MasterCard offers a cheaper, quicker way of paying in the future
December 1, 2003 | 12:00am
Hong Kong based Gammon Skanska is a leading construction services company with operations throughout Southeast Asia and China. The company has gained a name by building leading-edge, award-winning structures for more than 40 years. With a number of projects running simultaneously in countries ranging from Singapore to the Philippines, making sure jobs are on-stream and completed on time and on budget is critical for the firm’s success.
To keep its market leadership in the industry, Gammon Skanska is always on the lookout for ways to further streamline its operations. It decided on implementing a corporate purchasing card program that would tap e-commerce tools for procurement needs to enhance the delivery of its core business construction services to its personnel and clients.
This was the reason why the firm recently turned to MasterCard for a way of speeding up purchases, increase efficiency and control expenses with a MasterCard purchasing card solution that the firm could use throughout its far-flung operations.
A report made by MasterCard’s Guy Higgins, process improvement project manager, indicated that Gammon Skanska was looking for a "general streamlining of inefficient practices throughout the whole purchasing chain for the purchase of low value items, which follows the same rules for a HK$5 purchase as for a HK$5 million purchase."
Higgins and his staff reported that Gammon Skanska had a high volume of low-value purchases. These purchases were costing a lot to process – sometimes more in processing than the actual cost of the item. In addition, because of its paper laden, labor intensive, multi-step approval process, getting necessary supplies to a construction site in a timely manner was frequently a problem.
For example, a site foreman who needed a pair of work boots would need to go through a multi-step process that involves paperwork and lots of steps and approvals to secure this simple requirement. That simple order for work boots would involve nine Gammon Skanska staff – some of them even more than once in the process – 21 sheets of paper, 11 signatures and 17 process operations, with the same information recorded four times during the process. By the time the paperwork for the pair of work boots has been approved, the need for it might have already gone.
Higgins said the purchasing card solution actually makes "life easier for the guy who actually orders or needs the item so that he can get the item in his hand quickly without a dozen pieces of paper and signatures being involved."
MasterCard’s review of Gammon Skanska’s purchasing process revealed that:
• Annually, materials purchased tallied about 50,000 transactions – equal to HK$1.5 billion in spending;
• That 75 percent of this transaction volume was for purchases with a value less than HK$15,000;
• This purchasing volume accounted for only 10 percent of budget spending; and,
• The processing cost for each transaction was estimated at HK$700, that is HK$35 million in purchase order and invoice payment costs.
The entire purchasing process was costing Gammon Skanska HK$26 million to process HK$150 in spending and HK$9 million to process the remaining HK$1,350.
Working with a local bank in Hong Kong, Gammon Skanska chose MasterCard because of its proven quality commercial products and business support. The proffered solution, the MasterCard purchasing card, or the P-Card as it is sometimes called, would help the firm reduce paperwork and administrative costs, streamline the ordering process and speed up delivery time as a result of the simplified process. The MasterCard P-Card would also give the firm complete accountability for all their charges.
"The MasterCard purchasing card streamlines our administrative procedures," said Gammon Skanska group managing director Martin Hadaway. "The construction industry requires frequent purchases of a range of small items, such as spare parts, accessories, small tools, fixtures and administrative equipment."
"At a high level, we wanted to introduce a less rigid style of management into the company. The P-Card, with the right controls in place, introduces the concept of ‘after the event management’ and ‘management by exception,’" added project manager Higgins
With the card, Hadaway and his team felt that site personnel who needed critical supplies would get them when they needed them with much greater efficiency while at the same time the company would be able to comprehensively track and control expenses. Its suppliers would also be able to receive payments on time.
This is one of the case studies MasterCard offered during the recent Greater China Commercial Payment Solutions Forum 2003 it recently held in Hong Kong.
Peter Gordon, MasterCard International vice president, commercial payment solutions, Asia Pacific, in a statement, noted that commercial payment cards (CPS) used mostly for business-to-business (B2B) transactions have been considered card center products, with the marketing of these items left to bank credit card departments.
"Leading-edge banks now understand that corporate payment cards are a significant way for commercial banking and SME banking operations to boost profitability and lock in customer loyalty," Gordon said.
"MasterCard has helped numerous financial organizations around the world integrate card-based commercial payment solutions with the transaction processing capabilities, marketing, sales and operational core competencies of card center operations. By overcoming internal boundaries and hurdles, these organizations now provide their customers with the most convenient, practical and globally-accepted payment modules available – credit and debit cards from the MasterCard family of brands," he added.
MasterCard’s secure position in the finance world offers business consumers of continuous service with the commercial payment solutions it may make available to them.
