Procurement Through the Ages
March is National Procurement Month: a fine time to review procurement’s history and evolution.
In the ancient world, supplies, materials, and workers were routinely recorded. One of the earliest known examples of this date back to the construction of the The Great Pyramid of Giza (2325 BCE). Using papyrus scrolls, scribes tracked orders through fulfillment, effectively becoming history’s first procurement professionals.
Greek, Roman, Chinese, and Mesopotamian civilizations also used procurement and accounting principals. We can thank the Romans for two innovations: risk management in the form of insurance and different contract categories, many of which are still in use today.
Fast forward to the Industrial Revolution of the 1800s and the vast expansion of commerce and supply (and railway) networks. In his 1832 book, “On the Economy of Machinery and Manufactures,” Charles Babbage argued for the need for a “materials man” who would select, purchase, and track the goods and services in a mining operation. By the end of the century, the procurement function was being formalized into actual organizations (the railroad’s “Supplying Department”.)
In the 20th century, procurement becomes steadily more strategic and sophisticated, spurred by scarcity (The Great Depression) and World War II. During the wartime boom, purchasing was recognized as a major, vital part of company operations. Perhaps as important, the function became professionalized during this period. As Purchasing and Supply Chain Management by Robert M. Monczka, Robert B. Handfield, and Larry Giunipero notes; in 1933, only nine universities had purchasing programs. By 1945, 49 had them. These professionals helped manage the economic expansion of the post-war ‘50s and ‘60s.
Procurement’s next major shift—one in which we still find ourselves—was during the ‘80s and ‘90s, when computers and computer networks gave organizations a slew of new tools for communicating and bidding. The sophistication of this period is evidenced by the fact that organizations began judging suppliers in terms of quality and dependability, not simply lowest price. By the late 1990s, “strategic sourcing” and supplier/supply chain management were the rage and remain so today.
Beyond automation (i.e. connecting the eSourcing tool and operational systems to automatically create contracts, POs, info records, etc.), modern procurement platforms now offer deep analysis of current and prospective suppliers, helping companies make more informed supplier choices and other business-critical decisions.
Today, procurement is entering yet another exciting period, thanks to technologies like blockchain, IoT and AI. Together, these platforms will create ever-more-efficient and automated sourcing, which will free organizations to identify new sources of value and unlocking them—efficiently, predictably, and with a minimum of risk.