Original Date: 04/26/2004
Revision Date: 01/18/2007

United Defense, L.P. Armament Systems Division Aberdeen established a company Procurement Credit Card program that goes beyond the normal industry process. Shop floor personnel are issued and trained in the use of company credit cards for the purchase of company-related overhead operating supplies.

In 1997, United Defense, L.P. Armament Systems Division (UDLP ASD) Aberdeen initiated a Procurement Credit Card program. The facility analyzed its supply chain management program and realized that a large volume of purchase orders was being issued for low impact/low dollar purchases. In many cases, the purchase order process cost exceeded the dollar value of the purchase order. In addition, the process for purchasing emergency items of low dollar value created delays in production and maintenance activities.

UDLP ASD Aberdeen’s Procurement Credit Card program reduces the amount of purchase orders and is more responsive to the facility’s needs. In order to be eligible to participate in the program, potential participants must attend a comprehensive training program where they are trained in the program’s purposes, purchasing of allowable materials or supplies, card usage responsibilities, and proper accounting procedures after using the card. The training includes instructions on purchasing items that are specifically prohibited (e.g., personal, leasing, office furniture, travel/seminars/tuition, recognition awards, membership dues, computer related expenses).

Credit cards are issued to one administrative assistant for the routine purchase of office supplies and one maintenance repair operations person for the purchase of machining, welding, painting, electrical, packaging supplies, and building maintenance items. In addition, UDLP ASD Aberdeen issued credit cards to shop technician team members to purchase low cost shop supplies, safety supplies, and general use tooling. The issuance of credit cards to shop floor personnel was an innovative step since management approval is not required prior to initiating a purchase.

The internal monthly statement reconciliation and auditing processes help ensure the integrity of the program and monitor that the $2,500.00 per purchase and $5,000.00 monthly transaction limits per user are enforced. Since implementing the process, UDLP ASD Aberdeen has expanded the use of the credit card and estimates an annual cost avoidance/cost savings of approximately $300K. These savings are based on a calculated purchase order processing cost of $130 and a calculated cost of printing a bi-monthly check of $20 to the credit card company.

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