Evolution of Strategic Purchasing

        Twenty-first-century perspective for procurement as the world has changed it's way of working and procurement process. Let's see how it has changed from past to recent times.

The early years:

Charles Babbage documents the existence of a materials man who selects, purchases, receives and delivers all articles required(1832).

Textile Industry: A selling agent was responsible for all purchasing decisions.

Growth of American Railroad Systems(1850): Creation of a supplying department reporting directly to the president of the railroad.

The First book on purchasing: Handling of Railway supplies- Their purchase and Disposition.

Nascent growth: The first non-railroad book on purchasing gets published - The book on buying - a compilation by 18 different authors.

World War I: The first time when purchasing gain importance- especially for high-grade material used for war. Principles of purchasing get established.

World War II: Purchasing becomes an important function. Courses in purchasing get developed. National Association of Purchasing Agents membership swells up.

Development years: GE pioneers the Value Analysis Technique involving Design function in purchasing along with marketing and finance.

Growth: The quality revolution in Japan prompts the Japanese to establish long term relationships with their suppliers ushering a new era in purchasing. Seeds of the supply chain are sown.

Globalization: Working with different suppliers despite their geographical dispersion takes precedence. Logistics assumes center stage.

Procurement Today:

        The supply chain is no longer as simple as getting goods from point A to B, as it is about understanding and executing a complex set of variables. Global competition, changing economics, and new supply chain challenges, have brought into focus the need for procurement leaders to develop strategies that will yield sustainable competitive advantage.

        There has been a steady shift in strategy around low-cost country sourcing to best-cost country sourcing. Companies have understood that source choice should be based, not only on a static view of the total cost of ownership. But on future costs, alternate growth markets, and approaches to implementing lean supply chain.

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