Developing purchasing's foundation

Journal of Supply Chain Management, Spring, 2008 by Michiel R. Leenders, Harold E. Fearon

Historians like to pronounce that an understanding of the future depends on an understanding of the past or that our past is our window to our future. Why should supply management be exempt from such a prevalent perspective? In this article an attempt has been made to document the development of key ideas and concepts in purchasing and supply management in the United States and Canada from 1830 to 1940. An understanding of supply's evolution may not only assist today's supply practitioners and academics in placing current practices and theories in context but also in charting our future.

Against a backdrop of periods of war and peace, prosperity and recession and an evolving legal, technological, political and social environment, we can trace the growing awareness that effective purchasing and supply management is a key contributor to organizational success in both the public and private sectors. We can also see that practitioners were the key movers behind these 110 years of professional growth and that academics interested in the field did not start writing about it seriously until the 1930s.

The really exciting aspect of this historical trek through our field is that it reveals the origins of many ideas we proudly cite as today's insights and developments. We are finding the seeds that led to the growth of the body of knowledge covering the supply management field. This is also a cautionary tale for doctoral candidates claiming a past lack of research and understanding of their current thesis topic and their discovery of new truths.

The choice of time-period covered is quite arbitrary. The original intent behind this research was to cover the complete 1830-2007 period in one paper. However, the extent and depth of material uncovered in the years before 1940 led to the realization that one paper could not do proper justice to the topic. It was, therefore, decided that the 1940-2007 time slot would require at least one, if not two more papers.

The authors also decided to include extensive quotes in their original form to share the richness of the language and the authenticity of the points raised.

Clearly, purchasing and supply activities were carried out throughout all of history. Even the ancients in creating structures like the pyramids or great cities, conducting wars on a massive scale, and engaging in commerce over large geographical areas, needed supply and logistics expertise to support these initiatives. The 1830 start was chosen to include Charles Babbage's text. Moreover, the United States and Canada saw significant growth in industry after that date, necessitating greater attention to the supply area. The cut-off date of 1940 was just before World War II, but after the Great Depression and after academics had seriously joined practitioners in growing the field of supply knowledge and promoting the teaching of purchasing at the college and university level.

During this 110-year span many truly interesting developments took place as the following material will show. The material has been organized into four time spans. From 1830 to 1900 the first literature covering the field of purchasing appeared. Between 1900 and 1920 local associations of practitioners were organized followed by the creation of the National Association of Purchasing Agents, Inc. (N.A.P.A.) in 1915. World War I created an unprecedented upheaval of markets. Also during this period, materials management, centralization, and outsourcing of the purchasing function were topics raised in articles and texts. The 1920 to 1930 period saw the term "scientific purchasing" gain prominence as well as the adoption of ethical standards. And the 1930-40 decade not only covered the Great Depression, but also saw significant developments in governmental purchasing, performance, measurement, purchasing education, legislation and serious discussion as to the scope of supply management.

THE 1830-1900 PERIOD

During the period from 1830 to 1900 the first recognition of purchasing was in the general management literature.

In the United Kingdom, Charles Babbage in 1832 had already identified the need for supply expertise. He referred to mining firms (one of the major industries in that time period) and noted in discussing proper organization structure that "... a materials man selects, purchases, receives, and delivers all articles required" (Babbage 1932). This likely was the first written acknowledgement of the materials management concept.

An 1870 article opined that judicious purchasing could save big bucks in construction costs, to wit: "After a bill of the necessary amount of lumber has been prepared, it will be found an economical practice to communicate with lumber dealers in various parts of the country, for the purpose of determining the price for the kinds of lumber required. In this way, a shrewd and judicious builder or buyer may often save from twenty to fifty percent on the price of his lumber" (Author Unknown 1870). Therefore, the savings potential and profit-leverage effect of purchasing were known many years ago.