Premium Essay

Business Operations

In: Business and Management

Submitted By aeaster82578
Words 520
Pages 3
The Low Dollar Purchase (LDP) System provides an efficient distributed

procurement method for non-repetitively purchased lower dollar value goods and services where other methods (e.g.,

Corporate Purchasing Card System,
Preferred Supplier Agreements, and Standing Purchase Orders) are not suitable.

2. Discuss the advantages and disadvantages of a procurement card system

A major benefit from using procurement cards is reduced purchasing

transactions costs. A pre-procurement card study of transactions costs for

items that did not have an established contract revealed an average

transactions cost of $150. This includes the cost to requisition, place,

receive and inspect, and process payment through accounts payable. A study

after initiating procurement cards revealed an average transactions cost of

$50, which includes user time for reconciliation. Furthermore, users appear

satisfied with the procurement card system. Before full-scale launching of the

card, purchasing conducted a six-month trial program with 300 users. After the

trial period, purchasing surveyed these users concerning their satisfaction

with the card program. More than 75 percent were positive about the

procurement card program. Negative comments came from high- volume transaction

users who were not prepared or organized to do a monthly reconciliation. Although PPL has currently issued over a thousand procurement cards, current

usage levels are lower than what management anticipated during development.

Part of this is due to certain supervisors not allowing subordinates to use

cards. Others are reluctant to use the card for travel because they do not

earn frequent flier miles like they would if they used their personal card and

submitted an expense report. Other users sense a general lack of…...

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