Evolution of Supply

Management
The Early Years(1850-1900)
● Charles Babbage’s book on the economy of machinery and
manufacturers, published in 1832.

● Development of purchasing during the early years occurred

after the 1850s.

● Growth of American railroads.

● By 1866, the Pennsylvania Railroad had given the

purchasing function departmental status, under the title of
Supplying Department.
The Early Years Contd.
● Few years later, the chief purchasing manager had top
managerial status.

● In 1887,The comptroller of the Chicago and Northwestern

Railroad wrote “The Handling of Railway Supplies-Their
Purchase and Disposition”

● The late 1800s signaled the beginning of organizing

purchasing as a separate corporate function requiring
specialized expertise.
The Growth of purchasing
● The growth of purchasing began around the turn of the
twentieth century and lasted until the beginning of World
War II

● This era witnessed the development of basic purchasing

procedures and ideas

● Purchasing gained importance during World War I because of

its role in obtaining vital war materials.

● The central focus of purchasing during this period was on the

procurement of raw material versus buying finished or semi
finished goods.
The War Years(1946-1949)
● Introduced a new period in purchasing history.
● Growth in purchasing interest.
● 76 percent of all purchase requisitions contained no
specifications or stipulation of brand
● Complex business problems were directly linked to
distribution.
War years contd.
● A military concept, logistics was defined .
● Corporate focused on the cost of distribution in discrete
segments of supply chains
● More concerned on value added circulatory system
between Production and consumption
Quiet Years
● Introduction of containerization

● The first shipping container invented during the mid

1950’s

● Regardless of the transport mode, standardization made

transporting and handling these containers fast and easy

● It was cost and efficiency saving throughout the supply

chain
● Increase speed of transfer of goods, reduced waste and
environmental impact and better margins.
Material Management
● Material management is simply the process by which an
organization is supplied with storage and services that it
needs to achieve its objectives of buying, storage and
movement of materials.

● Related to planning, procuring, storing and providing the

appropriate material of right quality, right quantity at right
place in right time.

● The concept of materials management was widely spread

during World War 2. WW2 introduced a new period in
purchasing history.
Material Management(Cont)
● The emphasis on obtaining required and scarce
materials influenced a growth in purchasing interest.

● Post war period value analysis technique which

materials or changes in the specification and design
would reduce overall product cost.

● From 1947 to 1960 were 13 years on further

developments in materials management

● Firms initiated dramatic growth in materials

management during 1960 to 1970.
Globalization Era
● The widespread recognition of the term “SUPPLY
CHAIN” has come primarily as a result of the
globalization of manufacturing.

● Can be characterized by the expansion of supply

beyond national boundaries.

● Focused on globalization accented the need for

logistics strategies to deal with complex networks
Globalization Era (Cont.)
● During the 1980s and 1990s, firms deal with
increased demands for ‘better, faster, cheaper
logistical service.

● As a result, many manufacturers outsourced logistics

activities

● In the 1990s was the introduction of Enterprise

Resource Planning (ERP)
Integrated Supply Chain Management (The
Twenty- First Century)

● Purchasing and supply chain management today reflects a

growing emphasis concerning the importance of suppliers.

● Supplier development, supplier design involvement, the use

of full-service suppliers, total cost supplier selection, long-
term supplier relationships, strategic cost management,
enterprise-wide systems (enterprise resource planning, or
ERP) and integrated Internet linkages and shared databases
are now seen as ways to create new value within the supply
chain.
Integrated Supply Chain Management
(Cont.)

● The competition, technology and customer behaviors in

modern world has affected the nature of purchasing
● Worldwide competition has increased the importance of
purchasing functions to industrial firms
● Purchasing should be integrated with fields like Operations,
Information Systems, Accounting,Logistics, Human
Resources etc.
Thank you !