History of Purchasing

History of Corporate Purchasing started in late 1890s purchasing was rarely used as different department except some railroad organizations. Even during early 1900s purchasing was considered to be a clerical work. During World War I and World War II purchasing function increased due to the importance of obtaining raw materials, supplies, and services needed to keep the factories and mines operating.

During 1950s and 1960s purchasing continued to gain stature as the techniques for performing the function became more refined and as the number of trained professionals increased but still purchasing agents were basically order-placing clerical personnel serving in a staff-support position.

In the late 1960s and early 1970s, purchasing personnel became more integrated with a materials system. As materials became a part of strategic planning, the importance of the purchasing department increased.

In the 1970s the oil embargo and the shortage of almost all basic raw materials brought much of business world's focus to the purchasing arena. The advent of just-in-time purchasing techniques in the 1980s, with its emphasis on inventory control and supplier quality, quantity, timing, and dependability, made purchasing a cornerstone of competitive strategy. Various different questions became the order of the day for a buyer like
Are we buying at right cost?
Supplier is producing it at right quantity or not?
Whether supplier Is producing the right product or not?
Whether material will come at right time or not?
Whether buyer is buying for the company or for personnel gain?

During Early 1990s, Value Proposition in purchasing increased. People realized that by letting purchaser negotiate and ask for discount bring lots of cost reduction. COST SAVINGS become a buzz word and ofcourse control over the buying process remains one important function of purchasing.

During Late 1990s the purchasing evolved into strategic sourcing. Enterprise wide process that continuously improves and re-evaluates the purchasing activities of a company. More emphasis on supplier data base begun. Contracts were sourced for long term basis to have better cost. Supplier relationship building and supplier management started.

In the past decade of 2000s Purchasing evolved from a myopic view on cost to much broader terms. Some of the new developments which are widely used now are:
Assessment of a company's current spend (what is bought where?) – SPEND ANALYSIS
Assessment of the supply market (who offers what?) –LOW COST COUNTRY SOURCING
Procurement Technology Evolved - (SAP, ERP)
Procurement Outsourcing Evolved - (P2P Model)
Total cost analyses (how much does it cost to provide those goods or services?) – TCO
Identification of suitable suppliers. – SUPPLIER MANAGEMENT
Development of a sourcing strategy (where to buy what considering demand and supply situation, while minimizing risk and costs) – ADVANCE STRATEGIC SOURCING
Negotiation with suppliers (products, service levels, prices, geographical coverage, etc.) – Data Mining and Benchmarking
Implementation of new supply structure – Lean Purchasing

In future Purchasing will continue to evolve with more focus on complete supply chain. Even purchasing at Tier I and Tier II will be looked in much more minutely. Suppliers will be key business partners driving new technological breakthroughs to drive cost down. Also Technology in Purchasing is evolving very fast and will redefine the way we procure and source currently. Purchasing is now recognized as a major function whose importance is immense and amount of value it brings to an organization is huge.