Visa Customers To Pilot D&B-Coded Procurement Card

<B> Visa Customers To Pilot D&B-Coded Procurement Card</B>

By Lynn Woods

Want to know what your company spends on pencils? Printer cartridges? Office chairs? It's not an easy task: The Level 3 data that standard purchasing cards provide includes the amount of the transaction and a description of the merchant, but not the type of item. The confusion deepens with the advent of more Internet-based suppliers, many of which specialize in different kinds of products and therefore are not adequately described by traditional merchant category codes.

Now Visa U.S.A. Inc. has contracted with Dun & Bradstreet to run a pilot in which purchases on the Visa procurement card will be coded by product. Visa is in the process of choosing a handful of the top Visa purchasing card customers at two banks, along with five participating suppliers, for the pilot. The pilot is expected to start at the beginning of next year.

Marcie Verdin, vice president of the purchasing card at Visa U.S.A., said the purpose of the pilot is to determine "what's the value, what's the price and who will pay" for the added service. A key question, she said, is "Will there be enough value so that customers will demand it from suppliers?" Verdin noted that there might be certain types of purchases in which the data is more meaningful than in others.

The pilot uses UN/SPSC codes, an eight-digit, hierarchical classification system that resulted from a merger between the United Nations' Common Coding System and Dun & Bradstreet's Standard Products and Services Classification. The codes allow companies to consistently classify the products and services they buy and sell and are available in four levels, from the most detailed layer consisting of 8,500 codes to the top layer comprised of 60 codes. The codes are expected to expand dramatically next year, according to Mike Smart, director of supply chain solutions at Dun & Bradstreet, based in Bethlehem, Pa.

The UN/SPSC codes have been available since February and are offered free to the public through the Web site www.unspsc.com. Several years ago, aware of the void in product codes, Dun & Bradstreet invented SPSC codes and got them endorsed by American Express, Visa and MasterCard, said Smart. Wanting to expand the system globally, D&B discovered that the UN was updating its coding system. It decided to team up with the UN and combine the two coding systems.

Companies that are working with D&B can choose the layer of detail, noted Smart. For a particular transaction, a code might range from "electronic/electrical product," at the top layer, for example, to "electrical product" in the middle layer, to "light bulb," at the lowest layer. "The lowest layer really enables companies to drill down," said Smart.

So far, D&B has provided and implemented the coding system to dozens of corporations, which can choose from two applications. In the first scenario, D&B obtains the product ordering data from the procurement department, including the historical spend, then codes every line item. It also will normalize the vendor master file, standardizing the codes of items from each supplier.

In the second application, D&B codes suppliers' catalogs in response to a mandate from a large buying organization. (Sometimes a supplier will choose to do the coding itself). Smart said that demand from corporations for the coding creates a clear incentive for merchants to comply. In some cases, the corporate buyer might even pay for the coding.

While the Visa pilot is the first major commercial application, Smart said D&B has been in discussion with other credit card companies. Visa has preferred pricing with D&B for the course of the pilot, but the infrastructure also is being developed for American Express and MasterCard. Obviously, attaining critical mass is critical to the widespread acceptance and usage of the codes. "The next step is to work with a couple of government agencies," said Verdin.

Smart said that widespread adoption of the codes not only would benefit companies from a reporting standpoint, but also help simplify the buying process, particularly in e-commerce. "If every supplier had organized the products sold in common classification codes, the buyer, through the Web or search engine, would have the ability to search for products and their source at the classification level," he said.

So far, the number of participating merchants is less than a thousand, but Smart said he expected many more to sign up in the years ahead. The cost to the merchant depends on the number of items coded.