Lockheed Martin Taps U.S. Bank For Purchasing

<B> Lockheed Martin Taps U.S. Bank For Purchasing</B>

By Mary Ann McNulty

<I>Bethesda, Md.</I> - In what is believed to be the world's largest purchasing card contract, Lockheed Martin Corp. has awarded its $750 million annual charge volume to U.S. Bancorp as part of a complete overhaul of its procurement practices. The program is expected to save multi-millions of dollars for all 110 companies within Lockheed Martin and create cost savings and synergies among 50 different accounting systems.

Over the five-year life of the contract, Lockheed Martin expects to generate nearly $4 billion in charges. Previously, the largest purchasing accounts for both U.S. Bank and American Express generated about $200 million in annual charge volume. Although the federal government reported $7.96 billion in purchasing volume on its program with U.S. Bank in the 1997-98 fiscal year, that business was split among five preferred vendors last November, as each agency negotiated its own contract under a master general services administration agreement.

Even though U.S. Bank Corporate Payment Systems, Minneapolis, also holds the contract for Lockheed Martin's T&E business, Lockheed Martin considered bids from six of the 18 bankcard issuers it asked to help reengineer purchasing. The T&E card contract was awarded in 1997 and is expected to generate about $500 million in charge volume this year (<I>BTN,</I> Aug. 25, 1997).

"In addition to eliminating purchase orders and streamlining low-value direct and indirect purchases, the purchasing card will be used as the payment vehicle for our procurement area's electronic catalog and for most purchases by field office personnel," said Molly Chung, program manager for Lockheed Martin Corp.

When fully implemented by year-end 2000, the company estimated it will eliminate 700,000 accounts payable transactions annually, significantly reducing processing costs.

More than 100 purchasing executives from the various entities began mapping and reengineering the existing purchasing processes last November. A corporatewide, multifunctional team invited 18 major card issuers, with which it has a banking relationship, to bid.

The purchasing card deployment began in May. One of the issues that is taking some time, Chung said, is general ledger mapping that the bank is performing to all of the company's multiple accounting systems. The reengineering effort is part of an extensive "LM21 Best Practices" initiative to achieve $2.6 billion in steady-state savings by the year 2002. In its first year of implementation this year, executives hoped to save a half billion dollars. However, July forecasts suggest the company could save double that amount, or $1 billion, according to Jack Hugus, vice president of LM21 Best Practices.