Four students* from the Master’s degree in Strategic Purchasing Management from Grenoble (France) produced an animated video on the history of the procurement function. The profession’s transformation is fascinating, from the administrative services used in industrial settings during the 1850s to the strategic dimension that safeguards the competitiveness of today’s businesses. This video offers a fun journey in the footsteps of the purchasing profession in just a few minutes.
The evolution of procurement from 1850 to the end of the 1960s
Procurement emerged with the growth of factories and the Industrial Revolution taking place in the mid-19th century. Initially considered a simple administrative function, it gradually became a fundamental performance lever for a company’s purchasing strategy. It continued to develop over the following decades, especially during the First and Second World Wars, due to the essential service it played in purchasing vital materials.
The visionary French engineer Henri Fayol, a pioneer in business management and strategy, stressed in 1916: “Knowing how to buy and sell is as important as knowing how to manufacture well…”.
During the period of industrial and economic recovery after the Second World War, procurement gained increasing recognition. The new challenge was to service the population’s growing demand. The world was experiencing a production economy characterised by demand greater than supply, stable competition and abundant raw materials for industrial applications. However, the procurement function in a company setting was still very administrative and product-centric, and relationships with suppliers were short-lived.
The evolution of procurement in the 1970s
With the oil shocks and financial crises around the world, growth slowed. Interest rates were high, economies were experiencing inflation, and competition was increasing in industrial settings. The supply/demand ratio had reversed. At this point, the procurement function began contributing to businesses’ competitive strategy and was modernised with a new threefold role:
- Active monitoring;
- Coordinating supplier networks;
- Contributing to the identification of innovation.
This turning point greatly contributed to the key role of procurement being recognised.
In 1975, French procurement expert Pierre-Yves Barreyre created the world’s first university course for future purchasing managers (DESMA), which helped propagate the importance of the customer-supplier relationship and the development of the buyer-supplier relationship.
The evolution of procurement from 1980 to the end of the 1990s
In the 1980s, the procurement function became more professional, shifting its focus from cost reduction to risk management and management of external services. Businesses started to understand how developing privileged relationships with their suppliers gave them a competitive advantage.
The “adversarial” approach that had previously characterised company-supplier relations gave way to a new “relational” strategy. As a result, company partnerships with a limited number of key suppliers were developing. While the number of suppliers decreased, the quality of their collaboration with businesses increased.
Another development during this decade was the separation of the procurement and supply functions, which strengthened the strategic position of procurement departments.
The evolution of procurement in the 2000s
In the 21st-century world of new technologies and innovation, and all the more so after the financial crisis, most businesses recognise the strategic role of the procurement function in creating value.
Confined to industrial settings up to this point, with advancements in technology, the procurement function now also appears in the tertiary and public services sectors. Some countries have even created their own purchasing department as a strategy to help control public spending, as France did in 2009.
The procurement function today
The different economic contexts around the world (post-war, oil shock, financial crisis, etc.) and, more recently, new ecological concerns and the challenges that go along with them have contributed to the evolution of the procurement function, which has become a real winning strategy for companies.
Originally, relationships with suppliers were minimal. No added value was perceived at this point. Over the decades, these have proven to be true value-adding partnerships.
Today, the tasks of a strategic procurement function are balanced between cost management, value creation and risk management, thus playing a key role in safeguarding the competitiveness of companies.
But what will tomorrow bring for the buyer of the future? What will the continued evolution of procurement lead to?
What is the future for the procurement function?
As mentioned throughout this article, the procurement function has continued to evolve since its inception during the Industrial Revolution, and there is no doubt that it will continue to do so in the future as technology changes and evolves. The challenges will certainly be new and different, but they will allow businesses in the future to become even more productive and competitive.
A future line of development, which is already underway, will be linked to the performance and automation of the management of operational tasks in order to free up time for more strategic missions. Going forward, procurement teams will therefore have a much more advisory-oriented role.
The challenges to be met in the future will mainly focus on digitalisation, acquiring knowledge on the use of new technologies and tools, and developing new procedures and services that are ever more respectful of the environment and sustainable development.
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*Marion Lejeune, Antoine Pirraud, Antoine Danthon and Walid Ben Garali.
