Procurement’s Evolution From Back Office to Strategic Business Role

In the last 50 years, purchasing has transformed from a transactional role into one that’s more strategic, aligned with long-term business requirements.

Until mid-1970, the purchasing function played a passive role within the organization, with reporting lines to Finance and Operations. The oil crisis in 1973-1974, and consequent lack of raw materials, changed all that, drawing attention for the first time to the importance of the procurement department.

In the late 1970s, business strategist Michael Porter identified buyers and suppliers as two of the five forces in his model of competitive advantage. Porter said suppliers were an essential part of the business organization, impacting a company’s ability to achieve strategic targets. After that, the importance of procurement began receiving greater attention from academics and consultants.

In the 2000s, business requirements for purchasing began expanding beyond the traditional focus on cost savings in acquiring production materials and services. Globalization became more intense, and with it came greater competition among companies and their supply networks. The fight for lower-cost source…