Worldwide, MasterCard has over 600 million cards in circulation. These were issued by 25,000 financial institutions in over 200 countries and territories. Not only that, its products have been used in 7.1 billion transactions in the first half of 2003 alone. In Asia Pacific alone, MasterCard has 15 million B2B cards and 150 million debit and ATM Maestro and Cirrus cards.
The concept of CPS may be new in the Asia Pacific but it has been at work in various parts of the world since the 1990s.
The United States federal government has been issuing since 1989 a purchasing card for government-wide transactions.
In Australia and New Zealand, the public sector has adopted CPS for federal government programs (since 1986), state and local government programs (1987) and in extensive programs in universities and utilities.
Taiwan adopted a CPS program for a variety of needs. The Taipei City Corporate Executive Card and Purchasing Card Program has been in place since 2000-2001, while other CSP consumers are the Taiwan Post, the Kaoshiung City and County Government, Tainan County Government and National Taiwan University.
The latest adopter of MasterCard’s CPS applications is Hong Kong’s Vegetable Marketing Organization (VMO). The program was implemented only last October.
The Vegetable Marketing Organization is a self-financing, non-profit organization governed by the Agriculture, Fisheries and Conservation Department of the Government of the Hong Kong SAR. Its market at Cheung Sha Wan represents over 45 percent of the wholesale vegetable marketing in Hong Kong.
Before the VMO adopted MasterCard’s P-Card, merchants paid for their purchases in cash. The organization needed 10 personnel to process the bills, counting them and separating according to issuing bank and packing them before delivery to a bank.
This process was deemed time-consuming and insecure. With cash involved in all transactions, there were risks both for the consumers and the organization.
Under the MasterCard CPS solution, the local Dah Sing Bank, which issues the P-Cards, would act as a bridge between the two. Now buyers can pay for their purchases using a P-Card, while the VMO can collect payments securely from the bank.
The concept of commercial payment solutions is still an emerging one in the Philippines, says Gordon in an interview after the forum.
"What we talked about today is not necessarily in the Philippines," he explained. "Dell and GE, they’ve got operations there. They’re saying to the banks, ‘We need more sophisticated tools. We have them in the other markets. We’re working in those organizations in Asia or in Indonesia or in Thailand.’ They have to get the banks to show them how to develop these products in the Philippines. Again, it’s the global spread of organizations at the big end of town saying, ‘We’re looking for these sort of solutions for these sort of activities.’"
A number of firms in the country are now using P-Cards for their needs. Gordon says the Bank of the Philippine Islands has a corporate card for travel and living expenses, while Rizal Commercial Banking Corporation has its own commercial card.
Armando Alemany, MasterCard International vice president, business development, corporate payment solutions, Latin America, Asia Pacific and SAMEA regions, says most of the delay in the introduction of CPS in most markets stem from the risks the banking sectors may face with these products.
"The bank will not necessarily undertake any venture unless they can prove profitability," says Alemany. "When the biggest customer or a big customer comes to the bank, knocks on the door and says, ‘If you want me as a customer, you have to provide a solution.’ There’s nothing that moves a bank faster than that big customer to come and ask for solution. That’s why we work directly with the companies, so that the companies create a demand for them. And when that happens, the bank often winds up bringing up a solution to the problem."
Gordon explained that when MasterCard started commercial cards three years ago in the Asia Pacific region, it had only 18 banks adopting the program.
"We had 160 odd banks that are full members of MasterCard, issuing out consumer cards, and we had 18 doing commercial cards. That’s a very small number," he said. "That grew to 48 banks; we’ve grown by 30 banks in 2-1/2 years. That is fantastic growth from our point of view."
"The point is the banks didn’t do it because MasterCard said they should. It’s because their customers are saying, we’re seeing globalization or multinational growth. And they’re adopting these tools from North America, the United States and Australia. And they’re saying, we need to do this here. And then the banks say, we don’t do this thing. And then they say, you should. It’s a cycle thing. We’d like to get a huge growth. But it will come in a number of years."
Alemany says an increased productivity in other parts has brought businesses in Asia to wise up and adopt the same practices that work on the other side of the globe. And this includes CPS.
"These solutions do the same thing. Take the companies in this side of the world. They don’t have blinders on. They’re competing with everybody else. When they see productivity gains in other markets, in companies that they are competing with, they have to jump on that same bandwagon and bring solutions internally to increase productivity so they could stay with the competitor," he said. "It’s a very interesting situation. The more productivity happening on one side of the world, the more that pushes other parts of the world to do the same thing. And a lot of these companies are buying something from each other and they are learning the best practices. It’s a really nice development to see."
