Historical Development of Purchasing

Purchasing has been affected by changes more in the last 15 years than in past 150 years. Its
evolution can be explained under 7 stages:
1. Period 1 : Early Years (1850 – 1900)
These were the early years of purchasing history. Charles Babbage in his book writes
about the ‘materials man’ who was responsible for materials and who selects,
purchases, receives, delivers all articles required.
However with the development of Railways in America, the purchasing history saw a
change. The Pennsylvania Railroad gave the purchasing function, the department role
thus making purchasing a separate department reporting to the head of organization. It
was also recognised as a contributor to overall profitability of the company.
2. Period 2 : Growth of Purchasing Fundamentals (1900 – 1939)
In this era. Purchasing procedures and ideas were developed with many articles being
written about developments in material specifications and need for qualified
purchasing personnel.
During World War I, purchasing gained importance because of managing war,
materials.
3. Period 3 : The War Years (1940-1946)
Due to scarcity of required materials during the war years, emphasis was placed on
purchasing. By 1945, 45 colleges started offering courses in purchasing as opposed to
only 9 colleges in 1933.Also number of professionals increased.

4. Period 4 : The Quiet Years ( 1947 – mid 1960s)

Purchasing was neglected .However few companies implemented practices to collect,
analyse, and present data which was to be used to make decisions related to
purchasing. Ford was the first company which created a purchase analysis department
(to assist buyers on the product and price analysis) and a commodity research
department to overlook the short term and long term commodity market information.
General Electric developed the Value Analysis Technique aimed at reducing product
cost.

5. Period 5 : Materials Management Age ( mid 1960 – late 1970)

During this time period, there was a huge growth in the concept of materials
management. Industry became more efficient in purchase and materials management
owing to the pressure resulting from The Vietnam War.
Materials management now became a system and not an individual function. Its scope
also increased.

6. Period 6 : The Global Era ( Late 1970s – 1999)

Globalisation hit purchasing faster than any other thing.
 Product life cycles reduced; rate of technology changes; World Wide Web and better
communication; global firms and their strategies, all these impacted purchasing. A
coordinated approach and supply chain management evolved to reduced costs and
improve existing systems.

7. Period 7 : Integrated Supply Chain Management ( 2000 onwards)

A cooperative approach towards supplier management i.e. supplier relationship
management is the new norm. Companies are emphasising on supplier development,
their involvement in the design phase, long term relationships, strategic cost
management, shared databases to create value in supply chain. Suppliers are more
trusted now and they are involved from the start.