collected) about each transaction in one consolidated report -Ability to obtain regulatory information, e.g. minority and women-owned business data -Spending by supplier Taxpayer Identification Number that may assist companies filing 1099 information returns. Benefits to Suppliers For suppliers, the Card's advantages include: -Faster payment, usually within three days, as compared to the typical 30- to 60-day period for accounts receivable -Reduced billing and collection costs -Minimized credit losses and low-dollar write-offs -P.C. software that facilitates integration into a supplier's existing ordering/billing system -Enhanced business opportunities, with corporate clients directing employees to use suppliers that accept the Corporate Purchasing Card. American Express Investment A long-time leader in expense management for corporate travel and entertainment (T&E), American Express has committed extensive resources to break ground in this new arena. "We are establishing a new standard in this business and capitalizing on corporations' need to streamline non-core functions," said Ballou. "Clearly, corporations want more than just a spending tool. They need comprehensive data capture that American Express is uniquely structured to provide." The company has established a new dedicated Corporate Purchasing Card unit, which encompasses product development, sales, marketing and customer service. The group, which has about 100 employees, is headed by John Yates, Senior Vice President, who recently joined American Express from General Electric, where he oversaw more than $20 billion in corporate purchases worldwide. American Express will expand the product internationally, beginning in Canada and the United Kingdom this year. Aggressive Pricing/Marketing Strategy Pricing to both the corporation and the supplier will be very competitive. The fee for corporate clients will be based on transaction volume and the payment terms that they choose. Pricing to suppliers will also be based on volume and settlement schedule, and discount rates are expected to be very competitive with rates charged by bank purchasing cards. In marketing the Corporate Purchasing Card, American Express intends to underscore its unique strengths: 1) Long experience and leadership in expense management for corporate travel 2) A one-company advantage, with American Express having direct relationships with both the corporate client and the supplier. This contrasts with the bank cards' fragmented structure that is dependent on coordination among merchant banks, issuing banks and over 50 outside processors 3) Commitment to invest in supplier support, such as the PC-based system that integrates with the supplier's order entry system 4) Ability to capture vendor-provided sales tax data. "Our ties to many large corporations and our ability to directly enlist and service suppliers will put us in a strong competitive position," said Ballou.
American Express counts 89 of the Fortune 100 as Corporate Card clients and is the leader in serving corporate T&E expense management needs.
American Express Travel Related Services Company, Inc. is a wholly owned subsidiary of American Express Company, a family of companies that provide travel, financial and expense management services. -0- 1/12/94 /CONTACT: Christine Levite of American Express, 212-640-3382/ (AXP)
CO: American Express Company ST: New York IN: FIN SU: PDT
LG-SP -- NY027 -- 1386 01/12/94 11:32 EST
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|Date:||Jan 12, 1994|
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