Gordon says MasterCard is now in the process of familiarizing the business sector with CPS by holding seminars and forums around the region.
"Definitely, we’ll see something more dynamic in this area by 2004," he added. "But it’s not gonna be in early 2004."
To keep its market leadership in the industry, Gammon Skanska is always on the lookout for ways to further streamline its operations. It decided on implementing a corporate purchasing card program that would tap e-commerce tools for procurement needs to enhance the delivery of its core business construction services to its personnel and clients.
This was the reason why the firm recently turned to MasterCard for a way of speeding up purchases, increase efficiency and control expenses with a MasterCard purchasing card solution that the firm could use throughout its far-flung operations.
A report made by MasterCard’s Guy Higgins, process improvement project manager, indicated that Gammon Skanska was looking for a "general streamlining of inefficient practices throughout the whole purchasing chain for the purchase of low value items, which follows the same rules for a HK$5 purchase as for a HK$5 million purchase."
Higgins and his staff reported that Gammon Skanska had a high volume of low-value purchases. These purchases were costing a lot to process – sometimes more in processing than the actual cost of the item. In addition, because of its paper laden, labor intensive, multi-step approval process, getting necessary supplies to a construction site in a timely manner was frequently a problem.
For example, a site foreman who needed a pair of work boots would need to go through a multi-step process that involves paperwork and lots of steps and approvals to secure this simple requirement. That simple order for work boots would involve nine Gammon Skanska staff – some of them even more than once in the process – 21 sheets of paper, 11 signatures and 17 process operations, with the same information recorded four times during the process. By the time the paperwork for the pair of work boots has been approved, the need for it might have already gone.
Higgins said the purchasing card solution actually makes "life easier for the guy who actually orders or needs the item so that he can get the item in his hand quickly without a dozen pieces of paper and signatures being involved."
MasterCard’s review of Gammon Skanska’s purchasing process revealed that:
• Annually, materials purchased tallied about 50,000 transactions – equal to HK$1.5 billion in spending;
• That 75 percent of this transaction volume was for purchases with a value less than HK$15,000;
• This purchasing volume accounted for only 10 percent of budget spending; and,
• The processing cost for each transaction was estimated at HK$700, that is HK$35 million in purchase order and invoice payment costs.
The entire purchasing process was costing Gammon Skanska HK$26 million to process HK$150 in spending and HK$9 million to process the remaining HK$1,350.
Working with a local bank in Hong Kong, Gammon Skanska chose MasterCard because of its proven quality commercial products and business support. The proffered solution, the MasterCard purchasing card, or the P-Card as it is sometimes called, would help the firm reduce paperwork and administrative costs, streamline the ordering process and speed up delivery time as a result of the simplified process. The MasterCard P-Card would also give the firm complete accountability for all their charges.
"The MasterCard purchasing card streamlines our administrative procedures," said Gammon Skanska group managing director Martin Hadaway. "The construction industry requires frequent purchases of a range of small items, such as spare parts, accessories, small tools, fixtures and administrative equipment."
"At a high level, we wanted to introduce a less rigid style of management into the company. The P-Card, with the right controls in place, introduces the concept of ‘after the event management’ and ‘management by exception,’" added project manager Higgins
With the card, Hadaway and his team felt that site personnel who needed critical supplies would get them when they needed them with much greater efficiency while at the same time the company would be able to comprehensively track and control expenses. Its suppliers would also be able to receive payments on time.
This is one of the case studies MasterCard offered during the recent Greater China Commercial Payment Solutions Forum 2003 it recently held in Hong Kong.
Peter Gordon, MasterCard International vice president, commercial payment solutions, Asia Pacific, in a statement, noted that commercial payment cards (CPS) used mostly for business-to-business (B2B) transactions have been considered card center products, with the marketing of these items left to bank credit card departments.
"Leading-edge banks now understand that corporate payment cards are a significant way for commercial banking and SME banking operations to boost profitability and lock in customer loyalty," Gordon said.
"MasterCard has helped numerous financial organizations around the world integrate card-based commercial payment solutions with the transaction processing capabilities, marketing, sales and operational core competencies of card center operations. By overcoming internal boundaries and hurdles, these organizations now provide their customers with the most convenient, practical and globally-accepted payment modules available – credit and debit cards from the MasterCard family of brands," he added.
MasterCard’s secure position in the finance world offers business consumers of continuous service with the commercial payment solutions it may make available to them.
Worldwide, MasterCard has over 600 million cards in circulation. These were issued by 25,000 financial institutions in over 200 countries and territories. Not only that, its products have been used in 7.1 billion transactions in the first half of 2003 alone. In Asia Pacific alone, MasterCard has 15 million B2B cards and 150 million debit and ATM Maestro and Cirrus cards.
