Procurement, or the process of acquiring goods, services or works from an external source, is essential to any business or organization. As such, procurement has a long and varied history, going back centuries and evolving alongside the changing landscape of global trade and business. This article will explore the history of procurement and how this important business function has developed over time.
The Evolution of the Procurement Function
Ancient civilizations: Procurement in ancient civilizations was often a manual process where individuals were responsible for acquiring goods and services for their communities. For example, in ancient Egypt, the pharaoh's officials were responsible for procuring goods and services for the royal court.
20th century: During the 20th century, procurement became a formalized function within organizations. Companies began to create dedicated procurement departments to manage the purchasing of goods and services, negotiate contracts, and ensure value for money. For example, in the automotive industry, procurement departments were established to manage the acquisition of raw materials, components, and other supplies needed to produce vehicles.
Technology-driven evolution: In recent decades, the rise of technology has transformed procurement. The use of electronic procurement systems, such as e-sourcing platforms, has made it easier for organizations to manage procurement activities, reducing the time and effort required to source goods and services. For example, many companies now use e-procurement platforms to manage their supply chains, allowing them to automate routine procurement tasks and improve the speed and accuracy of their purchasing processes.
From Manual to Automated Procurement: A Brief History
As businesses grew in size and complexity, manual methods alone could no longer adequately keep up with their procurement needs. In response to these needs, in the late 1950s, the first commercially available computer systems designed for procurement functions were released. Though rudimentary in comparison to modern systems, these first-gen systems came with significant improvements in terms of speed since they allowed deals to be negotiated quickly while also offering data storage that ensured accuracy in accounting and forecasting.
With further advancements in computing technology, automation soon advanced even further. This period saw the introduction of more advanced software that could handle procurement related operations such as order processing on a larger scale. In the 1980s and beyond, automation reached another level with the introduction of advanced software applications that allowed companies to totally manage their procurement workflow, including the bidding and negotiation processes with suppliers.
Today, automated procurement systems are commonplace in many businesses, offering a range of features such as automated purchase order creation, supplier management, and inventory tracking. Automated procurement systems have revolutionized the way businesses manage their procurement processes, allowing them to save time and money while also improving accuracy and efficiency.
The Globalization of Procurement and Its Impact
The globalization of procurement began in earnest during the latter half of the twentieth century as many companies began to explore markets previously unexplored due to logistical and cost limitations. This period saw such developments as sourcing from multiple geographies for improved cost efficiencies and economies of scale, as well as strengthening compliance standards and increasing transparency in global trade.
As businesses become even more connected globally, a continual growth in global sourcing is expected which will see even more companies making use of a wider array of foreign suppliers who can provide services that are cheaper than those near home.
In conclusion, the evolution of procurement has been driven by the need for organizations to adapt to changing market conditions and technological advances. The function continues to evolve and adapt to meet the needs of organizations, ensuring that they are well positioned to achieve their goals and objectives. As new technologies and business models emerge, the role of procurement will continue to evolve, creating new opportunities for organizations to optimize their purchasing practices and achieve greater success.
At FactWise, we are committed to building truly distinctive procurement software solutions that delight users and provide sustainable positive impact to the organizations we serve. We do this by providing transparency and insights to leaders (31% increase in governance), streamlining and automating processes to improve efficiency (20% increase in efficiency), and driving bottom-line impact by unlocking savings potential (25% cost reduction for direct spend).