The concept of CPS may be new in the Asia Pacific but it has been at work in various parts of the world since the 1990s.
The United States federal government has been issuing since 1989 a purchasing card for government-wide transactions.
In Australia and New Zealand, the public sector has adopted CPS for federal government programs (since 1986), state and local government programs (1987) and in extensive programs in universities and utilities.
Taiwan adopted a CPS program for a variety of needs. The Taipei City Corporate Executive Card and Purchasing Card Program has been in place since 2000-2001, while other CSP consumers are the Taiwan Post, the Kaoshiung City and County Government, Tainan County Government and National Taiwan University.
The latest adopter of MasterCard’s CPS applications is Hong Kong’s Vegetable Marketing Organization (VMO). The program was implemented only last October.
The Vegetable Marketing Organization is a self-financing, non-profit organization governed by the Agriculture, Fisheries and Conservation Department of the Government of the Hong Kong SAR. Its market at Cheung Sha Wan represents over 45 percent of the wholesale vegetable marketing in Hong Kong.
Before the VMO adopted MasterCard’s P-Card, merchants paid for their purchases in cash. The organization needed 10 personnel to process the bills, counting them and separating according to issuing bank and packing them before delivery to a bank.
This process was deemed time-consuming and insecure. With cash involved in all transactions, there were risks both for the consumers and the organization.
Under the MasterCard CPS solution, the local Dah Sing Bank, which issues the P-Cards, would act as a bridge between the two. Now buyers can pay for their purchases using a P-Card, while the VMO can collect payments securely from the bank.
The concept of commercial payment solutions is still an emerging one in the Philippines, says Gordon in an interview after the forum.
"What we talked about today is not necessarily in the Philippines," he explained. "Dell and GE, they’ve got operations there. They’re saying to the banks, ‘We need more sophisticated tools. We have them in the other markets. We’re working in those organizations in Asia or in Indonesia or in Thailand.’ They have to get the banks to show them how to develop these products in the Philippines. Again, it’s the global spread of organizations at the big end of town saying, ‘We’re looking for these sort of solutions for these sort of activities.’"
A number of firms in the country are now using P-Cards for their needs. Gordon says the Bank of the Philippine Islands has a corporate card for travel and living expenses, while Rizal Commercial Banking Corporation has its own commercial card.
Armando Alemany, MasterCard International vice president, business development, corporate payment solutions, Latin America, Asia Pacific and SAMEA regions, says most of the delay in the introduction of CPS in most markets stem from the risks the banking sectors may face with these products.
"The bank will not necessarily undertake any venture unless they can prove profitability," says Alemany. "When the biggest customer or a big customer comes to the bank, knocks on the door and says, ‘If you want me as a customer, you have to provide a solution.’ There’s nothing that moves a bank faster than that big customer to come and ask for solution. That’s why we work directly with the companies, so that the companies create a demand for them. And when that happens, the bank often winds up bringing up a solution to the problem."
Gordon explained that when MasterCard started commercial cards three years ago in the Asia Pacific region, it had only 18 banks adopting the program.
"We had 160 odd banks that are full members of MasterCard, issuing out consumer cards, and we had 18 doing commercial cards. That’s a very small number," he said. "That grew to 48 banks; we’ve grown by 30 banks in 2-1/2 years. That is fantastic growth from our point of view."
"The point is the banks didn’t do it because MasterCard said they should. It’s because their customers are saying, we’re seeing globalization or multinational growth. And they’re adopting these tools from North America, the United States and Australia. And they’re saying, we need to do this here. And then the banks say, we don’t do this thing. And then they say, you should. It’s a cycle thing. We’d like to get a huge growth. But it will come in a number of years."
Alemany says an increased productivity in other parts has brought businesses in Asia to wise up and adopt the same practices that work on the other side of the globe. And this includes CPS.
"These solutions do the same thing. Take the companies in this side of the world. They don’t have blinders on. They’re competing with everybody else. When they see productivity gains in other markets, in companies that they are competing with, they have to jump on that same bandwagon and bring solutions internally to increase productivity so they could stay with the competitor," he said. "It’s a very interesting situation. The more productivity happening on one side of the world, the more that pushes other parts of the world to do the same thing. And a lot of these companies are buying something from each other and they are learning the best practices. It’s a really nice development to see."
Gordon says MasterCard is now in the process of familiarizing the business sector with CPS by holding seminars and forums around the region.
"Definitely, we’ll see something more dynamic in this area by 2004," he added. "But it’s not gonna be in early 2004."
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